10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008.

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____.

Commission file number 1-7160

COACHMEN INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Indiana	35-1101097
(State of incorporation or organization)	(IRS Employer Identification No.)

423 North Main Street, Middlebury, Indiana	46540
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (574) 825-5821

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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Number of shares of Common Stock, without par value, outstanding as of the close of business on March 31, 2008:  15,785,574

FORM 10-Q
INDEX
PartI. Financial Information	Page
Financial Statements:
Consolidated Balance Sheets at March 31, 2008 and December 31, 2007	3
Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007	4
Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007	5
Notes to Consolidated Financial Statements	6-13
Management’s Discussion and Analysis of Financial Condition and Results of Operations	14-19
Quantitative and Qualitative Disclosures About Market Risk	20
Controls and Procedures	20
Part II. Other Information
Item 6. Exhibits	21
Signatures	22
Index to Exhibits	23

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Coachmen Industries, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands)

		March 31,			December 31,
		2008			2007
Assets		(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	2,568		$	1,549
Trade receivables, less allowance for doubtful receivables 2008 - $747 and 2007 - $744		35,777			9,122
Other receivables		5,218			3,819
Refundable income taxes		1,627			1,628
Inventories		82,255			79,268
Prepaid expenses and other		2,704			3,804
Assets held for sale		5,021			-
Total current assets		135,170			99,190
Property, plant and equipment, net		47,231			52,932
Goodwill		12,993			12,993
Cash value of life insurance, net of loans		29,531			33,936
Other		8,169			8,617
TOTAL ASSETS	$	233,094		$	207,668
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Short-term borrowings	$	33,858		$	20,073
Accounts payable, trade		31,173			15,042
Accrued income taxes		510			536
Accrued expenses and other liabilities		28,678			33,235
Floorplan notes payable		3,565			4,116
Current maturities of long-term debt		832			852
Total current liabilities		98,616			73,854
Long-term debt		2,992			3,010
Deferred income taxes		1,990			1,990
Postretirement deferred compensation benefits		6,854			7,632
Other		72			49
Total liabilities		110,524			86,535
COMMITMENTS AND CONTINGENCIES(Note 10)
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized 60,000 shares; issued 2008 – 21,185 shares and 2007 - 21,180 shares		92,587			92,552
Additional paid-in capital		7,938			7,856
Accumulated other comprehensive loss		(70	)		(48	)
Retained earnings		81,254			79,927
Treasury shares, at cost, 2008 – 5,399 shares and 2007 - 5,402 shares		(59,139	)		(59,154	)
Total shareholders' equity		122,570			121,133
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	233,094		$	207,668

See Notes to Consolidated Financial Statements.

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Coachmen Industries, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2008			2007
Net sales	$	121,318		$	130,244
Cost of sales		110,455			128,817
Gross profit		10,863			1,427
Operating expenses:
Selling		4,597			5,813
General and administrative		4,533			6,235
Gain on sale of assets, net		(208	)		(445	)
		8,922			11,603
Operating income (loss)		1,941			(10,176	)
Nonoperating (income) expense:
Interest expense		1,028			842
Investment income		(294	)		(474	)
Other income, net		(120	)		(95	)
		614			273
Income (loss) before income taxes		1,327			(10,449	)
Income taxes (credit)		-			(1	)
Net income (loss)		1,327			(10,448	)
Earnings (loss) per share - Basic & Diluted	$	.08		$	(.67	)
Number of common shares used in the computation of earnings (loss) per share:
Basic		15,749			15,700
Diluted		15,758			15,700
Cash dividends declared per common share	$	-		$	.03

See Notes to Consolidated Financial Statements.

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Coachmen Industries, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	1,327		$	(10,448	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		1,377			1,506
Provision for doubtful receivables, net of recoveries		5			30
Net realized and unrealized losses on derivatives		(22	)		(4)
Gains on sale of properties and other assets, net		(208	)		(445	)
Increase in cash surrender value of life insurance policies		132			(301	)
Other		(658	)		599
Changes in certain assets and liabilities:
Trade receivables		(28,059	)		(11,449	)
Inventories		(2,987	)		(2,676	)
Prepaid expenses and other		1,100			1,500
Accounts payable, trade		16,131			18,064
Income taxes - accrued and refundable		(25	)		6,646
Accrued expenses and other liabilities		(4,557	)		1,096
Net cash provided by (used in) operating activities		(16,444	)		4,118
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of properties and other assets		240			746
Investments in life insurance policies		(1,727	)		(1,776	)
Purchases of property and equipment		(552	)		(391	)
Other		271			330
Net cash used in investing activities		(1,768	)		(1,091	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings		13,801			3,866
Payments of short-term borrowings		(567	)		(5,373	)
Proceeds from borrowings on cash value of life insurance policies		10,000			-
Payments of borrowings on cash value of life insurance policies		(4,000	)		-
Payments of long-term debt		(38	)		(77	)
Issuance of common shares under stock incentive plans		35			46
Cash dividends paid		-			(471	)
Net cash provided by (used in) financing activities		19,231			(2,009	)
Increase in cash and cash equivalents		1,019			1,018
CASH AND CASH EQUIVALENTS:
Beginning of period		1,549			2,651
End of period	$	2,568		$	3,669
Supplemental disclosures of cash flow information:
Operating cash received during the quarter related to insurance settlement	$	600,000		$	-

See Notes to Consolidated Financial Statements.

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Coachmen Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1.    BASIS OF PRESENTATION.

The condensed consolidated financial statements have been prepared by Coachmen Industries, Inc. (“the Company”), without audit, in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. Management believes the disclosures made in this document are adequate so as not to make the information presented misleading.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements, taken as a whole, contain all adjustments which are of a normal recurring nature necessary to present fairly the financial position of the Company as of March 31, 2008, and the results of its operations and cash flows for the interim periods presented. Operating results for the three-month period ended March 31, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2007.

Adoption of New Accounting Standards

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 establishes a framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards which permit, or in some cases require, estimates of fair market value. SFAS No. 157 also expands financial statement disclosure requirements about a company’s use of fair value measurements, including the effect of such measures on earnings. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007.

The Company adopted the provisions of SFAS No. 157 related to its financial assets and liabilities in the first quarter of 2008, which did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. Assets or liabilities that have recurring measurements are shown below as of March 31, 2008 (in thousands):

				Fair Value Measurements at Reporting Date Using
				Quoted Prices in
				Active Markets		Significant			Significant
				For Identical		Other Observable			Unobservable
				Assets		Inputs			Inputs
	Total as of
Description	March 31, 2008			(Level 1)		(Level 2)			(Level 3)
Cash	$	2,568		$	2,568	$	-		$	-
Interest Rate Swap (1)		(70	)		-		(70	)		-
Net	$	2,498		$	2,568	$	(70	)	$	-

(1) Included in other long-term liabilities on consolidated balance sheet.

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2.    SEGMENT INFORMATION.

The Company has determined that its reportable segments are those that are based on the Company's method of internal reporting, which disaggregates its business by product category. The Company's two reportable segments are Recreational Vehicles and Housing. The Company evaluates the performance of its segments based primarily on net sales and pre-tax income and allocates resources to them based on performance. There are no inter-segment revenues. The Company allocates certain corporate expenses to these segments based on three dimensions: revenues, subsidiary structure and number of employees. Differences between reported segment amounts and corresponding consolidated totals represent corporate income or expenses for administrative functions and income, costs or expenses relating to property and equipment that are not allocated to segments.

The table below presents information about segments, used by the chief operating decision maker of the Company for the three months ended March 31 (in thousands):

	Three Months Ended March 31,
	2008		2007
Net sales
Recreational vehicles	$	90,479	$	104,152
Housing		30,839		26,092
Consolidated total	$	121,318	$	130,244
Gross profit
Recreational vehicles	$	5,192	$	(866	)
Housing		5,671		2,293
Consolidated total	$	10,863	$	1,427

Operating expenses
Recreational vehicles	$	6,284		$	7,072
Housing		4,291			5,022
Other reconciling items		(1,653	)		(491	)
Consolidated total	$	8,922		$	11,603
Operating income (loss)
Recreational vehicles	$	(1,092	)	$	(7,938	)
Housing		1,380			(2,729	)
Other reconciling items		1,653			491
Consolidated total	$	1,941		$	(10,176	)
Pre-tax income (loss)
Recreational vehicles	$	(1,057	)	$	(8,044	)
Housing		1,358			(2,677	)
Other reconciling items		1,026			272
Consolidated total	$	1,327		$	(10,449	)
	March 31,			December 31,
	2008			2007
Total assets
Recreational vehicles	$	99,754		$	86,816
Housing		70,288			54,601
Other reconciling items		63,052			66,251
Consolidated total	$	233,094		$	207,668

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3.    INVENTORIES.

Inventories consist of the following (in thousands):

	March 31,		December 31,
	2008		2007
Raw materials
Recreational vehicles	$	14,606	$	11,789
Housing		6,355		5,989
Consolidated total		20,961		17,778
Work in process
Recreational vehicles		13,514		12,913
Housing		4,211		2,941
Consolidated total		17,725		15,854
Improved lots
Housing		670		645
Consolidated total		670		645
Finished goods
Recreational vehicles		29,714		34,038
Housing		13,185		10,953
Consolidated total		42,899		44,991
Consolidated total	$	82,255	$	79,268

4.    PROPERTY, PLANT AND EQUIPMENT.

Property, plant and equipment consist of the following (in thousands):

	March 31, 2008		December 31, 2007
Land and improvements	$	10,823	$	11,452
Buildings and improvements		53,745		59,765
Machinery and equipment		24,537		24,429
Transportation equipment		13,957		14,654
Office furniture and fixtures		17,193		17,274
Total		120,255		127,574
Less, accumulated depreciation		73,024		74,642
Property, plant and equipment, net	$	47,231	$	52,932

At March 31, 2008, the Company had $5.0 million classified in assets held for sale.  These assets were available and listed for sale during the first quarter of 2008.  Housing Segment property and buildings accounted for the majority of these assets, including the former manufacturing facility in Zanesville, Ohio that was consolidated into a larger Indiana manufacturing plant, plus a warehouse and office building in Decatur, Indiana.  In addition, with the relocation of the corporate offices to Middlebury, Indiana, the former corporate office building and land in Elkhart, Indiana are also held for sale.

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5.    ACCRUED EXPENSES AND OTHER LIABILITIES.

Accrued expenses and other liabilities consist of the following (in thousands):

	March 31, 2008		December 31, 2007
Wages, salaries, bonuses and commissions	$	2,585	$	2,432
Dealer incentives, including volume bonuses, dealer trips, interest reimbursement, co-op advertising and other rebates		1,174		1,577
Warranty		7,277		8,123
Insurance-products and general liability, workers compensation, group health and other		7,074		8,519
Customer deposits and unearned revenues		2,856		4,208
Litigation		825		930
Interest		720		751
Sales and property taxes		1,964		1,837
Deferred gain on sale of real estate		1,145		1,145
Other current liabilities		3,058		3,713
Total	$	28,678	$	33,235

Changes in the Company's warranty liability during the three-month periods ended March 31 were as follows (in thousands): 

	Three Months Ended March 31,
	2008			2007
Balance of accrued warranty at beginning of period	$	8,123		$	11,099
Warranties issued during the period and changes in liability for pre-existing warranties		2,976			5,363
Settlements made during the period		(3,822	)		(6,330	)
Balance of accrued warranty at March 31	$	7,277		$	10,132

The decrease in the warranty accrual for 2008 was primarily the result of improvements in quality and lower sales levels.

6.    COMPREHENSIVE INCOME (LOSS).

The changes in the components of comprehensive income (loss) for the three months ended March 31 are as follows (in thousands):

	Three Months Ended March 31,
	2008			2007
Net income (loss)	$	1,327		$	(10,448	)
Unrealized losses on cash flow hedges, net of taxes		(22	)		(4	)
Comprehensive income (loss)	$	1,305		$	(10,452	)

As of March 31, 2008 and 2007, the accumulated other comprehensive loss, net of tax, relating to deferred losses on cash flow hedges was ($70,000) and ($14,000), respectively.

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7.    EARNINGS PER SHARE.

Basic earnings per share is based on the weighted average number of shares outstanding during the period. Diluted earnings per common share is based on the weighted average number of shares outstanding during the period, after consideration of the dilutive effect of stock options and awards and shares held in deferred compensation plans. Basic and diluted earnings per share for the three-month period ended March 31 were calculated using the average shares as follows (in thousands):

	Three Months Ended March 31,
	2008		2007
Numerator:
Net income (loss) available to common stockholders	$	1,327	$	(10,448	)
Denominator:
Number of shares outstanding, end of period:
Weighted average number of common shares used in basic EPS		15,749		15,700
Effect of dilutive securities		9		-
Weighted average number of common shares used in diluted EPS		15,758		15,700

For the quarter ended March 31, 2008, 132,850 shares of outstanding stock options were not included in the computation of diluted earnings per share because their exercise price was greater than the average market prices for the respective periods and their inclusion would have been antidilutive. As the Company reported a net loss for the quarter ended March 31, 2007, the dilutive effect of stock options and awards did not enter into the computation of diluted earnings per share because their inclusion would have been antidilutive.

8.    INCOME TAXES.

The Company accounts for income taxes based upon Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“FAS 109”). Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company continues to carry a full valuation allowance on all of its deferred tax assets.

As of the beginning of fiscal year 2008, the Company had unrecognized tax benefits of $2.4 million including interest and penalties. There has been no significant change in the unrecognized tax benefits through March 31, 2008. If recognized, the effective tax rate would be affected by approximately $1.6 million of the unrecognized tax benefits.

The Company is subject to periodic audits by U.S. federal and state taxing authorities. Currently, the Company is undergoing an audit by the Internal Revenue Service for a claim for research and development credits. It is reasonably possible that the amounts of unrecognized tax benefits could change in the next twelve months as a result of the audit. Based on the current audit in process, the entire amount of the unrecognized tax liability of $3.5 million which was recorded to offset the research and development tax benefits claimed in previously filed tax returns could be reversed or an additional liability of $1.1 million could be recorded.

For the majority of tax jurisdictions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2004.

Due to the Company’s cumulative losses in recent years, net operating loss carryforwards were utilized to offset current taxable income essentially reducing the effective tax rate to zero for the first quarter of 2008. In the first quarter of 2007, a valuation allowance of $4.5 million was recognized to offset potential net operating loss tax benefits associated with the losses from the quarter, also essentially reduced the effective tax rate to zero for the first quarter of 2007.

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9.    COMMITMENTS AND CONTINGENCIES.

Obligation to Purchase Consigned Inventories

The Company obtains vehicle chassis for its recreational vehicle products directly from automobile manufacturers under converter pool agreements. The agreements generally provide that the manufacturer will provide a supply of chassis at the Company's various production facilities under the terms and conditions as set forth in the agreement. Chassis are accounted for as consigned inventory until assigned to a unit in the production process. At that point, the Company is obligated to purchase the chassis and it is recorded as inventory. At March 31, 2008 and December 31, 2007, chassis inventory, accounted for as consigned inventory, approximated $13.7 million and $10.2 million, respectively.

Repurchase Agreements

The Company was contingently liable at March 31, 2008 to banks and other financial institutions on repurchase agreements in connection with financing provided by such institutions to most of the Company's independent dealers in connection with their purchase of the Company's recreational vehicle products. These agreements provide for the Company to repurchase its products from the financing institution in the event that they have repossessed them upon a dealer's default. Products repurchased from dealers under these agreements are accounted for as a reduction in revenue and cost of sales at the time of repurchase. Although the estimated contingent liability approximates $183.3 million at March 31, 2008 ($176.0 million at December 31, 2007), the risk of loss resulting from these agreements is spread over the Company's numerous dealers and is further reduced by the resale value of the products repurchased. Based on losses previously experienced under these obligations, the Company has established a reserve for estimated losses under repurchase agreements. At both March 31, 2008 and December 31, 2007, $0.7 million was recorded as an accrual for estimated losses under repurchase agreements.

The Company was also contingently liable at March 31, 2008 to a financial institution on repurchase agreements in connection with financing provided by the institution to certain of the Company's independent home builders in connection with their purchase of the Company's housing products. This agreement provides for the Company to repurchase its products from the financing institution in the event that they have repossessed them upon a builder's default. Products repurchased from builders under this agreement are accounted for as a reduction in revenue and cost of sales at the time of repurchase. Although the estimated contingent liability approximates $10.2 million at March 31, 2008 ($14.6 million at December 31, 2007), the risk of loss resulting from these agreements is spread over the Company's numerous builders and is further reduced by the resale value of the products repurchased. The Company has evaluated the potential for losses under this agreement and has recorded an accrual of $0.1 million as of March 31, 2008 and $0.2 million at December 31, 2007 for estimated losses under the repurchase agreement.

Corporate Guarantees

The Company was contingently liable under guarantees to financial institutions of their loans to independent dealers for amounts totaling approximately $6.0 million at March 31, 2008 and $2.6 million at December 31, 2007. The Company has an agreement with a financial institution to form a private-label financing program to provide wholesale inventory financing to the Company's dealers in the Recreational Vehicle Segment. The agreement provides for a preferred program that provides financing that is subject to the standard repurchase agreement described above. In addition, the agreement provides for a reserve pool whereby the financial institution makes available an aggregate line of credit not to exceed $40 million that will provide financing for dealers that may not otherwise qualify for credit approval under the preferred program. No dealer being provided financing from the reserve pool can receive an aggregate line of credit exceeding $5 million. In addition to the standard repurchase agreement described above, at March 31, 2008 the Company was contingently liable to the financial institutions up to a maximum of $2.0 million of aggregate losses, as defined by the agreement, incurred by the financial institutions on designated dealers with higher credit risks that are accepted into the reserve pool financing program. The Company has recorded a loss reserve of $0.1 million at March 31, 2008 and December 31, 2007 associated with these guarantees.

The Company is liable under an agreement to guarantee the indebtedness incurred by a recreational vehicle dealer towards the purchase of a dealership facility. The guarantee is in the principal amount of $1 million for a period of five years or until all indebtedness has been fully paid, whichever occurs first. The Company has evaluated the potential for losses under this agreement and has determined that the resolution of any claims that may arise in the future would not materially affect the Company's financial statements.

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9.    COMMITMENTS AND CONTINGENCIES, continued.

Financing Obligation

During the second quarter of 2004, the Company entered into an agreement to provide financing of up to $4.9 million to a developer for the construction of a hotel for which the Company was to provide modular units. As of March 31, 2008, the Company provided $2.3 million in financing to the developer under this arrangement. No funding has been provided since December 2005. The loans are collateralized by a first priority interest in all tangible and intangible property of the borrower. The developer was unable to obtain a building permit, so the Company is pursuing its legal remedies through litigation to recoup the financing extended to date. During the fourth quarter of 2006, the Company obtained title to the real estate that was partial collateral for this Note. In the event the sale of the property does not generate proceeds sufficient to cover the financing previously provided, the Company will continue pursuing its legal remedies to recover any shortfall. As of March 31, 2008, the Company has reserved an amount for which Management believes the Company may not recover, however, there is a potential for exposure in excess of the amount reserved.

Litigation

On November 21, 2006 the Company received a summons from the Internal Revenue Service which required the Company to produce various documents relating to its research and development claims filed with the Internal Revenue Service for the tax years 1999 through 2004. On March 6, 2007 the Company received an additional summons from the Internal Revenue Service related to this matter regarding tax years 1984 through 1988.

The Company was named as a defendant in McGuire v. Gulf Stream Coach, Inc., which was filed as a class action on April 9, 2007 in the United States District Court for the Eastern District of Louisiana. The factual basis alleged is that the plaintiffs were exposed to formaldehyde in FEMA travel trailers, which exposure constitutes a manifest injury requiring medical monitoring to thwart development of disease. Plaintiffs sought the following relief: class certification, which was denied; payment into a court-supervised medical monitoring fund; removal of all formaldehyde-existing materials from all trailers and modification to provide adequate ventilation; repair and testing to prevent further exposure; attorneys' fees and costs; and other appropriate relief. Company filed a motion to dismiss on the basis that none of named plaintiffs received a Coachmen trailer. The case and motion are currently pending before the U.S. Judicial Panel on Multidistrict Litigation. Other litigation has also been filed, in which the Company may become a party.

During the first quarter of 2008, as a result of the favorable settlement of two lawsuits involving insurance recoveries, the Company recorded income of approximately $1.0 million, which was classified in general and administrative expenses on the consolidated statement of operations.

The Company is involved in various other legal proceedings, most of which are ordinary disputes incidental to the industry and most of which are covered in whole or in part by insurance. Management believes that the ultimate outcome of these matters and any liabilities in excess of insurance coverage and self-insurance accruals will not have a material adverse impact on the Company's consolidated financial position, future business operations or cash flows.

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10.  STOCK-BASED COMPENSATION.

Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment, using the modified-prospective-transition method. Under SFAS 123R, the Company is required to measure compensation cost for all stock-based awards at fair value on date of grant and recognize compensation expense over the period that the awards are expected to vest. Restricted stock and stock options issued under the Company’s equity plans, as well as, stock purchases under the employee stock purchase plan are subject to the provisions of SFAS 123R. Since the adoption of SFAS 123R, there have been no modifications to outstanding stock-based awards.

Stock options generally vest over a four-year service period. The Company has not granted any stock option awards since 2003. Compensation expense related to the Company's Employee Stock Purchase Plan was not significant for the first quarter of 2008.

On January 4, 2008, the Company granted Restricted Stock Awards to certain key employees as a means of retaining and rewarding them for performance and to increase their ownership in the Company. The awards are governed by the Company’s 2000 Omnibus Stock Plan. Participants will earn the restricted shares awarded to them based on attainment of certain performance goals for the first quarter of 2008 and for the full calendar year 2008. If the Company meets the minimum or maximum target levels of pre-tax profits, the participants will earn corresponding levels of awards. To the extent the Company meets the performance goals for the first quarter and/or the full year, and the participant remains employed by the Company during the vesting period, the earned restricted shares will vest and be delivered to the participants over a three-year vesting period: one-third on January 1, 2009, one-third on January 1, 2010 and one-third on January 1, 2011. A total of 237,375 shares, assuming 100% of the performance goal is achieved, could be granted. At March 31, 2008, the Company determined that the minimum target of the performance goal for the first quarter of 2008 would be achieved; therefore, compensation expense in the amount of $0.1 million was recorded related to this plan for the quarter ended March 31, 2008. As of March 31, 2008, the Company determined that it is not yet probable that the performance conditions associated with the restricted stock grants for the full calendar year 2008 will be achieved.

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Coachmen Industries, Inc. and Subsidiaries

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

The following is management’s discussion and analysis of certain significant factors, which have affected the Company’s financial condition, results of operations and cash flows during the periods included in the accompanying consolidated financial statements.

A summary of the changes in the principal items included in the consolidated statements of operations is shown below (dollar amounts in thousands).

	Three Months					Three Months					Percentage Change
	Ended			Percentage		Ended			Percentage			2008
	March 31,			of		March 31,			of			to
	2008			Net Sales		2007			Net Sales			2007
Net sales:
Recreational vehicles	$	90,479		74.6	%	$	104,152		80.0	%		(13.1	)%
Housing		30,839		25.4			26,092		20.0			18.2
Consolidated total		121,318		100.0			130,244		100.0			(6.9	)
Gross profit:
Recreational vehicles		5,192		4.3			(866	)	(0.7	)		699.5
Housing		5,671		4.7			2,293		1.8			147.3
Consolidated total		10,863		9.0			1,427		1.1			661.2
Operating expenses:
Selling		4,597		3.8			5,813		4.4			(20.9	)
General and administrative		4,533		3.7			6,235		4.8			(27.3	)
Gain on sale of assets, net		(208	)	(0.1	)		(445	)	(0.3	)		53.3
Consolidated total		8,922		7.4			11,603		8.9			(23.1	)
Nonoperating expense		614		0.5			273		0.2			124.9
Income (loss) before income taxes		1,327		1.1			(10,449	)	(8.0	)		112.7
Income taxes (credit)		-		-			(1	)	-			100.0
Net income (loss)	$	1,327		1.1	%	$	(10,448	)	(8.0	)%		112.7	%
n/m - not meaningful

The following table presents key items impacting the results of operations for the periods presented (in thousands): 

	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2008			2007
Gain on sale of assets	$	(208	)	$	(445	)
Legal/Insurance expense recoveries	$	(950	)	$	-

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NET SALES

Consolidated net sales from continuing operations for the quarter ended March 31, 2008 were $121.3 million, a decrease of $8.9 million, or 6.9%, from the $130.2 million reported for the corresponding quarter last year. The Company’s Recreational Vehicle Segment experienced a net sales decrease of 13.1% compared to the prior year’s first quarter as a result of the weakness in the RV industry which continued in the first quarter. Through March, industry wholesale shipments of all types of RV’s declined 11.8%, following a 9.5% decline in full year 2007. For the quarter, RV Segment wholesale unit shipments of all product types decreased by 22.4% to 3,067 units. Shipments of motorized products fell 13.7% to 848 units. Shipments of non-motorized products decreased by 25.3% to 2,219 units. The RV Segment did have several sales successes, as first quarter 2008 unit shipments of fifth wheel trailers increased by over 57% and Class C motorhome shipments were up over 14% compared to the first quarter of 2007.

The Company’s Housing Segment experienced a net sales increase for the quarter ended March 31, 2008 of 18.2%, from $26.1 million during the first quarter of 2007 to $30.8 million for the first quarter of 2008, due mainly to the impact of major project revenues offsetting the weakness in traditional single-family housing markets. The Company’s All American Building Systems (AABS) commercial business unit began deliveries for the military housing project at Fort Carson in Colorado contributing to the net sales increase during the quarter.

The national housing market continues to decline as evidenced by U.S. Census Bureau data showing single-family housing starts declining 39.0% year to date in the first quarter of 2008, following a full year 2007 decline of 28.6%. The Housing Segment continues its efforts to grow its traditional business by enhancing the design and marketing of single-family homes, with exciting new products including the introduction of the products available in the Green Catalog, recognizing the increasing need for energy efficiency and the use of sustainable materials in the construction of new homes. In addition, the Company recently announced an agreement with Solar Village to market a line of solar energy powered homes. The Housing Segment continues to aggressively pursue major project opportunities in the multi-family residential, military housing and commercial markets.

COST OF SALES

Cost of sales decreased 14.3%, or $18.4 million, for the three months ended March 31, 2008. As a percentage of net sales, cost of sales was 91.0% for the three-month period ended March 31, 2008 compared to 98.9% for the three months ended March 31, 2007. Cost of sales decreased more than net sales declined, increasing corresponding gross profit to $10.9 million or 9.0% for the three-month period ended March 31, 2008 compared to $1.4 million or 1.1% for the three months ended March 31, 2007. Improvement in gross profit is the result of action plans implemented by management during 2007, including the strategic sourcing project reducing material costs, continued product quality initiatives reducing warranty expenses, and consolidating manufacturing facilities in order to reduce expenses and improve profitability through improved capacity utilization of fewer facilities. In late 2007, the RV Segment consolidated Class A production into a single facility, relocated a paint facility in Elkhart, Indiana to the main complex in Middlebury, Indiana, and consolidated two towable assembly plants into a single facility, while the Housing Segment consolidated its All American Homes production facility located in Zanesville, Ohio with its larger facility located in Decatur, Indiana.

OPERATING EXPENSES

As a percentage of net sales, operating expenses, which include selling, general and administrative expenses, were 7.5% and 9.2% for the three-month periods ended March 31, 2008 and 2007, respectively. Selling expenses were 3.8% of net sales for the 2008 quarter compared to 4.4% of net sales for the three-month period ended March 31, 2007. The $1.2 million reduction in selling expenses for the three-month period of 2008 versus 2007 was primarily due to reduced payroll related costs and lower sales promotion expenses as a result of planned cut backs and the overall lower revenues. General and administrative expenses were 3.7% of net sales for the 2008 quarter compared to 4.8% for the 2007 corresponding quarter. The decrease of $1.7 million in general and administrative expenses for the three-month period of 2008 versus 2007 was primarily the result of legal settlements and insurance recoveries of $1.0 million, and other various expense reductions including professional services and payroll related expenses.

GAIN ON THE SALE OF ASSETS, NET

For the three months ended March 31, 2008, the gain on the sale of assets was $0.2 million, as compared to $0.4 million in the same quarter of 2007. The gain on sale of assets recognized in the first quarter of 2008 primarily resulted from the sale of excess transportation equipment. During the first quarter of 2007, the Company completed the sale of two parcels of the former Georgie Boy Manufacturing complex for approximately $0.6 million, resulting in a pre-tax gain of approximately $0.3 million. Also during the first quarter of 2007, the Company completed the sale of vacant farmland in Middlebury, Indiana for cash of approximately $0.1 million, resulting in a pre-tax gain of approximately $0.1 million.

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INTEREST EXPENSE

Interest expense was $1.0 million and $0.8 million for the three-month periods ended March 31, 2008 and 2007, respectively. Interest expense increased due to higher borrowings during the quarter, offset partly by the lower applicable interest rates.

INVESTMENT INCOME

There was a net investment income of $0.3 million for the quarter ended March 31, 2008 compared to $0.5 million in the same quarter of 2007. Investment income is principally attributable to earnings of the life insurance policies held. 

OTHER INCOME, NET

Other income, net, represents income of $0.1 million for both the first quarter of 2008 and the first quarter 2007.

PRE-TAX INCOME (LOSS)

Pre-tax income for the first quarter of 2008 was $1.3 million compared with a pre-tax loss of $10.4 million in the first quarter of 2007. The Company's RV Segment generated a pre-tax loss of $1.1 million, or 1.2% of recreational vehicle net sales in the first quarter of 2008, compared with a pre-tax loss of $8.0 million, or 7.7% of the RV Segment's net sales in the first quarter of 2007. The Housing Segment recorded a pre-tax income of $1.4 million in the first quarter of 2008 or 4.4% of segment net sales compared with a pre-tax loss of $2.7 million in the first quarter of 2007 or 10.3% of segment net sales (see Note 2 of Notes to Consolidated Financial Statements).

INCOME TAXES

Due to the Company’s cumulative losses in recent years, net operating loss carryforwards were utilized to offset current taxable income essentially reducing the effective tax rate to zero for the first quarter of 2008. In the first quarter of 2007, a valuation allowance of $4.5 million was recognized to offset potential net operating loss tax benefits associated with the losses from the quarter, also essentially reduced the effective tax rate to zero for the first quarter of 2007 (see Note 8 of Notes to Consolidated Financial Statements).

NET INCOME (LOSS)

Net income for the quarter ended March 31, 2008 was $1.3 million (income of $0.08 per diluted share) compared to a net loss for the quarter ended March 31, 2007 of $10.4 million (a loss of $0.67 per diluted share).

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

The Company generally relies on funds from operations as its primary source of working capital and liquidity. In addition, the Company maintains a $55.0 million secured line of credit to meet its seasonal working capital needs. At March 31, 2008 there was $33.9 million in outstanding borrowings, while at March 31, 2007 there was $7.6 million. As of March 31, 2008 and December 31, 2007, respectively, $23.7 million and $17.6 million had been borrowed against the cash surrender value of Company-owned life insurance contracts. As of March 31, 2008, the cash surrender value of life insurance is approximately $53.2 million, with $23.7 million borrowed, resulting in a cash surrender value net of loans of $29.5 million. As of March 31, 2008, the Company had capacity to borrow an additional maximum amount of $26.9 million against the net cash surrender value.

At March 31, 2008, working capital increased to $36.6 million from $25.3 million at December 31, 2007. The $36.0 million increase in current assets at March 31, 2008 versus December 31, 2007 was primarily due to the increase in accounts receivable of $26.7 million, assets held for sale of $5.0 million and inventory of $3.0 million. The $24.8 million increase in current liabilities at March 31, 2008 versus December 31, 2007 was primarily due to an increase in accounts payable of $16.1 million, an increase in short-term borrowings of $13.8 million, offset by decreases in accrued expenses and other liabilities of $4.6 million.

Management believes that the Company’s existing cash and cash equivalents as of March 31, 2008, together with its available revolving credit facility and cash expected to be generated from future operations, will be sufficient to fund future planned capital expenditures and other operating cash requirements for the foreseeable future.

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CRITICAL ACCOUNTING POLICIES

The preparation of the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Historically, actual results have not been materially different from the Company's estimates. However, actual results may differ from these estimates under different assumptions or conditions. A summary of the Company’s more significant accounting policies that require the use of estimates and judgments in preparing the financial statements is provided in the Company’s 10-K Report for the year ended December 31, 2007. During the first three months of fiscal 2008, there was no material change in the accounting policies and assumptions previously disclosed.

New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 establishes a framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards which permit, or in some cases require, estimates of fair market value. SFAS No. 157 also expands financial statement disclosure requirements about a company’s use of fair value measurements, including the effect of such measures on earnings. The adoption of this statement did not have a material effect on the Company's financial statements

In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS No. 159). SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The adoption of this statement did not have a material effect on the Company's financial statements.

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141 (revised 2007), Business Combinations, (SFAS No. 141R). SFAS No. 141R provides revised guidance on how acquirers recognize and measure the consideration transferred, identifiable assets acquired, liabilities assumed, noncontrolling interests, and goodwill acquired in a business combination. SFAS No. 141R also expands required disclosures surrounding the nature and financial effects of business combinations. SFAS No. 141R is effective, on a prospective basis, for fiscal years beginning after December 15, 2008. The Company believes that the adoption of SFAS 141 (revised 2007) could have an impact on the accounting for any future acquisition, if one were to occur.

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, (SFAS No. 160). SFAS No. 160 changes the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

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Forward-Looking Statements

This Form 10-Q Report contains certain statements that are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on management’s expectations and beliefs concerning future events. Forward-looking statements are subject to risks and uncertainties, and are dependent on various factors, many of which are outside the control of the Company. These uncertainties and other factors include, but are not limited to:

• the ability of the management team to achieve desired results;

• interest rates, which affect the affordability of the Company's products;

• consumer confidence and the availability of credit;

• the Company’s ability to utilize manufacturing resources efficiently;

• the Company’s ability to introduce new models that achieve consumer acceptance;

• the margins associated with the mix of products the Company sells in a particular period;

• the availability of floorplan financing for the Company's recreational vehicle dealers and corresponding availability of cash to the Company;

• oil supplies and the availability and price of gasoline and diesel fuel, which can impact the sale of recreational vehicles;

• the Company's dependence on chassis and other suppliers;

• potential liabilities under repurchase agreements and guarantees;

• consolidation of distribution channels in the recreational vehicle industry;

• legislation governing the relationships of the Company with its recreational vehicle dealers, which may affect the Company’s options and liabilities in the event of a general economic downturn;

• the price volatility of materials used in production and the ability to pass on rapidly increasing costs of product components and raw materials to end buyers;

• the availability and cost of real estate for residential housing;

• the increased size and scope of work of military housing projects, and other major projects, as compared to the Company's traditional single-family homes business, with increased reliance on third parties for performance which could impact the Company; 

• the ability to perform in new market segments or geographic areas where it has limited experience;

• the impact of performance on the valuation of intangible assets;

• the supply of existing homes within the Company’s markets;

• the impact of home values on housing demand;

• uncertainties and timing with respect to sales resulting from recovery efforts in the Gulf Coast;

• adverse weather conditions affecting home deliveries;

• changing government regulations, including those covering accounting standards;

• environmental matters or product warranties and recalls, which may affect costs of operations, revenues, product acceptance and profitability;

• the state of the recreational vehicle and housing industries in the United States;

• changes in property taxes and energy costs;

• changes in federal income tax laws and federal mortgage financing programs;

• competition in the industries in which the Company operates;

• further developments in the war on terrorism and related international crises;

• uncertainties of matters in litigation and other risks and uncertainties;

• the ability of the Company to generate taxable income in future years to utilize deferred tax assets and net operating loss carryforwards that are available;

• the availability of financing under the Company’s line of credit;

• the Company’s ability to increase gross margins which are critical whether or not there are increased sales;

• the Company’s use of incentives at either the wholesale or retail level;

• the impact of sub-prime lending on the availability of credit for the broader housing market;

• the dependence on key customers within certain product types;

• the potential fluctuation in the Company’s operating results;

• uncertainties regarding the impact of the disclosed restructuring steps in both the Recreational Vehicle and Housing Segments.

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In addition, investors should be aware that generally accepted accounting principles prescribe when a company must disclose or reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for a major contingency. Reported results may therefore appear to be volatile in certain accounting periods. The foregoing lists are not exhaustive, and the Company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements.

At times, the Company's actual performance differs materially from its projections and estimates regarding the economy, the recreational vehicle and housing industries and other key performance indicators. Readers of this Report are cautioned that reliance on any forward-looking statements involves risks and uncertainties. Although the Company believes that the assumptions on which the forward-looking statements contained herein are reasonable, any of those assumptions could prove to be inaccurate given the inherent uncertainties as to the occurrence or nonoccurrence of future events. There can be no assurance that the forward-looking statements contained in this Report will prove to be accurate. The inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that the Company's objectives will be achieved.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, operations of the Company are exposed to fluctuations in interest rates. These fluctuations can vary the costs of financing and investing yields. During the first three months of 2008, the Company has utilized its revolving credit facility to meet short-term working capital needs. The Company had $33.9 million outstanding against the revolving credit facility on March 31, 2008. The Company had $7.6 million outstanding against the revolving credit facility on March 31, 2007.

At March 31, 2008, the Company had one interest rate swap agreement with a notional amount of $2.4 million that was used to convert the variable interest rates on an industrial development revenue bond to a fixed rate. In accordance with the terms of the swap agreement, the Company pays a 3.71% interest rate, and receives the Bond Market Association Index (BMA), calculated on the notional amount, with net receipts or payments being recognized as adjustments to interest expense. This swap agreement, is designated as a cash flow hedge for accounting purposes and effectively converts a portion of the Company's variable-rate borrowing to a fixed-rate basis through November of 2011, thus reducing the impact of changes in interest rates on future interest expense. The fair value of the Company's interest rate swap agreement represents the estimated receipts or payments that would be made to terminate the agreements. A cumulative loss of approximately $22,000, net of taxes, attributable to changes in the fair value of interest rate swap agreements was recorded as a component of accumulated other comprehensive income (loss) for the quarter ended March 31, 2008. If in the future the interest rate swap agreements were determined to be ineffective or were terminated before the contractual termination dates, or if it became probable that the hedged variable cash flows associated with the variable-rate borrowings would stop, the Company would be required to reclassify into earnings all or a portion of the unrealized losses on cash flow hedges included in accumulated other comprehensive income (loss).

ITEM 4. CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2008. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2008.

There have been no changes during the quarter ended March 31, 2008 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 

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PART II. OTHER INFORMATION

Item 6. Exhibits

See Index to Exhibits incorporated by reference herein.

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

COACHMEN INDUSTRIES, INC.

(Registrant)

Date: April 30, 2008	By:	/s/ Richard M. Lavers
		Richard M. Lavers, Chief Executive Officer
Date: April 30, 2008	By:	/s/ Colleen A. Zuhl
		Colleen A. Zuhl, Chief Financial Officer
Date: April 30, 2008	By:	/s/ Stephen L. Patterson
		Stephen L. Patterson, Corporate Controller

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INDEX TO EXHIBITS

Number Assigned In Regulation S-K, Item 601	Description of Exhibit
(3)(a)(i)	Articles of Incorporation of the Company as amended on May 30, 1995 (incorporated by reference to Exhibit 3(i) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995).
(3)(a)(ii)	Articles of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 4.2 to the Company's Form S-3 Registration Statement, File No. 333-14579).
(3)(b)	By-Laws as modified through August 22, 2007.
(10)(a)	Entry into a Material Definitive Contract for production of Modular Units for Ft. Carson (incorporated by reference to the Company’s Form 8-K filed January 25, 2008).
(10)(b)	2008 Annual Executive Incentive Compensation Plan (incorporated by reference to the Company’s Form 8-K filed February 11, 2008).
(10)(c)	Entry into a Material Definitive Agreement with ARBOC Mobility, LLC to produce ADA compliant low floor accessible buses.
(31.1)	Rule 13a-14(a) Certification of Chief Executive Officer.
(31.2)	Rule 13a-14(a) Certification of Chief Financial Officer.
(32.1)	Section 1350 Certification of Chief Executive Officer.
(32.2)	Section 1350 Certification of Chief Financial Officer.

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EX-3.B

BY-LAWS OF

COACHMEN INDUSTRIES, INC.

(as modified through August 22, 2007)

ARTICLE I

OFFICES

Principal Offices.  The principal office of the Corporation shall be in the City of Elkhart, Indiana, and the Corporation may have such other offices, either within or without the State of Indiana, as it may require from time-to-time.

ARTICLE II

SHAREHOLDERS

Section 2.1 -  Place of Meetings.  All meetings of the shareholders for the election of Directors shall be held at the offices of the Corporation in the County of Elkhart, State of Indiana, or elsewhere as the Board of Directors may designate.  Meetings of shareholders for any purpose may be held at such place as shall be stated in the notice of the meeting, or in a duly executed waiver of notice thereof.

Section 2.2 -  Annual Meetings.  An annual meeting of the shareholders, commencing with the year 1983, shall be held at a time and place to be determined by the Chairman on the fifth (5th) Thursday after the end of the first quarter, but if a legal holiday, then on the next secular day following, or at such other time as the Board of Directors shall determine, at which they shall vote on any Directors standing for election and transact such other business as may properly be brought before such meeting.

Section 2.3 - Special Meetings.  Special meetings of the shareholders may be called by the Chairman, or by a majority of the Board of Directors.

Section 2.4 - Shareholders Suits. As a condition precedent to any shareholder in a representative capacity bringing any action or suit against the Corporation or its directors or officers, or any of them or any combination thereof (in their respective capacities), including but not limited to allegations of securities irregularities or fraud, the shareholder must enter into a written agreement with the Corporation providing that the prevailing party(ies) shall be reimbursed by the adverse party(ies) for its/his/their reasonable attorney’s fees, court costs and other expenses of litigation incurred in connection with the action or suit.

Section 2.5 – Notice of Meetings. Written or printed notice stating the place, day, and hour of the meeting of shareholders, and in case of a special meeting, the purpose or purposes for which the meeting is called shall be delivered not less than ten (10) days nor more than sixty (60) days before the meeting, either personally or by mail, by or at the direction of the Chairman, the President, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting.  If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the records of the Corporation, with postage thereon prepaid.  No business may be transacted at a special meeting other than that described in the notice thereof.

Section 2.6 - Shareholders Entitled to Vote.  The Board of Directors may fix a date as the record date in order to determine the shareholders entitled to notice of a shareholders meeting, to demand a special meeting, to vote, or to take any other action, such date in any case to be not more than seventy (70) days before the meeting or action requiring a determination of shareholders.

Section 2.7 - Voting Lists.  The officer or agent who has charge of the transfer books for shares of the Corporation shall make, at least five (5) business days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period beginning five (5) business days prior to such meeting and continuing through the meeting, shall be kept on file at the principal office of the Corporation and shall be subject to inspection of any shareholder in accordance with applicable law during the whole time of the meeting.  The original share ledger or transfer book, or a duplicate thereof kept in this state shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer books or to vote at any meeting of shareholders.  Failure to comply with the requirements of this Section 2.7 shall not affect the validity of any action taken at a shareholders’ meeting.

Section 2.8 - Quorum.  A majority of the outstanding shares of the Corporation entitled to vote at any meeting, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, provided that if less than such quorum is present, the meeting may be adjourned, in accordance with Section 2.10 of this Article, until a quorum is present.

Section 2.9 - Manner of Acting.  Every decision (other than the election of Directors) with respect to which the votes cast in favor exceed the votes cast in opposition shall be approved as a corporate act unless a larger affirmative vote is required by applicable statute or regulation, the Articles of Incorporation of the Corporation, the Rules of the New York Stock Exchange, these by-laws, or the Board of Directors.  Directors are elected by a plurality of the votes cast by shares entitled to vote in the election at a meeting at which a quorum is present, unless otherwise provided in the Articles of Incorporation of the Corporation.

Section 2.10 -  Adjournment.  If an annual or special shareholders’ meeting is adjourned to a different date, time, or place, notice thereof need not be given if the new time, date, or place is announced at the meeting before the adjournment.  A new record date need not be set if the adjournment is within one hundred twenty (120) days of the original meeting date.

Section 2.11 – Proxies.  At all meetings of shareholders, a shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney in fact.  Such proxy shall be filed with the meeting.  No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy.

Section 2.12 – Voting of Shares.  At every such meeting, each shareholder shall be entitled to cast one vote in person or proxy for each voting share of stock held in his name upon each matter submitted to vote.

Shares of its own stock belonging to this Corporation shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time, but shares of its own stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares at any given time.

Section 2.13 – Voting of Shares by Certain Holders.  Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the Board of Directors of such corporation may appoint or as the by-laws of such corporation may prescribe.

Shares standing in the name of a deceased person, a minor ward, or an incompetent person may be voted by his administrator, executor, court appointed guardian or conservator, either in person or by proxy without a transfer of such shares into the name of such administrator, executor, court appointed guardian or conservator.  Shares standing in the name of a trustee may be voted by him, either in person or by proxy.

Shares standing in the name of a receiver or trustee in bankruptcy may be voted by such receiver or trustee in bankruptcy, and shares held by or under the control of a receiver or trustee in bankruptcy may be voted by such receiver or trustee in bankruptcy without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver or trustee in bankruptcy was appointed.

A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote shares so transferred.

Section 2.14 – Voting by Ballot.  Voting on any question may be viva voce unless the presiding officer shall order that voting be by written ballot, and except that voting in elections shall be by written ballot, if a shareholder entitled to vote at that election so requests.

Section 2.15 – Notice of Director Nominations and Shareholder Proposals

(a)   Nominations for the election of Directors may be made by the Board of Directors or by any stockholder holding five percent (5%) or more of the outstanding shares entitled to vote for the election of Directors. Nominations by stockholders shall be made by notice in writing, either delivered to the Secretary of the Corporation, or mailed to the Secretary of the Corporation by first-class United States mail, postage prepaid, and in either case received by the Secretary of the Corporation not less than ninety (90) days prior to the month and day of the anniversary of the last meeting of the stockholders called for the election of Directors.  Notice of nominations which are proposed by the Board of Directors shall be given to the Secretary by the Chairman on behalf of the Board, by any reasonable means before the mailing of the proxy statement.

(b)   Each notice under subsection (a) must contain the name and number of shares beneficially held by the nominating stockholder, a clear and unequivocal statement of nomination, and certain information about each proposed nominee, including his/her name, age, business and residence addresses, principal occupation, the number of shares of Common Stock beneficially he/she owns, and such other information as is required under procedures adopted for nominations by the Governance Committee, and as is required to be included in a proxy statement soliciting proxies for the election of such proposed nominee.

(c)   Stockholders wishing to bring a proposal before a meeting of stockholders, whether or not it is to be included in a proxy statement, must submit it to the Secretary of the Corporation in writing, either delivered to the Secretary of the Corporation or mailed to the Secretary of the Corporation by first class United States mail, postage prepaid, and in either case received by the Secretary of the Corporation not less than sixty (60) days prior to the month and day of the anniversary of the mailing of the prior year’s proxy statement, together with identification and address of the proposing stockholder and such other information as would be required to determine the appropriateness of including the proposal in a proxy statement.  The Secretary, in conjunction with the Chairman and such professional advisors as they deem necessary, shall determine whether and in what form to include the stockholder proposal in proxy materials.

  (d)   If the Chairman of the meeting of stockholders determines that a     nomination or a proposal was not made in accordance with the   foregoing procedures, such nomination is void and such proposal shall not be submitted for consideration at the meeting.

ARTICLE III

DIRECTORS

Section 3.1 – General Powers.  The business and affairs of the Corporation shall be managed under the direction of its Board of Directors.

Section 3.2 – Number, Tenure, and Qualifications. The number of Directors of the Corporation shall be not less than six (6) nor more than twelve (12), the exact number of Directors to be determined from time-to-time by resolution of the Board of Directors.  The term for each Director shall be three (3) years, staggered so that the terms of approximately one third (1/3rd) of the Directors expire each year, except a shorter term may be authorized by a unanimous resolution of the Board of Directors in special circumstances.Each Director shall hold office until his term shall expire and his successor shall have been elected and qualified. Directors need not be residents of Indiana or shareholders of the Corporation, except as the Directors may direct by resolution from time to time.  No person shall be eligible for election of the Board of Directors who will have attained the full age of seventy-five (75) years prior to the beginning of the term for which said person is to serve as a Director, except pursuant to a unanimous resolution of the Board of Directors authorizing continued service for a limited period of time in special circumstances.

Directors may be removed with or without cause by action of a majority of the Directors acting at a meeting when the removal of a Director is included in the notice of the meeting as a purpose of the meeting. A Director may also be removed by the shareholders in any manner provided by statute.

Section 3.3 – Committees.  The Board of Directors, by resolution adopted by a majority of Directors, may create one or more committees and appoint members of the Board to serve on the committee or committees.  Each committee shall have one or more members, who serve at the pleasure of the Board.

The Board of Directors shall have three (3) standing committees: the Governance Committee, the Management Development & Compensation Committee, and the Audit Committee. Membership on these standing committees shall be limited to Independent Directors, and the authority and duties of these standing committees shall be determined according to charters for each of them adopted by the Board of Directors, all in accordance with applicable statutes and regulations, the Rules of the New York Stock Exchange and the Corporation’s Governance Guidelines. To the extent specified by the Board of Directors or in the Articles of Incorporation or these by-laws, each other committee may exercise the authority of the Board of Directors under the Indiana Business Corporation Law, provided, however, no committee may: (1) authorize distributions, except a committee may authorize or approve a reacquisition of shares if done according to a formula or method prescribed by the Board of Directors; (2) approve or propose to shareholders action that requires shareholders’ approval under the Indiana Business Corporation Law; (3) fill vacancies on the Board of Directors or on any of its committees; (4) amend the Articles of Incorporation of this Corporation; (5) adopt, amend, or repeal these by-laws; or (6) approve a plan of merger not requiring shareholder approval.

Section 3.4 – Regular Meetings.  A regular meeting of the Board of Directors shall be held without other notice than this by-law, immediately after, and at the same general location as the annual meeting of shareholders.  If such meeting is not held as above provided, the election of officers may be held at any subsequent meeting of the Board of Directors specifically called in the manner hereinafter provided.  The Board of Directors may provide, by resolution, the time and place, either within or without the State of Indiana, for the holding of additional regular meetings without other notice than such resolution.

Section 3.5 – Special Meetings.  Special meetings of the Board of Directors may be called by or at the request of the Chairman or any three Directors, or as otherwise provided in these by-laws.  The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Indiana, as the place for holding any special meeting of the Board of Directors called by them.

Section 3.6 – Notice  Notice of any special meeting of Directors shall be given to be effective at least three (3) daysprior to the meeting.  Notice shall include the date, time and place of the meeting.  Neither the business to be transacted at, nor the purpose of any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting, except as otherwise specifically provided in these By-laws, the Articles of Incorporation or by applicable statute or regulation. Written notice of any special meeting of Directors shall be given as follows: by mail (which includes U.S. mail and private carrier service); or, by electronic mail or facsimile to an address or number provided by the Director(s) for such purposes; or, by personal delivery, telegram, teletype or other form of wire or wireless communication; in all cases, to each Director at his/her business address, or, in the event delivery  is to be made on a Saturday, Sunday, or legal holiday, then to the resident address of each Director.  Written notice is effective at the earliest of the following:  when received; five (5) days after the date of regular mailing, as evidenced by the postmark if correctly addressed to the address listed in the most current records of the corporation; or, on the date shown on the return receipt of a mailing or private carrier receipt, if the receipt is signed by or on behalf of the addressee.  If sent by electronic mail or facsimile, such notice will be presumed and determined to be delivered when the electronic records indicate that a good transmission was made unless proven otherwise. For purposes of dealing with an emergency situation, as conclusively determined by the Director(s)  calling the meeting, notice may be given in person, orally or by  any means that reasonably may be expected to provide notice under the circumstances, not less than two (2) hours prior to the meeting.  If the Secretary fails or refuses to give such notice, then the notice may be given by the  Director(s) calling the meeting.  Any Director may waive notice of any meeting.  The attendance of a Director at any meeting shall constitute a waiver of notice of such meeting, except where a Director attends and announces that  the express purpose of his/her attendance at the beginning of the meeting is to object to the holding of the meeting or the transaction of any business because the meeting is not lawfully called or convened, and provided that such Director does not thereafter participate in any way, vote for or assent or dissent to or on the record abstain from voting on any action taken at the meeting.

Section 3.7 – Quorum.  A majority of the number of Directors fixed under these by-laws shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, provided that if less than a majority is present, the majority of such Directors present may adjourn the meeting from time-to-time until a majority of the Board of Directors is present, without further notice.

Section 3.8 – Manner of Acting.  The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. A Chairman shall be chosen from the Board of Directors. The Chairman shall preside at all meetings of the shareholders and of the Board of Directors, and in general shall perform all duties incident to the office of the Chairman of the Board and such other duties as from time-to-time may be assigned to him/her by the Board of Directors. If the Chairman is not independent, an independent Director shall be elected by the independent Directors as the Lead Director. The Lead Director shall have authority to call and shall preside at all meetings of the independent and non-management Directors, and shall serve as the spokesperson for the independent Directors to the Chief Executive Officer and to the Chairman.

Section 3.9 – Vacancies.  Any vacancy occurring in the Board of Directors, and any Directorship to be filled by reason of an increase in the number of Directors, may be filled by the remaining Directors, though less than a quorum, at a regular or special meeting thereof.

Section 3.10 – Compensation.  By resolution of the Board of Directors, irrespective of any personal interest of any of the members, the Directors may be  compensated for their services to the Corporation in any reasonable manner, including but not limited to payment of their expenses, if any, of attendance at each meeting of the Board, or any duly organized committee of the Board of which they are members, and/or payment of a fixed sum for attendance at such  meeting(s) , and/or payment of a stated periodic amount for serving on the Board and/or any committee thereof.  Alternatively or additionally, the Directors may be paid either by issuance of a fixed number of shares of the Corporation, or payment of the fixed sums may be made by issuance of shares of the Corporation of an equivalent value as the amount due, as determined by the Board.  Such payment shall not alone preclude any Director from serving the Corporation in any other capacity and receiving compensation therefore, subject to applicable law and the policies of the Company.

Section 3.11 – Presumption of Assent.  A Director of the Corporation who is present at a meeting of the Board of Directors, at which action on any corporate matter is taken, shall be conclusively presumed to have assented to the action taken, unless his dissent shall be entered in the minutes of the meeting, or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof, or shall forward such dissent by registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting.  Such right to dissent shall not apply to a Director who voted in favor of such action taken.

Section 3.12 – Informal Action by Directors.  Any action required to be taken at a meeting of the Board of Directors, or any other action which may be taken at a meeting of the Board of Directors, or any duly organized committee thereof acting within the scope of its delegated authority, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the Directors entitled to vote with respect to the subject matter thereof or by all the members of such committee, as the case may be, and such consent is included in the minutes or filed with the corporate records reflecting the action taken.

ARTICLE IV

OFFICERS

Section 4.1 – Number.  The officers of the Corporation shall include a Chief Executive Officer, a President, a Treasurer, and a Secretary, all of whom shall be elected by the Board of Directors.

The Board of Directors may appoint such other officers as they deem necessary which may include various levels of Vice Presidents, a Controller, a Chief Financial Officer, a General Counsel, and others who shall have such authority and shall perform such duties as from time to time may be prescribed by the Board of Directors. Any two or more offices may be held by the same person.

The officers of the Corporation shall have such powers and authority in the control and management of the property and business of the Corporation as is usual and proper in the case of, and incident to, such corporate offices, except insofar as such power and authority is limited by these by-laws or by resolution of the Board of Directors. Officers shall report as designated by the Board of Directors or by these by-laws, or if there is no such designation, then as designated by the Chief Executive Officer.

Section 4.2 – Election and Term of Office.  The officers of the Corporation shall be elected annually, by the Board of Directors, at the first meeting of the Board of Directors held after each annual meeting of shareholders.  If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be.  Vacancies may be filled, or new offices filled, at any meeting of the Board of Directors.  Each officer shall hold office until his successor shall have been duly elected and shall have qualified, or until his death, or until he shall resign or shall have been removed in the manner hereinafter provided.

Section 4.3 – Removal.  Any officer or agent of the Corporation may be removed at any time by the Chairman, the Chief Executive Officer, or by the Board of Directors whenever, in his/her/its judgment, the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed; and, any such removal by the Chairman or Chief Executive Officer shall be subject to ratification by the Board of Directors, provided that such ratification shall be effective retroactive in effect to the date of removal.

Section 4.4 – Vacancies.  A vacancy in any office because of death, resignation, retirement, removal, disqualification or otherwise, may be filled by the Board of Directors, or to the extent permitted by applicable law, by the Chief Executive Officer, subject to ratification at the next regular meeting of the Board of Directors, in either case for the unexpired portion of the term.

Section 4.5 – Bonds.  If the Board of Directors by resolution shall so require, any officer or agent of the Corporation shall give bond to the Corporation in such amount and with such surety as the Board of Directors may deem sufficient, conditioned upon the faithful performance of their respective duties and offices.

Section 4.6 – Chief Executive Officer - The Chief Executive Officer shall have executive authority to see that all orders and resolutions of the Board of Directors are carried into effect and, subject to the control vested in the Board of Directors by statute, by the Articles of Incorporation or by these by-laws, shall administer and be responsible for the overall management of the business and affairs of the Corporation.  He/she may sign with the Secretary, or any other proper officer of the Corporation thereunto authorized by the Board of Directors, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors, or by these by-laws, to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed and, in general, shall perform all duties as may be prescribed by the Board of Directors from time-to-time.

Section 4.7 – President.  The President shall be chosen by the Board of Directors, and shall be directly in charge of all of the Corporation’s operations.  He may sign with the Secretary, or any other proper officer of the Corporation thereunto authorized by the Board of Directors, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors, or by these by-laws, to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed and, in general, shall perform all duties as may be prescribed by the Board of Directors from time-to-time.

Section 4.8 – Vice Presidents and Other Officers.  Vice Presidents and other Officers shall have such authority within an appointed area as determined by the Board of Directors, and shall perform such other duties as from time to time may be assigned to them by the Chief Executive Officer, President, or the Board of Directors. The Chief Financial Officer shall be the Officer of the Corporation who is primarily responsible for and whose duties shall be the financial reporting and management of the finances of the Corporation. The General Counsel shall be an Officer of the Corporation, whose primary duties shall be to provide legal advice to the Corporation. The General Counsel may also serve in other officer capacities, and action taken by the General Counsel in such capacities shall not be considered legal advice by reason of his or her dual capacity. The act of settlement or failure to settle litigation brought against the Corporation or any of its subsidiaries is not the rendering of legal advice.

Section 4.9 – Treasurer.  If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine.  He shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation; receive and give receipts for moneys due and payable to the Corporation from any source whatsoever, and deposit all such moneys in the name of the Corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Article V of these by-laws; (b) in general, perform all duties incident to the office of Treasurer and such other duties as from time-to-time may be assigned to him by the Chief Executive Officer, the Chief Financial Officer, or the Board of Directors.

Section 4.10 – Secretary.  The Secretary shall: (a) keep the minutes of the shareholders and Board of Directors’ meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) be custodian of the Corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these by-laws; (d) keep a register of the post office address of each shareholder; (e) have general charge of the share transfer books of the Corporation; (f) in general, perform all duties incident to the office of Secretary and such other duties as from time-to-time may be assigned to him by the Chairman, the Chief Executive Officer, or by the Board of Directors. The Secretary may sign any document on behalf of the Corporation, subject to Articles V and VI.

Section 4.11 – Assistant Treasurers and Assistant Secretaries.  The Assistant Treasurers shall, respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine.  The Assistant Treasurers and Assistant Secretaries, in general, shall perform such duties as shall be assigned to them by the Treasurer or the Secretary, respectively, or by, the Chief Executive Officer, or the Board of Directors.

Section 4.12 – Compensation.  The compensation of the officers shall be fixed from time-to-time by the Board of Directors and no officer shall be prevented from receiving such compensation by reason of the fact that he is also a Director of the Corporation.

Section 4.13 – Succession.  The Board of Directors by resolution shall from time to time establish emergency succession procedures and authority in case of the unexplained absence of, or inability to reach, the Chairman, the Chief Executive Officer, and/or the President for a period of forty-eight (48) hours, or in the event of the inability of any of them to act, or the refusal by any of them to act in accordance with the law or the directives of the Board of Directors. In the absence of such a resolution in such an event:

(a) with respect to the President, the Chief Executive Officer or any other officer whom the Chief Executive Officer shall designate shall perform the duties of the President;

(b) with respect to the Chief Executive Officer, the President shall perform the duties of the Chief Executive Officer;

(c) in case of such an unexplained absence or inability to reach both the Chief Executive Officer and the President, or such an inability or refusal to act by both the Chief Executive Officer and the President, then the Chairman shall perform the duties of both the Chief Executive Officer and the President; and, if the Chairman is unable to so perform, then the most senior Executive Vice President shall temporarily perform the duties of the Chief Executive Officer and President until action by the Board of Directors.

(d) with respect to the Chairman, the Chief Executive Officer shall perform the duties of the Chairman if the offices are held by two individuals. In the event the offices of Chairman and Chief Executive Officer are unitary, then the President shall perform the duties of the Chief Executive Officer, and the Lead Director shall perform the duties of the Chairman.

The Chairman, or the Lead Director in his or her stead, shall call a Special Meeting of the Board of Directors within seven (7) days of such an event, for the express purpose of filling any vacancies and appointing new officers, as appropriate, unless the Chief Executive Officer, President or the Chairman, respectively, resumes his or her duties in the interim.

ARTICLE V

CONTRACTS, LOANS, CHECKS, AND DEPOSITS

Section 5.1 – Contracts.  The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of, and on behalf of, the Corporation, and such authority may be general or confined to specific instances. In the absence of any such applicable authorization, any two (2) of the Chief Executive Officer, the President, the Chief Financial Officer and the Secretary shall have the authority to sign any contract or deed in the name of, and on behalf of, the Corporation.

Section 5.2 – Loans.  No loans shall be contracted on behalf of the Corporation, and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors.  Such authority may be general or confined to specific instances.

Section 5.3 – Checks, Drafts, Etc.  All checks, drafts, or other order for the payment of money, notes, or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner as shall from time-to-time be determined by resolution of the Board of Directors.

Section 5.4 – Deposits.  All funds of the Corporation not otherwise employed shall be deposited from time-to-time to the credit of the Corporation in such banks, trust companies, or other depositaries as the Board of Directors may select.

ARTICLE VI

SHARES, CERTIFICATES FOR SHARES, AND TRANSFER OF SHARES

Section 6.1 – Regulation.  The Board of Directors may make such rules and regulations as it may deem expedient concerning the issuance, transfer, and registration of certificates for shares of the Corporation, including the appointment of transfer agents and registrars.

Section 6.2 – Shares.  Shares may be certificated or uncertificated as specifically provided in this Section.

(a)           Except as specifically provided in this Section, all shares shall be represented by a certificate.  Certificates representing shares of the Corporation shall be respectively numbered serially, with due consideration for any uncertificated shares, for each class of shares, or series thereof, as they are issued, may be impressed with the Corporate seal, or a facsimile thereof, and shall be signed by the Chairman, Chief Executive Officer, or President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, provided that such signatures may be facsimile if the certificate is counter signed by a transfer agent, or registered by a registrar other than the Corporation itself or its employee.  Each certificate shall state the name of the Corporation, the fact that the Corporation is organized or incorporated under the laws of the State of Indiana, the name of the person to whom issued, the date of issue, the class (or series of any class), the number of shares thereby or a statement that such shares are without par value.  If the Articles of Incorporation of the Corporation authorize the issuance of more than one class of shares, a statement of the designations, preferences, qualifications, limitations, restrictions and special or relative rights of the shares of each class shall be set forth in full or summarized on the face or back of the certificates which the Corporation shall issue or in lieu thereof, the certificate may set forth that such a statement or summary will be furnished to any shareholder upon request without charge.  Each certificate shall be otherwise in such form as may be prescribed by the Board of Directors and as shall conform to the rules of any stock exchange on which the shares may be listed.

The Corporation shall not issue certificates representing fractional shares and shall not be obligated to make any transfers creating a fractional interest in a share of stock.  The Corporation may, but shall not be obligated to, issue script in lieu of any fractional shares, such scrip to have terms and conditions specified by the Board of Directors.

(b) Uncertificated, Book-entry Shares.  Uncertificated, book-entry shares shall be permitted only through the Direct Registration System (“DRS”) approved by the Securities Exchange Commission.  All registered shareholders owning uncertificated, book-entry shares through the DRS shall have the same rights as if they held certificated shares.

Section 6.3 – Cancellation of Certificates.  All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificates shall be issued in lieu thereof until the former certificate for a like number of shares shall have been surrendered and cancelled, except as herein provided with respect to lost, stolen, or destroyed certificates.

Section 6.4 – Lost, Stolen, or Destroyed Certificates.  Any shareholder claiming that his certificate for shares is lost, stolen, or destroyed may make an affidavit or affirmation of that fact and lodge the same with the Secretary of the Corporation, accompanied by a signed application for a new certificate.  Thereupon, and upon the giving of a satisfactory bond of indemnity to the Corporation not exceeding in amount double the value of the shares represented by such certificate, such value to be determined by the Chairman and Treasurer of the Corporation, a new certificate may be issued of the same tenor and representing the same number, class, and series of shares as were represented by the certificate alleged to be lost, stolen, or destroyed.

Section 6.5 – Transfer of Shares.  Shares of the Corporation shall be transferable on the books of the Corporation by the holder thereof in person or by his duly authorized attorney, upon the surrender and cancellation of a certificate or certificates for a like number of shares.  Upon presentation and surrender of a certificate for shares properly endorsed and payment of all taxes therefor, the transferee shall be entitled to a new certificate or certificates in lieu thereof.  As against the Corporation, a transfer of shares can be made only on the books of the Corporation and in the manner hereinabove provided, and the Corporation shall be entitled to treat the holder of record of any share as the owner thereof and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the statutes of the State of Indiana.

ARTICLE VII

FISCAL YEAR

The fiscal year of the Corporation shall end of the last day of December in each calendar year.

ARTICLE VIII

DIVIDENDS

The Board of Directors may from time-to-time fix a record date, declaration date, and payment date with respect to any share dividend or distribution to shareholders in the manner and upon the terms and conditions provided by law and its Articles of Incorporation.

ARTICLE IX

SEAL

The Board of Directors shall provide a Corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the Corporation and the words “Corporate Seal, Indiana.”

ARTICLE X

WAIVER OF NOTICE

Whenever any notice is required to be given under the provisions of these by-laws or under the provisions of the Articles of Incorporation or under the provisions of the Indiana Business Corporation Law, or otherwise, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.  Attendance at any meeting, in person, or by proxy shall constitute a waiver of notice of such meeting, unless the person or persons entitled to such notice at the beginning of the meeting objects to holding the meeting.

ARTICLE XI

INDEMNIFICATION

Section 11.1 – General.  The Corporation shall, to the fullest extent to which it is empowered to do so by the Indiana Business Corporation Law, or any other applicable laws, as from time-to-time in effect, indemnify any Indemnified Officer who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal administrative, or investigative, and whether formal or informal, by reason of the fact that he is or was a Director, officer, employee, or agent of the Corporation, or who, while serving as such Director, officer, employee, or agent of the Corporation, is or was serving at the request of the Corporation as a Director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, whether for profit or not, against judgments, settlements, penalties and fines (including excise taxes assessed with respect to employee benefit plans) and reasonable expenses (including counsel fees) incurred by him in accordance with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed, in the case of conduct in his official capacity, was in the best interests of the Corporation, and in all other cases, was not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, he either had reasonable cause to believe his conduct was lawful or no reasonable cause to believe his conduct was unlawful.  For these purposes, the giving of legal advice regarding matters pertaining to the Corporation by the General Counsel to the Corporation, a Director, or any member of management shall be deemed serving as an officer.

Any other person may be so indemnified if it is determined by the Board of Directors by a majority vote of a quorum none of whom were at the time parties to such action that such indemnification is in the interest of the Corporation, subject to the provisions of this Article.

The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not meet the prescribed standard of conduct.

Section 11.2 – Authorization of Indemnification.  To the extent that an Indemnified Officer of the Corporation has been successful, on the merits or otherwise in the defense of any action, suit or proceeding referred to in Section 11.1 of this Article, or in the defense of any claim, issue or matter therein, the Corporation shall indemnify such person against reasonable expenses (including counsel fees) incurred by such person in connection therewith.  Any other indemnification under Section 11.1 of this Article (unless ordered by a court) shall be made by the Corporation only as indemnification of the person to be indemnified is permissible in the circumstances because he has met the applicable standard of conduct, and as authorized as provided below.

Determination as to whether indemnification is permissible shall be made (a) by the Board of Directors by a majority vote of a quorum none of whom were  at the time parties to such action, suit or proceeding; or (2) if a quorum cannot be obtained under subdivision (1) by majority vote of a committee duly designated by the Board of Directors (in which designation Directors who are parties may participate), consisting solely of two or more Directors not at the time parties to such action, suit, or proceeding; or (3) by special legal counsel: (A) selected by the Board of Directors or its committee in the manner prescribed in subdivision (1) or (2), or (B) if a quorum of the Board of Directors cannot be obtained under subdivision (1) and a committee cannot be designated under subdivision (2), selected by majority vote of the full Board of Directors; or (4) by the shareholders, but shares owned by or voted under the control of Directors who are at the time parties to such action, suit or proceeding may not be voted on the determination.

Authorization of indemnification, the extent of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shall be made by those entitled under sub-section (3) to select counsel.

Section 11.3 – Good Faith Defined. For purposes of any determination under this Article XI, a person shall be deemed to have acted in good faith and to have otherwise met the applicable standard of conduct set forth in Section 11.1 if his action is based on information, opinions, reports, or statements, including financial statements and other financial data if prepared or presented by (1) one or more other Directors, officers or employees of the Corporation or another enterprise whom he reasonably believes to be reliable and competent in the matters presented; (2) legal counsel, public accountants, appraisers or other persons as to matters he reasonably believes are within the person’s professional or expert competence; or (3) a committee of the Board of Directors of the Corporation or another enterprise of which the person is not a member if he reasonably believes the committee merits confidence.  The term “another enterprise” as used in this Section 11.3 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such a person is or was serving at the request of the Corporation as a Director, officer, partner, trustee, employee, or agent.  The provisions of this Section 11.3 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standards of conduct set forth in Section 11.1 of this Article XI.

Section 11.4 – Payment of Expenses in Advance.  Reasonable expenses incurred in connection with any civil or criminal action, suit or proceeding may be paid for or reimbursed by the Corporation in advance of the final disposition of such action, suit, or proceeding, as authorized in the specific case in the same manner described in Section 11.2 of this Article, upon receipt of a written affirmation of the person to be indemnified’s good faith belief that he has met the standard of conduct described in Section 11.1 of this Article and upon receipt of a written undertaking by or on behalf of the  said person to repay such amount if it shall ultimately be determined that he did not meet the standard of conduct set forth in this Article XI, and a determination is made that the facts then known to those making the determination would not preclude indemnification under this Article XI.

Section 11.5 – Provisions Not Exclusive.  The indemnification provided by this Article shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under the Articles of Incorporation of this Corporation, any other by-law, any resolution of the Board of Directors or shareholders, any other authorization, whenever adopted, after notice, by a majority vote of all voting shares then outstanding, or any contract, both as to action in this official capacity and as to action in another capacity while holding such office.

Section 11.6 – Vested Right to Indemnification.  The right of any individual to indemnification under this Article shall vest at the time of occurrence or performance of any event, act or omission giving rise to any action, suit, or proceeding of the nature referred to in Section 11.1 of this Article and, once vested, shall not later be impaired as a result of any amendment, repeal, alteration or other modification of any or all of these by-laws, or by a change in his employment status or other capacity entitling him to indemnification, and shall inure to the benefit of the heirs, executors and administrators of such an individual.  Notwithstanding the foregoing, the indemnification afforded under this Article shall be applicable to all alleged prior acts or omissions of any individual seeking indemnification hereunder, regardless of the fact that such alleged acts or omissions may have occurred prior to the adoption of this Article, and to the extent such prior acts or omissions cannot be deemed to be covered by this Article XI, the right of any individual to indemnification shall be governed by the indemnification provisions in effect at the time of such prior acts or omissions.

Section 11.7 – Insurance.  The Corporation may purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee, or agent of the Corporation or who is or was serving at the request of the Corporation as a Director, officer, partner, trustee, employee, or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against or incurred by the individual in that capacity or arising from the individual’s status as a Director, officer, employee, or agent, whether or not the Corporation would have power to indemnify the individual against the same liability.

Section 11.8 – Additional Definitions.  For purposes of this Article, references to “the Corporation” shall include any domestic or foreign predecessor entity of the Corporation in a merger or other transaction in which the predecessor’s existence ceased upon consummation of the transaction.

For purposes of this Article, serving an employee benefit plan at the request of the Corporation shall include any service as a Director, officer, employee, or agent of the Corporation which imposes duties on, or involves services by such Director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries.  A person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of any employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interest of the Corporation” referred to in this Article.

For purposes of this Article, “party” includes any individual who is or was a plaintiff, defendant, or respondent in any action suit or proceeding, or who is threatened to be made a named defendant or respondent in any action, suit or proceeding.

For purposes of this Article, “official capacity,” when used with respect to a Director, shall mean the office of Director of the Corporation; and when used with respect to an individual other than a Director shall mean the office in the Corporation held by the officer or the employment or agency relationship undertaken by the employee or agent on behalf of the Corporation.  “Official capacity” does not include service for any other foreign or domestic corporation or any partnership, joint venture, trust, employee benefit plan, or other enterprise, whether for profit or not.

For the purpose of this Article, “Indemnified Officer” means any Officer or Director of the Corporation, any officer or Director of any wholly owned subsidiary of the Corporation, and any member of the Management Group (as hereafter defined) of an operating division of the Corporation or any of its subsidiaries.

For the purpose of this Article, “Management Group” means the division General Manager, and those employees who have division-wide responsibility and whose titles are or include President or Vice President..

Section 11.9 – Payments a Business Expense.  Any payments made to any indemnified party under these by-laws or under any other right to indemnification shall be deemed to be an ordinary and necessary business expense of the Corporation, and payment thereof shall not subject any person responsible for the payment, or the Board of Directors, to any action for corporate waste or to any similar action.

ARTICLE XII

AMENDMENTS

These by-laws may be altered, amended, or repealed and new by-laws may be adopted by a majority of the Directors present at any meeting of the Board of Directors of the Corporation at which a quorum is present.

b

EX-10.C

AGREEMENT

This AGREEMENT entered into on December 5, 2007, by and between ARBOC GROUP, LLC ("The ARBOC Group" herein) and Consolidated Leisure Industries, LLC ("CLI"); a limited liability company organized and existing under the laws of the State of Indiana.

WHEREAS, CLI owns certain subsidiaries that are engaged in the designing, manufacturing, marketing and selling recreational vehicles ("RVs") for a number of years:

WHEREAS, members of The ARBOC Group, through an entity known as ARBOC Technologies, LLC, have developed a unique and patented design of a handicapped-accessible vehicle commonly referred to as a Low Floor Light Duty Bus ("The Product");

WHEREAS, CLI is a wholly owned subsidiary of Coachmen Industries, Inc., a publicly traded company in the United States;

WHEREAS, CLI must comply with all applicable United States regulatory and statutory restrictions, including compliance with the Sarbanes-Oxley Act and must take any action deemed necessary by its parent company, Coachmen Industries, Inc.;

WHEREAS, CLI and The ARBOC Group wish to combine their efforts to manufacture, market and sell The Product through a company, ARBOC MOBILITY, LLC, a limited liability company formed under the laws of the State of Michigan.

NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants herein contained, the parties hereby agree as follows:

ARTICLE 1-ORGANIZATION AND CAPITALIZATION OF ARBOC MOBILITY, LLC

Section 1.01. ARBOC MOBILITY, LLC. By mutual consent and acting in concert, the parties have caused to be formed a new limited liability company formed under the laws of the State of Michigan named ARBOC MOBILITY, LLC. The Articles of Organization and Operating Agreement shall be as mutually agreed by CLI and The ARBOC Group. The principal office of ARBOC MOBILTY shall initially be located in Middlebury, Indiana, and ARBOC MOBILITY, LLC shall have such other offices as determined by its Board of Directors.

Section 1.02. Purpose of ARBOC MOBILITY, LLC. The purpose of ARBOC MOBILITY, LLC shall be to establish and expand a market for The Product which shall be manufactured exclusively by CLI, subject to the terms and provisions of this Agreement, and to engage in other business consistent with this Agreement as may be determined by its Board of Directors.

Section 1.03. Initial Contributions. The authorized membership units of ARBOC MOBILITY, LLC initially shall be 1000 membership units. ARBOC MOBILITY, LLC shall issue thirty percent (30%) of the units to CLI and seventy percent (70%) to The ARBOC Group. Notwithstanding the disparity in ownership of units, the Membership units issued to CLI and The ARBOC Group shall give fifty percent (50%) of the voting units in ARBOC MOBILITY, LLC to CLI and to The ARBOC Group respectively. As full consideration for such shares, CLI and The ARBOC Group shall provide the services, capital and other benefits identified in this Agreement.

Section 1.04. Additional Capital Contributions. In addition to the initial capital contributions, the Members may determine from time to time that additional capital is needed to enable the Company to conduct its business and affairs including but not limited to the expenses or earnest money deposits associated with the acquisition of real property. After making such a determination, and upon approval of at least 75% of the Membership Interests, notice shall be given to all Members in writing at least 30 days before the date on which the additional contributions are due. The notice shall describe, in reasonable detail, the purposes and uses of the additional capital, the amounts of additional capital required, and the date by which payment of the additional capital is due. Each Member's percentage of the total additional capital due shall equal the percentage of each Member's Membership Interest in the Company.

Section 1.05. Transferability of Membership Units.

(a)                 Transfer to a Third Party. Neither party shall voluntarily transfer, sell, assign, pledge, hypothecate, give or otherwise dispose of all or any portion of its Membership Units without the prior written approval of ,the other party, except in connection with a termination of the parties' relationship pursuant to Article 5.

(b)                 Purpose. Each party acknowledges and agrees that the restrictions on transfer of units of ARBOC MOBILITY, LLC herein are reasonable in view of the purpose and intent of the parties.

(c)                 Non-Dissolution. Each party hereby agrees not to petition any authority for the involuntary dissolution of ARBOC MOBILITY, LLC in the event that (1) the other party refuses to approve the transfer or other disposition of Membership Units pursuant to subsection 2.07(a) hereof, or (ii) the other party defaults in any obligation under this Agreement to purchase any Membership Units of the first party.

ARTICLE 2-FINANCING OF ARBOC MOBILITY, LLC

Section 2.01. General Financing Requirements for ARBOC MOBILITY, LLC. Subject to the conditions stated in this Agreement, it is intended that funding for operating costs as outlined in Exhibit 1 hereto shall be provided by CLI. As consideration for such funding, ARBOC MOBILITY, LLC shall execute a line of credit promissory note in the form substantially similar to Exhibit 2 hereto. Interest shall accrue on all indebtedness owed by ARBOC MOBILITY, LLC under said Line of Credit Promissory Note at the rate 1% per month on the principal balance without compounding interest. CLI agrees to provide up to Five Hundred Thousand Dollars ($500,000.00) up to and through January 31, 2008. In the event that ARBOC MOBILITY, LLC is unable to finance its own operating expenses after January 31, 2008, then the provisions of Section 2.03 hereof shall govern.

Section 2.02. Conditions To CLI's Financing. Upon the issuance of five (5) days written notice of termination, CLI shall have no further obligation to finance the operations of ARBOC MOBILITY, LLC. Upon issuance of the notice of termination hereunder, CLI shall remain obligated to complete the manufacture of any units that are in process within a timely manner. If such notice of termination is issued by CLI, then CLI shall transfer its equity ownership in ARBOC MOBILITY, LLC to The ARBOC Group upon receipt of payment of any outstanding balances on the Line of Credit note issued in accordance with this Agreement, and CLI shall forfeit its exclusivity in any intellectual property rights granted hereunder.

Section 2.03. Financing of Administrative Expenses after January 31, 2008. In the event that ARBOC MOBILITY, LLC is unable to finance its own operating expenses after January 31, 2008, then CLI, may at its option, elect to continue to finance such operating expenses on a month-by-month basis in accordance with the terms hereof without further commitment until such time as cash flow of ARBOC MOBILITY, LLC enables it to finance its own operating expenses. Notwithstanding CLI's rights hereunder, it shall have no obligation to continue to fund operating expenses after January 31,2008.

Section 2.04. Outside Financing. No additional financing shall be obtained by ARBOC MOBILITY, LLC without the written consent of the parties hereto.

ARTICLE 3-ENTITLEMENTS TO PROFITS

The parties shall be entitled to distribution of the profits of the company in accordance with their equity ownership in ARBOC MOBILITY, LLC up to the amount of the projected Pre-Tax Profitability as stated in Exhibit 3 hereof. To the extent that ARBOC MOBILITY, LLC shall generate profits in excess of said projected amounts, then CLI and The ARBOC GROUP shall share equally in any such excess profits. After year 3, the profits will be split in accordance with the parties equity ownership interest in the ARBOC MOBILITY, LLC (30% to CLI and 70% to The ARBOC Group) up to a maximum profit of the lesser amount of the year three (3) profitability from the Projections or the actual profitability of ARBOC MOBILITY, LLC from year three of operations provided that CLI meets the production demand of the lesser of 669 units or the actual sales orders with reasonable lead time submitted that calendar year. For any profits realized in an amount greater than the lesser of these two figures, the profits shall be shared equally without consideration to the equity ownership of the parties hereto.

ARTICLE 4-MANAGEMENT OF ARBOC MOBILITY, LLC

Section 4.01. General. The powers, responsibilities and procedures of the members, the Board of Directors, the Operating Management, and officers, managers and deputy managers of ARBOC MOBILITY, LLC shall be as specified in this Agreement and in the Articles of Organization and Operating Agreement (or By-Laws) of ARBOC MOBILITY, LLC.

Section 4.02. Meetings of Members. Annual and special meetings of the members shall be conducted as provided in the Articles of Organization and Operating Agreement.

Section 4.03. Member Issues.  Neither party shall petition any authority for the involuntary dissolution of ARBOC MOBILITY, LLC on the grounds of division or dissension of the members or the Board of Directors.

Section 4.05. Operating Management. The Operating management of ARBOC MOBILTY, LLC is made up of the Executive Management.

The Executive Management shall be comprised of a total of four (4) members, (2) assigned by each of CLI and The ARBOC Group.

Section 4.06. Audit of ARBOC MOBILITY, LLC. At the request of Executive Management, CLI may conduct an internal audit to monitor the financial performance of ARBOC MOBILITY, LLC and shall report the findings from all such audits to the Executive Management and the Members of the Board of Directors. ARBOC and CLI agree to cooperate with such internal auditors fully and to provide access to all information and records necessary for the conduction of such audit(s). All findings and working papers of the auditors shall be available to CLI and ARBOC. ARBOC MOBILITY, LLC shall be responsible for paying all costs associated with the internal audit including the time and expense incurred by CLI in completing the audit.

Additionally, CLI shall have the right to conduct such an internal audit at its own expense at anytime.

Section 4.07. External Audit. Executive Management shall have the authority to retain external auditors.

Section 4.08. Reporting Obligations. As determined by the Executive Management, ARBOC MOBILITY, LLC shall report to the Executive Management, the daily, weekly, monthly, quarterly and annual financial performance numbers.

Section 4.09. Administrative Services. Executive Management shall have the authority to arrange for the outsourcing of the administrative functions of the ARBOC MOBILITY, LLC. Initially, these functions will be performed CLI.

ARTICLE 5-CONTRACTS WITH CLI

Section 5.01. Contracts with CLI. ARBOC MOBILITY, LLC shall purchase products made by CLI in accordance with the terms of the Long Term Supply Agreement and Long Term Services Agreement that are attached hereto as Exhibits 1 and 4 provided that CLI shall reasonably satisfy the production requirements of ARBOC MOBILITY, LLC.

Section 5.02. Other Contracts Prohibited. ARBOC MOBILITY, LLC will exclusively sell, market and distribute only products made or licensed by CLI, except with the prior written consent of CLI, which consent may be withheld for any reason.

Section 5.03. Exclusive Patent Rights. ARBOC MOBILITY, LLC has the exclusive license for certain patent(s) necessary for the design and manufacture of The Product. Said Patents are more fully depicted in Schedule 1 hereto. ARBOC MOBILITY, LLC agrees to obtain the consent of the patent holder to license and/or assign its rights under such exclusive license to CLI for the manufacture, design, sale and other related matters of The Product at no cost or royalty fee to CLI, and to execute appropriate agreements to document such entitlements. Further, the parties hereto agree that CLI shall have the right to issue any necessary sub-license of the patents for the specific purpose of enabling third parties to provide services in relation to CLI's manufacture of The Product. CLI shall further have the exclusive right to obtain further license of the technology for use with unrelated products. The terms of any such further license, including the license fee to be paid to ARBOC MOBILITY, LLC, shall be the subject of a separate, independent agreement.

Section 5.04. Improvements, Innovations, Designs or Inventions. Any improvements, innovations, designs or inventions developed, discovered or acquired by ARBOC MOBILITY, LLC applicable to the manufacture, design, or distribution of The Product shall be exclusively licensed to CLI, royalty free, for use in the North American Free Trade Agreement area.

ARTICLE 6-TERMINATION

Section 6.01. Events of Termination. The parties' relationship, but not necessarily ARBOC MOBILITY, LLC, shall be terminated by mutual agreement of the parties or upon the occurrence of any of the following events:

i.   If ARBOC MOBILITY, LLC requires capital to fulfill its agreed upon objectives in an amount in excess of the amount CLI has agreed to provide pursuant to Article 2 hereof, and CLI and ARBOC after discussions, are unable to reach agreement on the further capital financing of ARBOC MOBILITY, LLC;

ii.   If a deadlock occurs in the Executive Management (subject to the provisions of Article 9).

iii.   In the event that CLI purchases the equity interests of The ARBOC Group in accordance with paragraph 6.02 hereof.

iv.   Five (5) days after issuance of a notice of termination or intent not to fund issued under paragraph 2.02 hereof;

v.   Five (5) days upon CLI's issuance of written Notice of Termination upon the failure of ARBOC MOBILITY, LLC to meet the following minimum firm sales orders on a cumulative basis:

i.   March 31,2008: 45

ii.   June 30, 2008: 75

iii.   September 30, 2008: 105

iv.   December 31,2008: 135

v.   The failure to procure a minimum of thirty (30) sales in any subsequent fiscal quarter.

For the purposes of this subsection, a "sale" shall mean receipt of a firm, irrevocable purchase order.

Section 6.02. CLl's Right to Purchase Interests of The ARBOC Group.

i.   (a)  after the completion of the second fiscal year of ARBOC MOBILITY, LLC, CLI shall have the exclusive right to purchase the ownership interest of The ARBOC Group if and only if the Pre-Tax Profit Projections are met or exceeded. In the event that Pre-Tax Profit projections are not met or exceeded, then CLI shall have the absolute right to assume control of the management of ARBOC MOBILITY, LLC and shall have the exclusive right to purchase the ownership interests of The ARBOC Group at the conclusion of the third fiscal year of operation.

ii.   (b)  Valuation. The parties shall agree upon the value of the ownership interest, taking fully into account CLI's thirty percent (30%) interest in profits up to the Projections and fifty percent (50%) interest in profits that exceed the Projections. In the event that the parties are unable to agree upon a valuation. Then, each party shall select a single business valuation expert ("valuator") who must have automotive industry experience. The parties agree that the method of valuation shall be a discounted projected cash flow valuation. The determinative value shall be the mean of the two valuator's opinions provided that the valuator's opinions are within twenty percent (20%) of the other's opinion. In the event that they are not within twenty (20%), then a third business valuator who shall be selected jointly by the valuators shall reach a final, determinative opinion of the value of The ARBOC's Group's ownership interest.

iii.   (c)  Timing of Exercise of Option. CLI may exercise its option within 30 days of the end of any fiscal year or 30 days within the end of any mid-fiscal year by providing written notice of the intent to exercise to The ARBOC Group.

iv.   (d)  Terms of Purchase. The terms of CLI's purchase hereunder shall be cash up to a maximum of Two (2) million dollars with any remaining balance payable on a five year term with a two year balloon at the Prime Rate minus one provided that CLI shall pledge the acquired membership units as collateral for the repayment of any such balance. Payments under such obligation shall be made on a monthly basis.

Section 6.03. Rights and Obligations. If the relationship is terminated pursuant to written notification from CLI, then CLI shall transfer to The ARBOC Group one hundred percent (100%) of CLI's ownership interest in ARBOC MOBILITY, LLC upon the satisfaction of all indebtedness owed to CLI by ARBOC MOBILITY, LLC and for no additional consideration. ARBOC MOBILITY, LLC shall pay any balances owing under the Line of Credit note provided for herein shall be due and payable within one hundred eighty (180) days of any notice of termination. In the event that ARBOC MOBILITY, LLC shall be terminated upon any other basis contained in this ARTICLE, ARBOC MOBILITY, LLC shall satisfy all outstanding liabilities and the remaining assets shall be distributed in accordance with the then existing ownership interests of CLI and The ARBOC Group.

Section 6.04. Release, Discharge and Indemnification

vi.          Release and Discharge. Upon a termination of the parties' relationship pursuant to this Section, ARBOC MOBILITY, LLC and its successors and assigns shall release and forever discharge CLI and The ARBOC Group and their respective successors and assigns and their respective employees and directors assigned to ARBOC MOBILITY, LLC from any and all claims, demands, costs, expenses, or compensation for or on account of any damages, loss, or injury, whether developed or undeveloped, resulting or to result, known or unknown, past, present or future, in any way arising out of, relating to, or concerning liabilities and/or violations of the ARBOC MOBILITY, LLC that have occurred on or before such termination.

vii.          Indemnification of CLI and The ARBOC Group. ARBOC MOBILITY, LLC and its successors and assigns shall indemnify and hold harmless CLI and The ARBOC Group from and against all liabilities incurred by them as a sole result of the events specified in paragraph (i) of this subsection unless CLI or The ARBOC Group to any extent, as independent entities, caused the liability or violation. If an action, suit, or proceeding shall be commenced, or any claim, demand or assessment be asserted against CLI or The ARBOC Group in connection with such events and in respect of which CLI and The ARBOC Group, as the case may be, proposes to demand indemnification, such party may be, proposes to demand indemnification, such party demanding indemnification shall notify ARBOC MOBILITY, LLC of such demand promptly, and ARBOC MOBILITY, LLC shall have the right to assume the entire control of the defense, compromise, or settlement thereof, including at its own expense employment of counsel, and, in connection therewith, the party demanding indemnification shall cooperate fully in such defense and make available to the ARBOC MOBILITY, LLC all pertinent information under its control.

viii.          Indemnification of Employees, Officers and Directors of CLI and The ARBOC Group. ARBOC MOBILITY, LLC and its successors and assigns shall, to the fullest extent permitted by law, indemnify and hold harmless the employees, officers and directors of CLI and The ARBOC Group assigned to ARBOC MOBILITY, LLC from and against liabilities incurred by them as a result of the events specified in paragraph (i) of this subsection.

ARTICLE 7-OPTION TO PURCHASE INTEREST

CLI shall have the exclusive option to purchase the interest of the remaining members of ARBOC MOBILITY, LLC in accordance with the provisions of Article 6 hereof.

ARTICLE 8 -CONFIDENTIALITY

Without the other's prior written consent, the parties hereto agree to keep the existence of this Agreement confidential and agree not to disclose the same generally to the public except and unless as required by law.

ARTICLE 9-DISPUTE RESOLUTION

Other than injunctive relief to enforce specific performance or the prohibitions under this Agreement or the licenses and contracts contemplated hereunder, any dispute, controversy or claim arising out of or relating to this Agreement or the operation of ARBOC MOBILITY, LLC which has not been resolved in the normal course through friendly discussions shall be settled first through discussions to be conducted by personal meeting of the Chief Executive Officers of CLI and The ARBOC Group in Middlebury, Indiana. In the event the parties are unable to reach resolution within thirty (30) days following such discussions, then the matter shall be submitted to non-binding mediation to be held in Elkhart, Indiana. In the event that non-binding mediation is unsuccessful in reaching a resolution, then either party may submit this matter to final and binding arbitration to be held in Chicago, Illinois and to be conducted in accordance with the Commercial Rules of the American Arbitration Association. If the parties agree upon an arbitrator, then the matter may be scheduled and conducted without the use of the administration of the American Arbitration Association. If the parties cannot agree upon an arbitrator, the matter shall be submitted to the American Arbitration Association for administration of the claim(s) in accordance with the rules of this Agreement.

Each party shall be solely responsible for its own costs. The arbitrator shall not draft an opinion regarding his / her arbitral award. The arbitral award shall be recognized and may be filed in and enforced by any court of competent jurisdiction. The parties may use equitable and injunctive powers of any court of competent jurisdiction to enforce compliance with this dispute settlement procedure.

ARTICLE 10-COVENANTS

Section 10.01. Restrictive Covenants. The parties agree that during the term of this Agreement and for a period of two (2) years thereafter if CLI purchases ARBOC's interest herein, neither party shall directly or indirectly

(1)   solicit for employment or contract any employee of the other; or

(2)              solicit any of the others' or ARBOC MOBILITY, LLC'S customers or suppliers in relation to sales of The Product or any similar products manufactured by any other other vehicle manufacturer.

The ARBOC Group further agrees that in the event that CLI shall terminate this relationship or cease funding that for a period of two (2) years from such termination or cessation of funding, The ARBOC Group will refrain from:

(1)   solicitation of any CLI employee;

(2)   solicitation of any of CLI's (or its subsidiaries) recreational vehicle customers.

This restrictive covenant specifically applies to all entities in which The ARBOC Group possesses any ownership interest or employment relationship, including ARBOC TECHNOLOGIES, LLC. The ARBOC Group agrees to deliver a restrictive covenant in favor of ARBOC Mobility, LLC prohibiting ARBOC TECHNOLOGIES, LLC from competing against it.

Section 10.02. Accurate Records. ARBOC MOBILITY, LLC shall maintain complete and accurate books and financial records, correctly reflecting all of its business transactions in accordance with generally accepted accounting principles. CLI and The ARBOC Group shall have complete and open access to such books and financial records. The Chief Financial Officer and Controller of ARBOC MOBILITY, LLC shall serve at the unanimous pleasure of The ARBOC Group and CLI.

Section 10.03. Disputes Concerning Financial or Accounting Matters. In the event of any dispute concerning the financial or accounting of ARBOC MOBILITY, LLC, the dispute shall be referred an This restrictive covenant specifically applies to all entities in which The ARBOC Group possess any ownership interest or employment relationship, including ARBOC TECHNOLOGIES, LLC. The ARBOC Group agrees to deliver a restrictive covenant in favor of ARBOC Mobility, LLC prohibiting ARBOC TECHNOLOGIES, LLC from competing against it.

independent accounting firm, whose decision and findings shall be final and binding. The fees of said accounting firm shall be borne entirely by ARBOC MOBILITY, unless the accounting firm also finds that either party was clearly in error, in which case the party in error shall pay the fees of said accounting firm or, if already paid, shall reimburse ARBOC MOBILITY, LLC all amounts paid for said fees.

Section 10.04. Confidentiality. The parties recognize that each may provide confidential information, know-how, technology or other form of data in furtherance of the objectives of ARBOC MOBILITY, LLC. The parties, therefore, agree to be bound by the Confidentiality Agreement previously executed by the parties which is attached hereto as Exhibit 5.

ARTICLE 11-REPRESENTATIONS AND WARRANTIES OF The ARBOC Group

Section 11.01 Validity of Patent licenses. The ARBOC Group represents that the patents depicted herein in Schedule 1 are valid and existing patents and further that the license of such patents to ARBOC MOBILITY, LLC and subsequently to CLI is the only existing license of said patents and shall remain exclusive in accordance with the express terms of said license agreements. The ARBOC Group further agree to take all necessary action to defend the rights in said patents to maintain current protection of the technologies protected thereby.

Section 11.02 Absence of Conflicts. The execution and delivery of this Agreement by The ARBOC Group and the consummation of the transactions required hereunder (1) do not and will not violate or conflict with any statute, regulation, judgment, order, writ, decree or injunction currently applicable to The ARBOC Group or any of its property or assets, and (ii) at and after the Closing will not violate or conflict with any charter provision or bylaw of The ARBOC Group or any of its business entities in which any member of The ARBOC Group possesses ownership interests or any existing mortgage, indenture, contract, licensing agreement, financing statement or other agreement binding on ARBOC.

Section 11.03. Survival of Representations and Warranties. These representations and warranties shall continue from date of execution of this Agreement and shall survive the termination of this Agreement.

ARTICLE 12 -REPRESENTATIONS AND WARRANTIES OF CLI

Section 12.01 Organization and Standing. CLI is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Indiana with the requisite power to enter into and perform its obligations under this Agreement in accordance with its terms.

Section 12.02 Authority. CLI has full right, power, and authority to execute and deliver this Agreement and to perform its terms. CLI has taken all required corporate actions to approve and adopt this Agreement. This Agreement is a duly authorized, valid and binding agreement of CLI enforceable against it in accordance with its terms, subject as to enforcement to bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors' rights and to general equity principles.

Section 12.03. Absence of Conflicts. The execution and delivery of this Agreement by CLI and the consummation of the transactions required hereunder (1) do not and will not violate or conflict with any statute, regulation, judgment, order, writ, decree or injunction currently applicable to CLI or any of its property or assets, and (ii) at and after the Closing will not violate or conflict with any charter provision or bylaw of CLI or any of its subsidiaries or any existing mortgage, indenture, contract, licensing agreement, financing statement or other agreement binding on CLI.

Section 12.04. Survival of Representations and Warranties. These representations and warranties shall continue from date of execution of this Agreement and shall survive the. termination of this Agreement.

ARTICLE 13-TAXATION AND INSURANCE

Section 13.01. Income Tax and Other Taxes. ARBOC MOBILITY, LLC shall pay all taxes required under laws and regulations of any governing bodies.

Section 12.02. Insurance. ARBOC MOBILITY, LLC shall at all times maintain insurance coverage of the types and in the amounts determined and approved by the Board of Directors.

ARTICLE 14-FORCE MAJEURE

Neither Party shall be liable for failure to perform its obligations hereunder due to causes beyond its control, including but not limited to labor disputes, acts of God, fire, flood or other catastrophes; any law, order, regulation or request of governmental authority of competent jurisdiction, national emergencies, insurrections, riots, wars, acts of terrorism, power failures, severe weather conditions or acts or omissions of transportation common carriers.

ARTICLE 15 -MISCELLANEOUS PROVISIONS

Section 15.01. Duration of Agreement. This Agreement shall continue in full force and effect unless terminated in accordance with the provisions of Section 8.06 of Article 9 hereof.

Section 15.02. No Assignment. Neither party to this Agreement may assign, transfer or otherwise convey any or all of its rights or obligations hereunder without the prior written consent of the other party, which may be withheld for any reason. Any attempt to assign, transfer or otherwise convey such rights or obligations without the requisite consents shall be void and of no effect.

Section 15.03. Entire Agreement: Amendment. This document with the annexed Exhibits sets forth the entire understanding between the parties relating to the subject matter contained herein and merges all prior discussions between them. No amendment to this Agreement shall be effective unless it is in writing and executed by the parties hereto.

Section 15.04. Severability. If anyone or more of the provisions contained in this Agreement or in any document executed in connection herewith (other than provisions constituting a material consideration to a party's entering into this Agreement or such other document) shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired; provided, however, that in such case the parties shall use their best efforts to achieve the purpose of the invalid provision.

Section 15.05. Governing Law. This Agreement and all actions contemplated hereby shall be governed by and construed and enforced in accordance with the laws of the State of Indiana, including the principles of conflict of laws thereof.

Section 15.06. Compliance with Laws. ARBOC MOBILITY, LLC will strictly comply with all provisions of the Sarbanes-Oxley Act and other applicable laws. ARBOC MOBILITY, LLC shall defend, indemnify and hold harmless ARBOC and CLI and any related companies for any loss, action or damage incurred as a result of any non­compliance by ARBOC MOBILITY, LLC with any such law.

Section 15.07 Notices. All notices, certificates, requests, demands, and other communications hereunder shall be in writing and may be personally served or sent by telex or certified or registered mail. All such notices, certificates, requests, demands and other communications shall be delivered to the party to receive same at the addresses indicated below (or at such other addressees) as a party may specify in a written notice).

If to CLI:

Michael R. Terlep

423 North Main Street

Middlebury, IN

With copy to:

Lorijean Oei

423 North Main Street

Middlebury, IN

P.O. Box 30

423 North Main

Middlebury, IN 46540

If to The ARBOC Group:

James Bartel

3504 Car Drive

Commerce Twp, MI 48382

With copy to:

Robert Ledbetter

2115 North Vermont

Royal Oak, MI

Section 15.08. Exhibits. The Exhibits are an integral part of this Agreement and all references herein to this Agreement shall encompass such Exhibits.

Section 15.09. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Section 15.10. Headings. The inserted headings are for convenience only and should not be used to construe or interpret this Agreement.

Section 15.11. Precedence. In the event of a discrepancy or inconsistency between (i) this Agreement, and (ii) the Articles of Organization, Bylaws or the procedures of ARBOC MOBILITY, LLC, the provisions of this Agreement shall control to the extent permitted by law.

Section 15.12. Drafting. This Agreement and the Exhibits hereto have been negotiated at arms length, and the parties hereto agree that neither shall be deemed responsible for the authorship thereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

[SIGNATURES ON NEXT PAGE]

THE ARBOC GROUP	CONSOLIDATED LEISURE INDUSTRIES, LLC
/s/ James J. Bartel	/s/ Michael R. Terlep, Jr.
Member	Michael R. Terlep, Jr.
Printed Name: James J. Bartel	President

Consolidated Leisure Industries, LLC.

Long Term Purchase/Supply Agreement

ADMINISTRATIVE SERVICES AGREEMENT

This agreement, dated the 5th day of December 2007, is entered by and between Consolidated Leisure Industries, LLC an Indiana limited liability company, hereinafter "CLI," and ARBOC MOBILITY, LLC., a Michigan Limited Liability Company, hereinafter "ARBOC".

Now therefore, the parties hereto agree as follows:

1   Term. The term of this agreement shall be from December 5,2007 to December 31,2012.

2   Purchase and sale of Administrative Services. ARBOC commits to the purchase from CLI" certain administrative services, including but not limited to human resources, accounting, payroll, benefits, IT, legal and other administrative services in accordance with the terms of this Agreement.

3   Purchase Price. The purchase price for Services covered by this Agreement shall be equal to Twenty-Two Thousand Dollars ($22,500.00) per month. CLI shall have the right to seek an annual adjustment of the amount paid hereunder based upon experience.

4   Payment. Payment to CLI shall be due within fifteen (15) days of submission of monthly statements for the provision of such services. Interest on the any outstanding balances shall accrue at the rate of 1% per month.

5   Termination. In the event that CLI shall terminate the Agreement executed by and between the parties on even date herewith, then this Agreement shall immediately terminate.

THE ARBOC GROUP	CONSOLIDATED LEISURE INDUSTRIES, LLC
By:  /s/ James J. Bartel	By:  /s/ Michael R. Terlep, Jr.
Member	Michael R. Terlep, Jr.  President
Date:  12/5/07	Date:  12/5/07

Consolidated Leisure Industries, LLC.

Long Term Purchase/Supply Agreement

This agreement, dated the 5th day of December 2007, is entered by and between Consolidated Leisure Industries, LLC an Indiana limited liability company, hereinafter "CLI," and ARBOC MOBILITY, LLC., a Michigan Limited Liability Company, hereinafter "ARBOC".

Now therefore, the parties hereto agree as follows:

1.   Term. The term of this agreement shall be from December 5,2007 to December 31,2012.•

2.   Purchase and Sale of Low Profile, handicap accessible buses. In accordance with the terms of this Agreement, ARBOC commits to the purchase from CLI the low profile, handicap accessible buses to be sold by ARBOC (collectively, "The Products" ).

3.   Purchase Price. The purchase price for Goods covered by this Agreement shall be equal to CLI's cost to manufacture (hereafter referred to as "cost of sales") The Products plus nine percent (9%). CLI's "cost of sales· is comprised of material costs, factory overhead costs and labor costs. CLI shall establish a standard cost of sales based on established standard material, standard labor and standard overhead costs. The parties hereto agree that for the Initial five production units, the "cost of sales· shall be equal to the actual Incurred costs to manufacture. Thereafter, the parties agree that, relying upon the data establishing the cost to manufacture the initial five units, CLI shall establish a standard cost of sales at a fixed figure for a period of calendar year quarters, subject to adjustments due to variances from established standard costs only as specifically provided herein. At the conclusion of each calendar year quarter period, the established standard costs shall be re­published by CLI accounting for any deviations in the costs realized during the prior three (3) month period that are not practically controllable by CU. Specific variances to the pricing shall be allowed for certain commodities as provided in paragraph 4 hereof and for any deviation that is not practically controllable by CLI from any single applicable Bill of Material item that is in excess of twenty percent (20%). For any deviation that is not practically controllable by CLI in excess of twenty percent (20%) ("The Recoverable Excess"), CLI shall be entitled to charge ARBOC an amount equal to The Recoverable Excess and the same shall be paid within thirty (30) days of receipt of a verified statement establishing the same. Additionally, CLI will conduct a cost review at the end of each quarter and within the first fifteen (15) days of each quarter, shall provide a verified statement of any deviations that are not practically controllable by CLI from the prior quarter's Bill of Materials. Any and all product changes made at the request of ARBOC that result in a change to the standard cost of sales will be passed through when the product change is implemented. Product changes resulting in ongoing design, process or material changes will result in changes to standard costs at time of Implementation.

For the initial five (5) production units only, any amount of cost of sales in excess of Fifty-Five Thousand Dollars ($55,000.00) per unit shall be charged to ARBOC as an additional line item on invoices issued for the next one hundred (100) units in equal proportion.

4.  Adjustments for Steel, Aluminum and Resin-based materials. The purchase price of Steel, Aluminum and Resin-based materials shall be fixed for each calendar month and subject to adjustment based upon published commodity prices for the same. For purposes of this agreement, the initial baseline cost of steel, aluminum and resin-based materials shall be as published by CLI. If pricing is adjusted, a new baseline price will be established based on the "spot settlement price" of the commodity as reported by NYMEX at the close of business on the last day of the month preceding the month that prices are adjusted.

5.   Payment. Payment to CLI shall be made simultaneously upon receipt of payment from ARBOC's customer but in no event in excess of thirty (30) days after sale to customer Any balances due after thirty (30) days from the date of sale shall accrue interest at the rate of 1% per month.

6.   Inventory. CLI shall be under no obligation to maintain a finished goods inventory of The Product sold hereunder. Further, it Is understood that The Products sold by CLI to ARBOC shall be subject to irrevocable purchase orders placed by ARBOC's customers.

[SIGNATURES ON PAGE 2]

THE ARBOC GROUP	CONSOLIDATED LEISURE INDUSTRIES, LLC
By:  /s/ James J. Bartel	By:  /s/ Michael R. Terlep, Jr.
Member	Michael R. Terlep, Jr.  President
Date:  12/5/07	Date:  12/5/07

Line of Credit Note

$1,000,000.00

On December 5, 2007 the undersigned (the "Borrower"), who, if two (2) or more, jointly and severally promises to pay to the order of CONSOLIDATED LEISURE INDUSTRIES, LLC ("CLI'), at its main office, the lesser of ($1,000,000.00) or the amount of advances made by CLI to Borrower under the terms and conditions of the Long Term Supply Agreement and Long Term Services Agreement and the Agreement all executed by and between CLI and Borrower on even date herewith (said documents are attached to this instrument and marked as exhibits 1,2 and 3 respectively) (the "Agreements"). This Note may be declared forthwith due and payable in the manner and with the effect provided in the Agreements or upon termination of any one or more of the Agreements. This Note is the Note described in the Agreement.

Interest shall accrue hereon at the rate of one percent per annum, compounded annually.

The Borrower may prepay this note in whole or in part at any time.

CLI is authorized to make, from time to time and based upon CLI's records, notations on its records as to the date and amount of each advance, the date and amount of each payment of principal and interest received by CLI, the principal balance of this note, and the date to which interest has been paid. On a monthly basis, CLI will provide to Borrower a Borrowing Certificate that shall state the principal and accrued interest outstanding on this Note.

Borrow~ shall be in default under this Note if, upon termination of any of The Agreements, Borrower fails to pay the entire amount due hereunder within one hundred eighty (180) days of issuance of such written notice of termination.

Borrower shall promptly reimburse CLI for all reasonable costs and expenses (including, but not limited to, attorney fees) incurred by CLI in pursuing its rights hereunder.

Any request, notice, or demand by or on behalf of CLI, when delivered, or deposited for delivery, postage prepaid, by certified or registered United States mail to Borrower at Borrower's address set forth below, shall constitute, but shall not preclude other means of, an effective request, notice, or demand. Borrower waives all notices and demands in connection with the delivery, acceptance, performance, default or enforcement of this note(including, without limitation, presentment and notice of dishonor). All provisions of this note shall be governed by and interpreted in a manner consistent with applicable Indiana and United States law. Unenforceability of any provision or any application of any provision of this note in any jurisdiction shall not affect the enforceability of such provision or such application in any other jurisdiction or of any other provision or any other application of any other provision of this note in any jurisdiction.

“BORROWER”:

ARBOC MOBILITY, LLC

By:  /S/  James J Bartel

Member

Printed Name:  James J Bartel

(Printed Name and Title)

Borrower's address:

NONDISCLOSURE AND CONFIDENTIALITY AGREEMENT

Between

CONSOLIDATED LEISURE INDUSTRIES, LLC

and

ARBOC

1.           This Agreement is entered into by Consolidated Leisure Industries, LIC , an Indiana limited liability company ("CLI") and ARBOC ("ARBOC"). CLI and ARBOC desire to discuss certain information relating to a possible creation of a Joint Venture. During the course of such discussions, ARBOC and CLI will have access and exposure to technical, confidential and proprietary knowledge and information owned by the other party. The parties hereto stipulate and agree that such disclosure and said discussions in contemplation of a possible business relationship are each, separately, sufficient valuable consideration for this Agreement.

2.           ARBOC recognizes that CLI's business involves confidential and proprietary knowledge and information, including methods, processes, techniques, financial data, customer lists, equipment designs, and skills ("Information") vital to its security and growth. ARBOC recognizes that CLI has researched, investigated, advertised, solicited, rendered services, obtained customers and expended large sums of money developing and supporting its Information, and acknowledges that any disclosure of Information would substantially injure its business, impair its investments and goodwill, injure the business of CLIs representatives and jeopardize CLI's relationships with its representatives, suppliers, and customers. ARBOC understands that any Information revealed by CLI to ARBOC in contemplation of performance of a contract or relationship between CLI and ARBOC remains the exclusive property of CLI unless expressly stated otherwise.

3.           CLI recognizes that ARBOC's business involves confidential and proprietary knowledge and information, including methods, processes, techniques, financial data, customer lists, equipment designs, and skills ("Information") vital to its security and growth. CLI recognizes that ARBOC has researched, investigated, advertised, solicited, rendered services, obtained customers and expended large sums of money developing and supporting its Information, and acknowledges that any disclosure of Information would substantially injure its business, impair its investments and goodwill, injure the business of ARBOC's representatives and jeopardize ARBOC's relationships with its representatives, suppliers, and customers. CLI understands that any Information revealed by ARBOC to CLI in contemplation of performance of a contract or relationship between CLI and ARBOC remains the exclusive property of ARBOC unless expressly stated otherwise.

4.           The parties hereto will not use, except for the above purposes, or disclose or communicate to any third party, or to any of its employees who do not need to know in the performance of their duties, any Information received from the other, except with the prior written permission from the other party and only after signing an agreement binding them to the protection and non-disclosure of the Information to the same extent as hereunder. The parties hereto will, upon request by the other, surrender any and all originals, copies, data, drawings, notes, extracts, summaries and other records of, or concerning, the requesting party's Information. The parties further agree to use their best efforts to regain any such materials that have been transmitted to any third party.

5.The parties, on behalf of themselves, their employees, and their subsidiaries and related organizations, acknowledge and agree that all Information received from the other during any preliminary negotiations prior to the date of execution of this Agreement is subject to this Agreement.

6.The parties agree to take all reasonable and necessary steps to protect the confidentiality of the Information and data disclosed, and will use at least the same degree of care with respect to the Information as it does with their own confidential information.

7.           Restrictions on use and obligations of confidentiality and nondisclosure shall remain in effect for five (5) years after the last date written below, provided that such restrictions and obligations will not apply to information which:

(a) is already known by the recipient party, as shown by written records in its possession at the time such information is received;

(b) is already part of the public domain at the time of disclosure, or subsequently becomes part of the public domain through no fault of party owning the Information;

(c) becomes available to a party hereto from a third party who is not under obligation to party owning the Information with respect thereto; or,

(d) is independently developed by                                                                an employee or consultant of a party hereto who had no knowledge of or access to the Information.

All Information disclosed hereunder shall be presumed to be confidential and proprietary unless shown otherwise. The restrictions and obligations apply to non-patented novel combinations or applications of known processes or methods that are not as a whole known to the parties or to those persons ordinarily skilled in the art

8.           The mere furnishing of any Information by the parties hereto is not a grant by implication. estoppel, or otherwise, of any license under any invention. trade secret, patent, trademark, or copyright now or hereafter owned or controlled by CLI. Any such right shall be the subject of a definitive agreement establishing its existence.

9.           This Agreement shall be interpreted under the laws of the State of Indiana, and both parties stipulate that venue is proper in the state and federal courts located in Indiana for any controversy or claim arising out of this Agreement of the disclosures made hereunder. The parties acknowledge that, in the event of a breach of this Agreement, the non-breaching party shall be entitled to injunctive and other equitable relief to protect its Information; as well as damages. reasonable attorney's fees, and expenses of litigation.

10.           In the event that any provision of this Agreement is found to be void or unenforceable by a court of competent jurisdiction. such finding shall be valid only in that jurisdiction, and no other provision shall be affected.

11.           No waiver of any restriction or obligation in any instance shall be deemed to be a continuing waiver or a waiver in any other instance.

ARBOC	CONSOLIDATED LEISURE INDUSTRIES, LLC
By:  /s/ James J. Bartel	By:  /s/ Michael R. Terlep, Jr.
James J Bartel	Michael R. Terlep, Jr.
(Printed Name)	(Printed Name)
Title:  President	Title:  President
Date:  12/5/07	Date:  12/5/07

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Richard M. Lavers, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Coachmen Industries, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a) - 15(e) and 15(d) - 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a) - 15(f) and 15(d) - 15(f)), for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: April 30, 2008
	By:	/s/ Richard M. Lavers
		Richard M. Lavers
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Colleen A. Zuhl, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Coachmen Industries, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a) - 15(e) and 15(d) - 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a) - 15(f) and 15(d) - 15(f)), for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: April 30, 2008
	By:	/s/ Colleen A. Zuhl
		Colleen A. Zuhl
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report on Form 10-Q of Coachmen Industries, Inc. (the “Company”) for the quarterly period ended March 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”) I, Richard M. Lavers, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period(s) covered in the Report.

Date: April 30, 2008

By:	/s/ Richard M. Lavers
	Richard M. Lavers
	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report on Form 10-Q of Coachmen Industries, Inc. (the “Company”) for the quarterly period ended March 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”) I, Colleen A. Zuhl, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period(s) covered in the Report.

Date: April 30, 2008

By:	/s/ Colleen A. Zuhl
	Colleen A. Zuhl
	Chief Financial Officer