-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MTxwSfEvv7l35fvGOt+SiMPLtxl9RDynKNMSrRKOAJ5oJvfo14n8If7L9jbsF46h cUvEXLdyMvQzSIO0XN/HWA== 0000914760-02-000042.txt : 20020415 0000914760-02-000042.hdr.sgml : 20020415 ACCESSION NUMBER: 0000914760-02-000042 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COACHMEN INDUSTRIES INC CENTRAL INDEX KEY: 0000021212 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR HOMES [3716] IRS NUMBER: 351101097 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-07160 FILM NUMBER: 02594476 BUSINESS ADDRESS: STREET 1: 2831 DEXTER DR CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192620123 MAIL ADDRESS: STREET 1: 2831 DEXTER DR CITY: ELKHART STATE: IN ZIP: 46514 10-K405 1 c01376k02.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark one) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001. OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____. Commission file number 1-7160 COACHMEN INDUSTRIES, INC. (Exact name of registrant as specified in its charter) INDIANA 35-1101097 (State of incorporation (IRS Employer Identification No.) or organization) 2831 DEXTER DRIVE, ELKHART, INDIANA 46514 (Address of principal executive offices) (Zip Code) (574) 262-0123 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK, WITHOUT PAR VALUE NEW YORK STOCK EXCHANGE (Title of each class) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No -- -- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment hereto. X -- While it is difficult to determine the number of shares owned by non-affiliates (within the meaning of such term under the applicable regulations of the Securities and Exchange Commission), the registrant estimates that the aggregate market value of the registrant's Common Stock on March 18, 2002 held by non-affiliates was $245.8 million (based upon the closing price on the New York Stock Exchange and an estimate that 89.3% of such shares are owned by non-affiliates). As of March 18, 2002, 16,072,016 shares of the registrant's Common Stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Parts of Form 10-K into which Document the Document is Incorporated -------- ---------------------------- Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on May 2, 2002 Part III 2 PART I ITEM 1. BUSINESS Coachmen Industries, Inc. (the "Company" or the "Registrant") was incorporated under the laws of the State of Indiana on December 31, 1964, as the successor to a proprietorship established earlier that year. All references to the Company include its wholly owned subsidiaries and divisions. The Company is one of the largest full-line producers of recreational vehicles in the United States and is a major manufacturer of modular housing and buildings. The Company's All American Homes group is the largest manufacturer of Modular homes in the United States. The Company's recreational vehicles are marketed under various brand names including Coachmen, Georgie Boy, Shasta and Viking. Modular housing and buildings are marketed by All American Homes, Miller Building Systems, and Mod-U-Kraf Homes. The Company operates in two primary business segments, recreational vehicles and modular housing and buildings. The Recreational Vehicle ("RV") Segment consists of the manufacture and distribution of Class A and Class C motorhomes, travel trailers, fifth wheels, camping trailers and related parts and supplies. The Modular Housing and Building Segment consists of the manufacture and distribution of factory-built homes, commercial buildings and telecommunication shelters. RECREATIONAL VEHICLE SEGMENT PRODUCTS The RV Segment consists of recreational vehicles and parts and supplies. This group consists of five operating companies: Coachmen RV Company, LLC; Coachmen RV Company of Georgia, LLC; Georgie Boy Manufacturing, LLC; Viking Recreational Vehicles, LLC; and Prodesign, LLC (a producer of composite and plastic parts) and two Company-owned retail dealerships located in Indiana and North Carolina. The principal brand names for the RV group are Somerset, Captiva, Chaparral, Rendezvous, Freedom, Catalina, Royal, Prospera, Futura, Shasta, Catalina Sport, Leprechaun, Santara, Mirada, Pathfinder, Sportscoach, Cross Country, Sport, Ranger, Flyte, Phoenix, Revere, Travelmaster, Cheyenne, Sprite, Velocity, Pursuit, Landau, Cruise Air, Cruise Master, Maverick, Suite, Viking and Clipper. Other brand names that have been protected, used and are available for use in the future include Normandy, Roadmaster, Montego, Encounter, Destiny, Northwind, Swinger and Frolic. Recreational vehicles are either driven or towed and serve as temporary living quarters for camping, travel and other leisure activities. Recreational vehicles may be categorized as motorhomes, travel trailers, camping trailers or truck campers. A motorhome is a self-powered mobile dwelling built on a special heavy-duty chassis. A travel trailer is a mobile dwelling designed to be towed behind another vehicle. Camping trailers are smaller towed units constructed with sidewalls that may be raised up and folded out. Truck campers are designed to be mounted on the bed of a pickup truck. The RV group currently produces recreational vehicles on an assembly line basis in Indiana, Michigan, and Georgia. Components used in the manufacturing of recreational vehicles are primarily purchased from outside sources. However, in some cases (such as fiberglass products) where it is profitable for the RV group to do so, or where it has experienced shortages of supplies, the RV group has undertaken to manufacture its own supplies. The RV group depends on the availability of chassis from a limited number of manufacturers. Occasionally, chassis availability has limited the group's production (see Note 12 of Notes to Consolidated Financial Statements for information concerning the use of converter pool agreements to purchase vehicle chassis). 3 Prodesign, LLC, located in Indiana, is a custom manufacturer of diversified thermoformed and composite products for the automotive, marine, recreational vehicle, afterlife, medical and heavy truck industries. MARKETING The RV group considers itself customer driven. Representatives from sales and service regularly visit dealers in their regions, and respond quickly to questions and suggestions. Divisions host dealer advisory groups and conduct informative dealer seminars and specialized training classes in areas such as sales and service. Open forum meetings with owners are held at campouts, providing ongoing focus group feedback for product improvements. Engineers and product development team members are encouraged to travel and vacation in Company recreational vehicles to gain a complete understanding and appreciation for the products. The RV group believes it has the ability to respond promptly to changes in market conditions. Most of the manufacturing facilities can be changed over to the assembly of other existing products in two to six weeks. In addition, these facilities may be used for other types of light manufacturing or assembly operations. This flexibility enables the RV group to adjust its manufacturing capabilities in response to changes in demand for its products. Recreational vehicles are generally manufactured against orders received from RV dealers. These products are marketed through approximately 900 independent dealers located in 49 states and internationally and through the two Company- owned dealerships. Agreements with most of its dealers are cancelable on short notice, provide for minimum inventory levels and establish sales territories. No dealer accounts for 10% or more of the Company's net sales. Most dealers' purchases of RVs from the RV group are financed through "floor plan" arrangements. Under these arrangements, a bank or other financial institution agrees to lend the dealer all or most of the purchase price of its recreational vehicle inventory, collateralized by a lien on such inventory. The RV group generally executes repurchase agreements at the request of the financing institution. These agreements provide that, for up to twelve months after a unit is financed, the Company will repurchase a unit that has been repossessed by the financing institution for the amount then due to the financing institution. This is usually less than 100% of the dealer's cost. 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 (see Note 12 of Notes to Consolidated Financial Statements). Prior to 2000, the Company had not reported any losses from the Company's obligations under theses repurchase agreements. However, in 2000, and to a lesser extent in 2001, as a result of business conditions negatively affecting the recreational vehicle industry, the Company experienced some losses under repurchase agreements. Accordingly, at December 31, 2001 and 2000, the Company recorded an accrual for estimated losses under repurchase agreements. In addition, at December 31, 2001, the group was contingently liable under guarantees to a financial institution of their loans to independent dealers for amounts totaling approximately $3.1 million, a reduction of approximately $12.0 million from the $15.1 million in guarantees at December 31, 2000. The RV group does not finance retail consumer purchases of its products, nor does it generally guarantee consumer financing. BUSINESS FACTORS Many recreational vehicles produced by the RV group require gasoline for their operation. Gasoline has, at various times in the past, been difficult to obtain, and there can be no assurance that the supply of gasoline will continue uninterrupted, that rationing will not be imposed or that the price of, or tax on, gasoline will not significantly increase in the future. Shortages of gasoline and significant increases in gasoline prices have had a substantial adverse effect on the demand for recreational vehicles in the past and could have a material adverse effect on demand in the future. 4 Recreational vehicle businesses are dependent upon the availability and terms of financing used by dealers and retail purchasers. Consequently, increases in interest rates and the tightening of credit through governmental action or other means have adversely affected recreational vehicle sales in the past and could do so in the future. COMPETITION AND REGULATION The RV industry is highly competitive, and the RV group has numerous competitors and potential competitors in each of its classes of products, some of which have greater financial and other resources. Initial capital requirements for entry into the manufacture of recreational vehicles are comparatively small; however, codes, standards, and safety requirements introduced in recent years may deter potential competitors. The RV group's recreational vehicles generally compete in the lower to mid- price range markets. The RV group strives to be a leader in the RV industry in its focus on quality. The RV group emphasizes a quality product and a strong commitment to competitive pricing in the markets it serves. The RV group estimates that its current share of the recreational vehicle market is approximately seven percent. The recreational vehicle industry is highly regulated. National Highway Traffic Safety Administration (NHTSA), state lemon law statutes and state legislation protecting motor vehicle dealerships all impact the way the RV group conducts its recreational vehicle business. The RV group continues to recognize its obligation to protect the environment insofar as its operations are concerned. To date, the RV group has not experienced any material adverse effect from existing federal, state, or local environmental regulations. MODULAR HOUSING AND BUILDING SEGMENT PRODUCTS The Modular Housing and Building Segment consists of housing, commercial buildings and telecommunication shelters. The Company's modular housing and building subsidiaries (All American Homes, LLC; Mod-U-Kraf Homes, LLC and Miller Building Systems, Inc.) produce single-family residences, multi-family duplexes and apartments, specialized structures for municipal and commercial use and telecommunication shelters. All American Homes and Mod-U-Kraf design, manufacture and market factory-built modular housing. All American Homes is the largest producer of modular homes in the United States and has seven operations strategically located in Colorado, Indiana, Iowa, Kansas, North Carolina, Ohio and Tennessee. Mod-U- Kraf operates from a plant in Virginia. Together these plants serve approximately 400 builders in 33 states. Modular homes are built to the same local building codes as site-built homes by skilled craftsmen in a factory environment unaffected by weather conditions. Nearly complete when they leave the plant, modular homes are delivered to their final locations, typically in two to seven sections, and are crane set onto a waiting basement or crawl space foundation. Production takes place on an assembly line, with components moving from workstation to workstation for framing, electrical, plumbing, drywall, roofing, and cabinet setting, among other operations. An average two- module home can be produced in just a few days. The housing group regularly conducts meetings to review the latest in new design options and component upgrades. These meetings provide an opportunity for valuable builder input and suggestions from their customers at the planning stage. Miller Building Systems, Inc. ("Miller Building") designs, manufactures and markets factory-built modular buildings for use as commercial buildings and telecommunication shelters. Miller Building specializes in the education and medical fields with its commercial modular buildings. It is also a major 5 supplier of shelters to house sophisticated telecommunications equipment for cellular and digital telephones, data transmission systems and two-way wireless communications. Miller Building also offers site construction services, which range from site management to full turnkey operations. Depending on the specific requirements of its customers, Miller Building uses wood, wood and steel, concrete and steel, cam-lock panels or all concrete to fabricate it structures. Miller Building manufactures its buildings in a factory, and the assembled modules are delivered to the site location for final installation. Miller Building has manufacturing facilities located in Indiana, New York, Pennsylvania, South Dakota and Vermont. MARKETING The Modular Housing and Building group participates in an expanding market for the factory-built housing, commercial buildings and telecommunication shelters. Housing is marketed directly to approximately 400 builders in 33 States who will sell, rent or lease the buildings to the end-user. Commercial buildings are marketed to approximately 130 companies in 30 states. Telecommunication shelters are sold directly to approximately 75 customers in 27 states, who are the end-users of the buildings. These customers have been principally telecommunication and utility companies. Customers may be national, regional or local in nature. The Modular Housing and Building group believes its success is the result of innovative designs that are created by listening to customer needs and taking advantage of advancements in technology. While price is often a key factor in the potential customer's purchase decision, other factors may also apply, including delivery time, quality and prior experience with a certain manufacturer. A significant benefit to the customer is the speed with which factory-built buildings can be made available for use compared to on-site construction, and the ability to relocate the building to another location if the end-user's utilization requirements change. The sales staff calls on prospective customers in addition to maintaining continuing contact with existing customers and assists its customers in developing building specifications to facilitate the preparation of a quotation. The sales staff, in conjunction with the engineering staff, maintains ongoing contact with the customer for the duration of the building project. BUSINESS FACTORS As a result of transportation costs, the effective distribution range of factory built homes and commercial buildings is limited. The shipping area from each manufacturing facility is approximately 200 to 300 miles for modular homes and 600 miles for commercial buildings. The potential shipping radius of the telecommunication shelters is not as restrictive as that of factory built homes and commercial buildings; however, the marketing of these shelters is concentrated in geographic areas where there is a freight advantage over a large portion of its competitors. The overall strength of the economy and the availability and terms of financing used by builders, dealers and end-users have a direct impact on the sales of the Modular Housing and Building group. Consequently, increases in interest rates and the tightening of credit through government action or other means have adversely affected the group's sales in the past and could do so in the future. COMPETITION AND REGULATION Competition in the factory-built building industry is intense and the Modular Housing and Building group competes with a number of entities, some of which may have greater financial and other resources. To the extent that factory- built buildings become more widely accepted as an alternative to conventional on-site construction, competition from local contractors and manufacturers of other pre-engineered building systems may increase. In addition to the competition from companies designing and constructing on-site buildings, the Modular Housing and Building group competes with numerous factory-built building manufacturers that operate in particular geographical regions. 6 The Modular Housing and Building group competes for orders from its customers primarily on the basis of price, quality, timely delivery, engineering capability and reliability. The group believes that the principal basis on which it competes with on-site construction is the combination of: the timeliness of factory versus on-site construction, the cost of its products relative to on-site construction, the quality and appearance of its buildings, its ability to design and engineer buildings to meet unique customer requirements, and reliability in terms of completion time. Manufacturing efficiencies, quantity purchasing and generally lower wage rates of factory construction, even with the added transportation expense, result in the cost of factory-built buildings being equal to or lower than the cost of on-site construction of comparable quality. With manufacturing facilities strategically located throughout the country, the Modular Housing and Building group provides a streamlined construction process. This process of manufacturing the building in a weather-free, controlled environment, while the site is prepared, significantly reduces the time to completion on a customer's project. Customers of the Modular Housing and Building group are generally required to obtain building installation permits from applicable governmental agencies. Buildings completed by the group are manufactured and installed in accordance with applicable building codes set forth by the particular state or local regulatory agencies. State building code regulations applicable to factory-built buildings vary from state to state. Many states have adopted codes that apply to the design and manufacture of factory-built buildings, even if the buildings are manufactured outside the state and delivered to a site within that state's boundaries. Generally, obtaining state approvals is the responsibility of the manufacturer. Some states require certain customers to be licensed in order to sell or lease factory-built buildings. Additionally, certain states require a contractor's license from customers for the construction of the foundation, building installation, and other on-site work. On occasion, the Modular Housing and Building group has experienced regulatory delays in obtaining the various required building plan approvals. In addition to some of its customers, the group actively seeks assistance from various regulatory agencies in order to facilitate the approval process and reduce the regulatory delays. 7 GENERAL ------- (APPLICABLE TO ALL OF THE COMPANY'S PRINCIPAL MARKETS) BUSINESS SEGMENT The table below sets forth the composition of the Company's net sales for each of the last three years (dollar amounts in millions): 2001 2000 1999 Amount % Amount % Amount % ------------ ------------ ------------ Recreational Vehicles Motorhomes $212.7 35.8 $337.5 46.0 $463.4 53.1 Travel Trailers and Fifth Wheels 100.1 16.9 147.8 20.1 163.4 18.7 Camping Trailers 17.9 3.0 24.4 3.3 26.6 3.0 Truck Campers .6 .1 1.8 .3 2.2 .3 Parts and Supplies 18.5 3.1 36.2 4.9 48.0 5.5 ------ ----- ------ ----- ------ ----- Total RV 349.8 58.9 547.7 74.6 703.6 80.6 Modular Housing and Buildings 244.1 41.1 186.9 25.4 169.2 19.4 ------ ----- ------ ----- ------ ----- Total $593.9 100.0 $734.6 100.0 $872.8 100.0 ====== ===== ====== ===== ====== ===== Note: See Note 2 of Notes to Consolidated Financial Statements regarding segment information. SEASONALITY Historically, the Company has experienced greater sales during the second and third quarters with lesser sales during the first and fourth quarters. This reflects the seasonality of RV sales for products used during the summer camping season and also the adverse impact of weather on general construction for the modular building applications. EMPLOYEES At December 31, 2001, Coachmen employed 3,788 persons, of whom 903 were employed in office and administrative capacities. The Company provides group life, dental, vision services, hospitalization, and major medical plans under which the employee pays a portion of the cost. In addition, employees can participate in a 401(k) plan and a stock purchase plan. Certain employees can participate in a stock option plan and in deferred and supplemental deferred compensation plans (see Notes 8 and 9 of Notes to Consolidated Financial Statements). The Company considers its relations with employees to be good. PATENTS AND TRADEMARKS The Company maintains approximately 90 trademarks, which are up for renewal from 2001 through 2015, and approximately 15 patents due to expire between 2001 and 2016. RESEARCH AND DEVELOPMENT During 2001, the Company spent approximately $6.6 million on research related to the development of new products and improvement of existing products. The amounts spent in 2000 and 1999 were approximately $6.0 million and $5.7 million, respectively. 8 ITEM 2. PROPERTIES The Registrant owns or leases 3,925,061 square feet of plant and office space, located on 1,276.7 acres, of which 3,147,466 square feet are used for manufacturing, 394,233 square feet are used for warehousing and distribution, 46,024 square feet are used for research and development, 70,844 square feet are used for customer service and 266,494 square feet are offices. Included in these numbers are 178,054 square feet leased to others and 517,355 square feet available for sale or lease. The Registrant believes that its present facilities, consisting primarily of steel clad, steel frame or wood frame construction and the machinery and equipment contained therein, are well maintained and in good condition. The following table indicates the location, number and size of the Registrant's properties by segment as of December 31, 2001: No. of Building Area Location Acreage Buildings (Sq. Ft.) -------- ------- --------- --------- Properties Owned and Used by Registrant: Recreational Vehicles Elkhart, Indiana 46.1 11 318,094 Middlebury, Indiana 501.9 28 770,753 Fitzgerald, Georgia 17.0 3 67,070 Centreville, Michigan 105.0 4 84,865 Edwardsburg, Michigan 83.1 12 303,254 Colfax, North Carolina 7.1 3 15,200 Goshen, Indiana 18.0 1 80,000 ------ --- --------- Subtotal 778.2 62 1,639,236 Modular Housing and Building Decatur, Indiana 40.0 1 202,870 Elkhart, Indiana 20.0 4 132,300 Dyersville, Iowa 20.0 1 168,277 Leola, Pennsylvania 20.0 2 113,100 Springfield, Tennessee 45.0 1 131,453 Rutherfordton, North Carolina 37.7 1 169,177 Zanesville, Ohio 23.0 2 139,753 Bennington, Vermont 5.0 1 28,900 Rocky Mount, Virginia 39.6 4 129,293 Osage City, Kansas 29.0 3 130,818 Wichita, Kansas 3.0 - - Milliken, Colorado 21.0 1 141,675 ------- --- --------- Subtotal 303.3 21 1,487,616 ------- --- --------- Total owned and used 1,081.5 83 3,126,852 ------- --- --------- Properties Leased and Used by Registrant: Recreational Vehicles Elkhart, Indiana 6.6 1 8,000 Grants Pass, Oregon 9.4 - - ------ --- -------- Subtotal 16.0 1 8,000 ------ --- -------- 9 Properties (Continued) Properties Leased and Used by Registrant Modular Housing and Building Binghamton, New York 11.0 2 58,700 Sioux Falls, South Dakota 5.0 2 36,100 ----- --- ------- Subtotal 16.0 4 94,800 ----- ------- Total leased and used 32.0 5 102,800 ----- --- ------- Properties Owned by Registrant and Leased to Others: Recreational Vehicles Lake Park, Georgia 8.0 1 11,720 Winter Garden, Florida 5.0 1 42,176 Crooksville, Ohio 10.0 2 39,310 Grapevine, Texas 8.6 4 52,848 Melbourne, Florida 7.5 1 32,000 ----- --- ------- Total owned and leased 39.1 9 178,054 Properties Owned by Registrant and Available for Sale or Lease: Recreational Vehicles Adelanto, California 1.1 - - Perris, California 15.5 - - Middlebury, Indiana 14.9 5 90,340 Elkhart, Indiana 34.4 6 218,942 Marietta, Georgia 5.2 1 17,400 Grants Pass, Oregon 22.5 1 62,563 Grapevine, Texas 4.0 - - Longview, Texas 9.2 - - ----- --- ------- Subtotal 106.8 13 389,245 Modular Housing and Building Decatur, Indiana 3.3 2 86,310 Rocky Mount, Virginia 14.0 2 41,800 ----- --- -------- Subtotal 17.3 4 128,110 ----- --- -------- Total owned and available For sale or lease 124.1 17 517,355 ----- --- -------- Total Company 1,276.7 114 3,925,061 ======= === ========= ITEM 3. LEGAL PROCEEDINGS From time to time, the Company is involved in certain litigation arising out of its operations in the normal course of business. The Company believes that there are no claims or litigation pending, the outcome of which will have a material adverse effect on the financial position of the Company. 10 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted during the quarter ended December 31, 2001 to a vote of security holders, through the solicitation of proxies or otherwise. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the executive officers of the Company, as of December 31, 2001: Name Position ---- -------- Claire C. Skinner Chairman of the Board, Chief Executive Officer and President Richard M. Lavers Executive Vice President and General Counsel and Secretary Joseph P. Tomczak Executive Vice President and Chief Financial Officer Michael R, Terlep, Jr. President, Coachmen Recreational Vehicle Company, LLC and Vice President, RV Group John T. Trant Senior Vice President, Modular Housing & Building Group Steven E. Kerr President, All American Homes, LLC and Vice President, Modular Housing & Building Group James P. Skinner Senior Vice President, Business Development William G. Lenhart Senior Vice President, Human Resources Claire C. Skinner (age 47) assumed the Presidency of the Company in September 2000 and has served as Chairman of the Board and Chief Executive Officer since August 1997. Before that, she served as Vice Chairman of the Company since May 1995, and as Executive Vice President from 1990 to 1995. From 1987 through July 1997, Ms. Skinner served as the President of Coachmen RV, the Company's largest division. Prior to that, she held several management positions in operations and marketing since 1983. She received her B.F.A. degree in Journalism/Marketing from Southern Methodist University and her J.D. degree from the University of Notre Dame Law School. Richard M. Lavers (age 54) assumed the position of Executive Vice President of the Company in May 2000 and has served as General Counsel and Secretary of the Company since March 1999. He joined the Company in October 1997 as General Counsel. From 1994 through 1997 Mr. Lavers was Vice President, Secretary and General Counsel of RMT, Inc. and Heartland Environmental Holding Company. Mr. Lavers earned both his B.A. degree and his J.D. degree from the University of Michigan. Joseph P. Tomczak (age 46) joined Coachmen Industries in July 2001 as Executive Vice President and Chief Financial Officer. Before joining Coachmen, Mr. Tomczak served in that same capacity at Kevco, Inc. from January 2000 through June 2001. In February 2001, Kevco and all of its wholly owned subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code. Prior to that, he held the positions at Outboard Marine Corporation of Vice President of Finance for the Engine Operations Group and Vice President and Corporate Controller. Prior to that, Mr. Tomczak was Vice President and Corporate Controller at Alliant Foodservice, Inc. He received his Masters of Management degree from Northwestern University's Kellogg Graduate School of Management and his B.A. degree in Accounting and Business Administration from Augustana College. Mr. Tomczak is a Certified Public Accountant. Michael R. Terlep, Jr. (age 40) was appointed President of Coachmen Recreational Vehicle Company (RV) in June 1997. Prior to that he was Executive Vice President of Coachmen RV, with retained responsibility for product development, among other duties, since 1993. He was given the additional responsibility of General Manager of the Indiana Division in 1995. Prior to his promotion to Executive Vice President, Mr. Terlep served as Vice President of Sales and Product 11 Development from 1990 to 1993. He has held several other management positions with the Company since joining Coachmen in 1984. He received his B.A. degree from Purdue University. John T. Trant (age 63) assumed the position of Senior Vice President in January 1990. He joined Coachmen Industries in 1987 and has held the position of Executive Vice President of Shasta Industries, Vice President of Operations of the RV and Housing Group, and Executive Vice President and Chief Operations Officer of All American Homes. Mr. Trant received his B.B.A. degree from the University of Pittsburgh and his J.D. degree from Duquesne University. Steven E. Kerr (age 53) joined Coachmen Industries in February 1999. He served as Vice President/General Manager of All American Homes from February 1999 to July 2000 and then was appointed President of All American Homes in July 2000. Prior to joining the Company, Mr. Kerr served as Vice President, Marketing of Unibilt Industries, Inc. Prior to that he served as Vice President/General Manager of New England Homes, Inc. Mr. Kerr received his B.A. degree from Indiana University. James P. Skinner (age 51) was appointed Senior Vice President in January 1990. Mr. Skinner joined the corporation in 1983 as Assistant Vice President of Manufacturing for the Coachmen RV Division and later became Vice President of Operations. He subsequently was promoted to Executive Vice President of Sportscoach. Before joining Coachmen, Mr. Skinner held management positions at the Crucible Alloy and Stainless Steel Division of Colt Industries. He received his B.S. degree in Business Administration from The Pennsylvania State University and received Executive Management training from the University of Pittsburgh. William G. Lenhart (age 53) joined Coachmen Industries in June 2001 as Senior Vice President of Human Resources. Prior to that he held the position of Vice President of Human Resources for Svedala Industries, Inc., an international mining and mineral processing equipment manufacturing company. Prior to that, he held senior human resources positions with Arandel Corporation and St. Mary's Medical Center. Mr. Lenhart holds a B.S. degree in Business Administration from Defiance College. 12 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The following table discloses the high and low sales prices for Coachmen's common stock during the past two years as reported on the New York Stock Exchange, along with information on dividends paid per share during the same periods. High & Low Sales Prices Dividends Paid 2001 2000 2001 2000 ---- ---- ---- ---- 1st Quarter $12.81 - $8.75 $16.63 - $10.56 $.05 $.05 2nd Quarter 13.45 - 8.50 17.50 - 11.13 .05 .05 3rd Quarter 13.65 - 8.25 11.69 - 9.50 .05 .05 4th Quarter 12.38 - 8.95 10.75 - 7.50 .05 .05 The Company's common stock is traded on the New York Stock Exchange: Stock symbol COA. The number of shareholders of record as of January 31, 2001 was 2,019. ITEM 6. SELECTED FINANCIAL DATA Five-Year Summary of Selected Financial Data -Year Ended December 31- (in thousands, except per share amounts) 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- Net sales $593,921 $734,578 $872,819 $779,437 $683,051 Net income (loss) (3,951) 2,164 29,502 33,063 24,763 Net income (loss) per share: Basic (.25) .14 1.80 1.93 1.44 Diluted (.25) .14 1.80 1.92 1.42 Cash dividends per share .20 .20 .20 .20 .20 At year end: Total assets 288,560 296,446 285,766 269,341 259,654 Long-term debt 11,001 11,795 8,346 10,191 12,591 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Selected Financial Data and the Consolidated Financial Statements. OVERVIEW The Company was founded in 1964 as a manufacturer of recreational vehicles and began manufacturing modular homes in 1982. Since that time, the Company has evolved into a leading manufacturer in both the recreational vehicle ("RV") and modular housing and building business segments through a combination of internal growth and strategic acquisitions. The Company's new plant openings have been an important component of its internal growth strategy. In 1995, the Company opened a new modular housing plant in Tennessee and in 1996, the Company expanded its modular housing production capacity with the construction of a new facility for the North Carolina housing operation. The construction of a new modular housing facility in Ohio became fully operational in 1998. Increases in production capacity also included additions to the modular housing plant in Iowa with an addition completed in 1998. New additions to expand the North Carolina and Iowa modular housing production facilities were completed in 2000. Additional travel trailer plants in Indiana became operational in 1996 and 1997. These additional plants helped capitalize on the growing market share of value- priced travel trailers. In 1999, a new service building was constructed at the RV production facility in Georgia. In addition, construction was completed in 1999 for a new manufacturing facility in Indiana for Class A motorhomes. Acquisitions have also played an important role in the Company's growth strategy, particularly in the modular housing and building segment. On February 12, 2001, the Company acquired Kan Build, Inc. ("Kan Build"), a manufacturer of modular buildings with facilities in Kansas and Colorado. During 2000, the Company significantly expanded its modular housing and building segment with the acquisitions of Mod-U-Kraf Homes, Inc. ("Mod-U-Kraf Homes") on June 30, 2000 and Miller Building Systems, Inc. ("Miller Building") on October 31, 2000. For further details, including unaudited pro forma financial information, see Note 11 of Notes to Consolidated Financial Statements. In addition, during 2000 and 1999, the Company sold or liquidated its Company-owned dealerships, with the exception of two Company-owned stores which were retained for research and development and regional service purposes. The Company's business segments are cyclical and subject to certain seasonal demand cycles and changes in general economic and political conditions. Demand in the RV and certain portions of the modular housing and building segment generally declines during the winter season, while sales and profits are generally highest during the spring and summer months. Inflation and changing prices have had minimal direct impact on the Company in the past in that selling prices and material costs have generally followed the rate of inflation. RESULTS OF OPERATIONS COMPARISON OF 2001 TO 2000 Consolidated net sales decreased $140.7 million, or 19.1% to $593.9 million in 2001 from $734.6 million in 2000. The Company's RV segment experienced a net sales decrease of 36.1%. The modular housing and building segment had a net sales increase of $57.2 million, or 30.6%. The current year acquisition of Kan Build on February 12, 2001 accounted for $29.0 million of the modular housing and building segment's increase in net sales. Sales decreases in the RV segment are attributable to a decline in overall market conditions affecting the RV industry as a whole caused mainly by reduced consumer confidence and dealer 14 inventory adjustments which negatively impacted RV industry shipments. The recreational vehicle segment experienced a slight increase in the average sales price per unit. The modular housing and building segment experienced an increase in unit sales, including unit sales of acquired businesses, but experienced a decrease in the average sales price per unit resulting from a larger percentage of sales of less expensive commercial structures during 2001 as compared to 2000. Sales increases in 2001 in the modular housing and building segment were mainly attributable to acquisitions in 2001 and the second half 2000. Historically, the Company's first and fourth quarters are the slowest for sales in both segments. Gross profit was $90.6 million, or 15.2% of net sales, in 2001 compared to $103.2 million, or 14.1% of net sales, in 2000. Although gross profit as a percentage of net sales improved in 2001, both the RV segment and the modular housing and building segment experienced a decline in gross profit as a percentage of sales when compared to 2000. The overall improvement was primarily attributable to the modular housing and building segment representing a greater percentage of the Company's total net sales. This segment generally has higher profit margins than the RV segment. While the RV segment benefited from cost cutting efforts including the improved utilization of manufacturing facilities resulting from consolidations that took place earlier in 2001, the reduced production volume in 2001 resulted in a reduction in gross profit as a percentage of net sales when compared to 2000. The modular housing and building segment's gross profit included significant contributions from acquired companies. Although the Company shifted its marketing emphasis to larger, more complex homes where demand is generally less cyclical and margins are higher, the increase in the mix of lower margin commercial sales resulted in an overall reduced gross profit as a percent of net sales for the modular housing and building segment. Operating expenses, consisting of selling, delivery, general and administrative expenses, were $95.0 million and $100.7 million, or as a percentage of net sales, 16.0% and 13.7% for 2001 and 2000, respectively. Delivery expenses were $32.1 million in 2001, or 5.4% of net sales, compared with $32.6 million, or 4.4% of net sales in 2000. Delivery expenses as a percentage of sales are considerably higher for the modular housing and building segment as compared to the recreational vehicle segment. With the acquisitions in 2001 and 2000, the modular housing and building segment contributed a greater percentage of overall Company sales in 2001 as compared to 2000, resulting in an increase in delivery expense as a percentage of net sales. Selling expenses for 2001 and 2000, both at 4.7% of net sales, were $28.1 million and $34.5 million, respectively. General and administrative expenses were $34.8 million in 2001, or 5.9% of net sales, compared with $33.6 million, or 4.6% of net sales, in 2000. The percentage increase in general and administrative expenses compared to sales in 2001 was primarily the result of goodwill amortization and other general and administrative expenses for companies acquired in 2001 and near the end of 2000. Operating loss in 2001 of $4.5 million compared with operating income of $2.5 million in 2000, a decrease of $7.0 million. This decrease is consistent with the $12.7 million decrease in gross profit offset by the overall decrease of $5.7 million in operating expenses. Interest expense for 2001 and 2000 was $2.3 million and $2.2 million, respectively. Interest expense varies with the amount of long-term debt and the amount of premiums borrowed by the Company against the cash surrender value of the Company's investment in life insurance contracts. Interest expense also increased as a result of assumed debt obligations in the acquisitions of Mod-U-Kraf Homes, Miller Building and Kan Build. Investment income for 2001 decreased to $.5 million from $1.4 million in 2000. The decrease in the investment income was principally due to less funds being invested in 2001 than in 2000 and a sharp decrease in interest rates during 2001. Cash and temporary cash investments were used in investing activities during 2001, including the acquisition of Kan Build. The gain on sale of properties decreased $.6 million in 2001. There were no 15 major gains on the sale of properties in 2001. Assets are continually analyzed and every effort is made to sell or dispose of properties that are determined to be excess or unproductive. Pretax loss for 2001 was $6.1 million compared with pretax income of $2.9 million for 2000. The Company's RV segment incurred a pretax loss of $11.6 million, or (3.3)% of recreational vehicle net sales in 2001, compared with a pretax loss of $5.0 million, or (.9)% of the RV segment's net sales in 2000. The modular housing and building segment generated 2001 pretax income of $15.5 million and in 2000, $11.9 million, or 6.3% of modular net sales for both periods. The pretax income (loss) of the two segments does not include an allocation of additional depreciation expense of $1.9 million in 2001 and $1.8 million in 2000 associated with the enterprise-wide technology systems which were placed in service during 1999. This corporate expense is included in "other reconciling items" in the segment disclosures (see Note 2 of Notes to Consolidated Financial Statements). The provision for income taxes was a benefit of $2.2 million for 2001 versus an expense of $.7 million for 2000, representing an effective tax rate of (35.4%) and 25.0%, respectively. The Company's effective tax rate fluctuates based upon the states where sales occur, the level of export sales, the mix of nontaxable investment income and other factors (see Note 10 of Notes to Consolidated Financial Statements). The net loss for the year ended December 31, 2001 was $4.0 million compared to net income of $2.2 million for 2000. COMPARISON OF 2000 TO 1999 Consolidated net sales for 2000 were $734.6 million, a decrease of 15.8% from the $872.8 million reported in 1999. The Company's RV segment experienced a sales decrease of 22.2%, while the modular housing and building segment's sales increased by 10.5%. The RV segment's net sales in 2000 and 1999 included $50.4 million and $84.0 million, respectively, of net sales attributable to RV segment business units which were sold or liquidated during 2000 and 1999 (see Note 11 to Notes to Consolidated Financial Statements). Sales decreases in the RV segment were attributable to a decline in overall market conditions affecting the recreational vehicle industry as a whole. Increases in interest rates, high fuel prices, dealer inventory adjustments and reduced consumer confidence negatively impacted RV industry shipments. The RV segment experienced a slight increase in the average sales price per unit while the modular housing and building segment experienced increases in both unit sales, including unit sales of acquired businesses, and in the average sales price per unit during 2000. Gross profit for 2000 decreased to $103.2 million, or 14.1% of net sales, from $133.8 million, or 15.3% of sales, in 1999. The decrease in gross profit was primarily attributable to significantly lower production volume accompanying a decrease in total net sales from the Company's RV segment. Gross profit was also negatively impacted by nonrecurring special charges in the fourth quarter of 2000 related to plant consolidation, losses on the closing and liquidation of four retail dealerships and write-downs of certain real estate held for sale. In addition, during the fourth quarter of 2000, the Company increased accruals for excess inventory quantities, warranty liabilities and estimated losses under repurchase agreements. Operating expenses, which include selling, delivery, general and administrative expenses, were $100.7 million, or 13.7% of net sales in 2000, compared with $93.1, or 10.7% of sales in 1999. Delivery expenses were $32.6 million, or 4.4% of net sales in 2000, compared with $32.8 million, or 3.8% of net sales in 1999. The increase in delivery expense as a percentage of sales was primarily the result of the modular housing and building segment representing a greater percentage of the Company's total net sales. Delivery expense is considerably higher as a percentage of net sales in the modular housing and building segment as compared to the recreational vehicle segment. Selling expenses were $34.5 million, or 4.7% of sales in 2000, compared with $31.9 million, or 3.7% of sales 16 in 1999. Selling expenses increased in 2000 as a result of overall increases in dealer incentives in both segments of the Company's business. During 2000, the Company responded to discounting in the RV marketplace with strong incentives and marketing programs in an effort to stimulate retail sales. General and administrative expenses were $33.6 million, or 4.6% of net sales in 2000, compared with $28.4 million, or 3.3% of net sales in 1999. The general and administrative percentage increase in 2000 reflects increased internal costs for compensation and related expenses which were capitalized in 1999 in connection with the implementation of the new enterprise-wide technology systems. Operating income was $2.5 million in 2000 compared with $40.6 million in 1999, a decrease of 93.8%. This decrease was consistent with the $30.5 million decrease in gross profit and the overall increase of $7.6 million in operating expenses. Interest expense increased in 2000 to $2.2 million from $1.8 million in 1999. Investment income decreased to $1.4 million from $2.7 million in 1999. The decrease in investment income was principally due to less funds being invested in 2000 than in 1999. During 2000, cash and temporary cash investments were used in investing activities, including the acquisitions of Mod-U-Kraf Homes and Miller Building. The net gain on the sales of properties decreased $1.1 million in 2000. The larger amount in 1999 was substantially due to the sale of real estate in Indiana, which included the previous corporate administrative building and various other miscellaneous properties. In 2000, the major gain on property was from the sale of the Lux Company facility, which approximated $1.2 million. Pretax income was $2.9 million in 2000 compared with $45.0 million in 1999. The Company's RV segment incurred a pretax loss of $5.0 million, or (.9)% of recreational vehicle net sales in 2000, compared with pretax income of $28.1 million, or 4.0% of the RV segment's net sales in 1999. The modular housing and building segment produced pretax income of $11.9 million in 2000, or 6.3% of the modular segment's net sales and $14.9 million, or 8.8% of the modular segments net sales, in 1999 (see Note 2 of Notes to Consolidated Financial Statements). The provision for income taxes was $.7 million for 2000 and $15.5 million for 1999, representing an effective tax rate of 25.0%, and 34.5%, respectively. Net income for the year ended December 31, 2000 was $2.2 million compared with $29.5 million for the prior year. LIQUIDITY AND CAPITAL RESOURCES The Company generally relies on funds from operations as its primary source of working capital and liquidity. In addition, the Company maintains a $30 million secured line of credit to meet its seasonal working capital needs (see Note 5 of Notes to Consolidated Financial Statements). During 2001, there were borrowings of $13.5 million under the credit facilities to finance the cash purchase price of Kan Build and such borrowings were subsequently repaid. There were no short-term borrowings outstanding at December 31, 2001, 2000 or 1999. The Company's operating activities have been the principal source of cash flows in each of the last three years. Operating cash flows were $41.3 million, $29.9 million and $22.2 million for 2001, 2000 and 1999, respectively. For the year 2001, depreciation and the decreases in receivables and inventories, offset somewhat by decreases in trade accounts payable, were the major sources of cash flows. The decrease in receivables was directly related to the decrease in total net sales for the fourth quarter of 2001 compared to the same period in 2000. For the year 2000, depreciation and decreases in receivables and inventories, net of acquired companies, were the major sources of cash flows. In 1999, net 17 income, adjusted for depreciation, was a significant factor in generating cash flows. In 1999 increases in trade accounts payable and accrued expenses and other liabilities were significantly offset by increases in receivables and inventories. This increase in receivables was related to the 12.0% increase in annual sales and the 11.6% increase in fourth quarter sales volume. Investing activities used cash of $4.4 million, $25.0 million and $17.9 million in 2001, 2000 and 1999, respectively. In 2001, investment activities were mainly attributable to the acquisition of Kan Build. The sale of marketable securities, net of purchases, provided cash flows of $3.9 million and $12.7 million for 2001 and 2000, respectively. In 2000, these proceeds were used in part to fund the acquisition of Mod-U-Kraf Homes. In 1999, purchases of marketable securities, net of sales, used $2.1 million of cash flows. Proceeds from the sale of businesses provided cash of $4.8 million in 2000 and $3.3 million in 1999 while acquisitions of businesses consumed cash of $7.7 million in 2001 and $34.4 million in 2000 (see Note 11 of Notes to Consolidated Financial Statements). Otherwise the principal use of cash for investing activities in each of the last three years has been for property, plant and equipment acquisitions. Major capital expenditures during 2001 included the completion of the Milliken, Colorado facility which was under construction at the time of the Kan Build acquisition. Major capital expenditures during 2000 included expanding production facilities in North Carolina and Iowa for the modular housing and building segment. In 1999, major capital expenditures included expanding production facilities for the RV segment, as well as capitalization of internal costs associated with the enterprise-wide technology system. In 2001, cash flows from financing activities reflected borrowings of $13.5 million, which were used for the purchase of Kan Build. This was subsequently repaid during the year along with $7.9 million of long-term debt acquired with the purchase. In 2000, cash flows reflected short-term borrowings and repayment of $30.0 million, which was used for the purchase of Miller Building. In 1999 the principal use of cash flows from financing activities was the $19.1 million used to purchase common shares under the Company's share repurchase programs. Other financing activities for 2001, 2000 and 1999, which used cash in each of the years, were payments of long-term debt and cash dividends. These negative cash flows were partially offset by the issuance of common shares under stock option and stock purchase plans. For a more detailed analysis of the Company's cash flows for each of the last three years, see the Consolidated Statements of Cash Flows. The Company's cash and temporary cash investments at December 31, 2001 were $28.4 million, or an increase of $25.8 million from 2000. The Company anticipates that available funds, together with anticipated cash flows generated from future operations and amounts available under its credit facilities will be sufficient to fund future planned capital expenditures and other operating cash requirements through the end of 2002. In addition, the Company has $12.2 million of marketable securities, which are invested in public utility preferred stocks under a dividend capture program. A downturn in the U.S. economy, lack of consumer confidence and other factors adversely impacted the RV industry during 2001 and the latter part of 2000. This has had a negative impact on the Company's sales of recreational vehicles and also increases the Company's risk of loss under repurchase agreements with lenders to the Company's independent dealers (see Note 12 of Notes to Consolidated Financial Statements and Critical Accounting Policies below). In 2001, working capital decreased $14.2 million, from $116.2 million to $102.0 million. The $12.7 million decrease in current assets at December 31, 2001 versus December 31, 2000 was primarily due to reductions in receivables and inventories. The $1.5 million increase in current liabilities is substantially due to increases in accrued expenses and other liabilities offset by decreases in trade accounts payable. 18 CRITICAL ACCOUNTING POLICIES The following discussion of accounting policies is intended to supplement the summary of significant accounting policies presented in Note 1 of the Notes to Consolidated Financial Statements. These policies were selected because they are broadly applicable within our operating units and they involve additional management judgment due to the sensitivity of the methods, assumptions and estimates necessary in determining the related income statement, asset and/or liability amounts. The Company evaluates the carrying amounts of tangible and intangible assets annually to determine if they may be impaired. If the carrying amounts of the assets are not recoverable based upon undiscounted cash flow analysis, they are reduced by the estimated shortfall of fair value compared to the recorded value. Impairment losses of $.9 million and $2.1 million were recognized from the write-down of inventories and various real estate properties owned by the Company during 2001 and 2000, respectively. The Company offers to its customers a variety of warranties on its products ranging from 1 to 5 years in length. Estimated costs related to product warranty are accrued at the time of sale and included in cost of sales. Estimated costs are based upon past warranty claims and sales history and adjusted as required to reflect actual costs incurred, as information becomes available. Warranty expense totaled $16.8 million, $15.5 million and $14.2 million in 2001, 2000 and 1999, respectively. Accrued liabilities for warranty expense at December 31, 2001 and 2000 were $8.4 million and $7.8 million, respectively. At December 31, 2001 the Company had reserves for numerous other loss exposures, such as product liability ($3.1 million), litigation ($.5 million) and accounts receivable ($1.0 million). The Company also has loss exposure on loan guarantees and repurchase agreements (see Note 12 of Notes to Consolidated Financial Statements). Establishing loss reserves for these matters requires the use of estimates and judgment in regards to risk exposure and ultimate liability. The Company estimates losses under the programs using consistent and appropriate methods; however, changes in assumptions could materially affect the Company's recorded liabilities for loss. Where available, the Company utilizes published credit ratings for our debtors to assist in determining the amount of required reserves. PENDING ACCOUNTING POLICIES (See New Accounting Standards Not Yet Adopted in Note 1 of the Notes to Consolidated Financial Statements). FORWARD-LOOKING STATEMENTS This Annual 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 involve risks and uncertainties, and are dependent on factors which may include, but are not limited to, the availability and price of gasoline, which can impact the sale of recreational vehicles; availability of chassis, which are used in the production of many of the Company's recreational vehicle products; interest rates, which affect the affordability of the Company's products; changing government regulations, such as those covering accounting standards, environmental matters or product warranties and recalls, which may affect costs of operations, revenues, product acceptance and profitability; 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 impact of economic uncertainty on high-cost discretionary product purchases; and also on the state of the recreational vehicle and modular housing and building industries in the United States. Other factors affecting forward-looking statements include the cyclical and seasonal nature of the Company's businesses, adverse weather, 19 changes in property taxes and energy costs, changes in federal income tax laws and federal mortgage financing programs, changes in public policy, competition in these industries and the Company's ability to maintain or increase gross margins which are critical to profitability whether there are or are not increased sales. At times, the Company's actual performance differs materially from its projections and estimates regarding the economy, the recreational vehicle and modular housing and building 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. ITEM 7A. 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. The Company utilized its credit facility in 2001 in connection with the acquisition of Kan Build and such borrowings were repaid within six months. Short-term borrowings were utilized in 2000 in connection with the Miller Building acquisition and were repaid within sixty days. The Company did not utilize its short-term credit facilities during 1999. Accordingly, changes in interest rates would primarily impact the Company's long-term debt. At December 31, 2001, the Company had $11.9 million of long-term debt, including current maturities. Long-term debt consists mainly of industrial development revenue bonds that have variable or floating rates. At December 31, 2001, the Company had $12.2 million invested in marketable securities. The Company's marketable securities consist of public utility preferred stocks which typically pay quarterly fixed rate dividends. These financial instruments are subject to market risk in that available energy supplies and changes in available interest rates would impact the market value of the preferred stocks. As discussed in Note 1 of the Notes to Consolidated Financial Statements, the Company utilizes U.S. Treasury bond future options as a protection against the impact of increases in interest rates on the fair value of the Company's investments in these fixed rate preferred stocks. Outstanding options are marked to market with market value changes recognized in current earnings. The U.S. Treasury bond futures options generally have terms ranging from 90 to 180 days. Based on the Company's overall interest rate exposure at December 31, 2001, including variable or floating rate debt and derivatives used to hedge the fair value of fixed rate preferred stocks, a hypothetical 10 percent change in interest rates applied to the fair value of the financial instruments as of December 31, 2001, would have no material impact on earnings, cash flows or fair values of interest rate risk sensitive instruments over a one-year period. 20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS PAGE ---- Financial Statements: Report of Independent Auditors/Accountants 22-23 Consolidated Balance Sheets at December 31, 2001 and 2000 24 Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999 25 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2000 and 1999 26 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 27-28 Notes to Consolidated Financial Statements 29-49 Financial Statement Schedule: II - Valuation and Qualifying Accounts for the years ended December 31, 2001, 2000 and 1999 51 All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. 21 REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders Coachmen Industries, Inc. We have audited the accompanying consolidated balance sheet of Coachmen Industries, Inc. (the Company) and subsidiaries as of December 31, 2001, and the related consolidated statements of operations, shareholders' equity, and cash flows for the year then ended. Our audit also included the financial statement schedule listed in the Index at Item 14(a)(2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Coachmen Industries, Inc. and subsidiaries at December 31, 2001, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ Ernst & Young LLP Grand Rapids, Michigan February 1, 2002 22 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Coachmen Industries, Inc. In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Coachmen Industries, Inc. and its subsidiaries at December 31, 2000 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As more fully described in Note 1 to the consolidated financial statements, effective January 1, 1999, the Company adopted Statement of Position No. 98-1, "Accounting for Costs of Computer Software Developed or Obtained for Internal Use." /s/ PricewaterhouseCoopers LLP South Bend, Indiana February 2, 2001, except for the information in Note 5, for which the date is February 9, 2001, and Note 11, for which the date is February 12, 2001 23 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31 (in thousands) ASSETS 2001 2000 ---- ---- CURRENT ASSETS Cash and temporary cash investments $ 28,416 $ 2,614 Marketable securities 12,180 18,737 Trade receivables, less allowance for doubtful receivables 2001 - $972 and 2000 - $1,066 23,756 37,743 Other receivables 2,162 2,336 Refundable income taxes 2,241 4,600 Inventories 80,477 97,315 Prepaid expenses and other 4,656 2,221 Deferred income taxes 7,319 8,384 -------- ------- Total current assets 161,207 173,950 Property, plant and equipment, net 80,233 84,163 Intangibles, less accumulated amortization 2001 - $2,096 and 2000 - $917 18,954 15,983 Cash value of life insurance 13,454 12,378 Other 14,712 9,972 -------- -------- TOTAL ASSETS $288,560 $296,446 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable, trade $ 18,944 $ 24,015 Accrued income taxes 494 845 Accrued expenses and other liabilities 38,846 31,988 Current maturities of long-term debt 917 865 -------- -------- Total current liabilities 59,201 57,713 Long-term debt 11,001 11,795 Deferred income taxes 1,257 3,370 Other 8,461 8,619 -------- -------- Total liabilities 79,920 81,497 -------- -------- COMMITMENTS AND CONTINGENCIES (Note 12) SHAREHOLDERS' EQUITY Common shares, without par value: authorized 60,000 shares; issued 2001 - 21,046 shares and 2000 - 21,020 shares 91,072 90,861 Additional paid-in capital 5,755 5,563 Accumulated other comprehensive income (loss)( 931) - Retained earnings 162,646 169,766 Treasury shares, at cost, 2001 - 5,110 shares and 2000 - 5,317 shares ( 49,902) (51,241) -------- -------- Total shareholders' equity 208,640 214,949 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $288,560 $296,446 ======== ======== See Notes to Consolidated Financial Statements. 24 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS for the years ended December 31 (in thousands, except per share amounts) 2001 2000 1999 ---- ---- ---- Net sales $593,921 $734,578 $872,819 Cost of sales 503,359 631,344 739,034 -------- -------- -------- Gross profit 90,562 103,234 133,785 -------- -------- -------- Operating expenses: Delivery 32,122 32,575 32,834 Selling 28,135 34,506 31,933 General and administrative 34,794 33,637 28,375 -------- -------- -------- 95,051 100,718 93,142 -------- -------- -------- Operating income (loss) (4,489) 2,516 40,643 -------- -------- -------- Nonoperating income (expense): Interest expense (2,298) (2,152) (1,829) Investment income 476 1,401 2,747 Gain on sale of properties, net 303 891 1,962 Other income (expense), net ( 110) 231 1,518 -------- -------- -------- (1,629) 371 4,398 -------- -------- -------- Income (loss) before income taxes (6,118) 2,887 45,041 Income taxes (benefit) (2,167) 723 15,539 -------- -------- -------- Net income (loss) $ (3,951) $ 2,164 $ 29,502 ======== ======== ======== Earnings (loss) per common share: Basic $ ( .25) $ .14 $ 1.80 Diluted ( .25) .14 1.80 Shares used in the computation of earnings per common share: Basic 15,835 15,584 16,370 Diluted 15,835 15,639 16,421 See Notes to Consolidated Financial Statements. 25 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY for the years ended December 31, 2001, 2000 and 1999 (in thousands, except per share amounts)
Accumulated Common Shares Additional Other Treasury Shares Total ------------- Paid-In Comprehensive Retained ----------------- Shareholders' Number Amount Capital Income(Loss) Earnings Number Amount Equity ------ ------ ----------- ------------- -------- ------ ------ ------------ Balance at January 1, 1999 20,843 $89,105 $3,867 $ - $114,488 (4,258) $(33,128) $204,332 Net income - - - - 29,502 - 29,502 Issuance of common shares upon the exercise of stock options net of tax benefit of $438 107 981 438 - - - - 1,419 Issuance of common shares under employee stock purchase plan 21 319 - - - - - 319 Issuance of common shares from treasury - - 318 - - 21 151 469 Acquisition of common shares for treasury - - - - - (1,206) (19,121) (19,121) Cash dividends of $.20 per common share - - - - (3,274) - - (3,274) ------- ------- ------ -------- -------- ------ ------- -------- Balance at December 31, 1999 20,971 90,405 4,623 - 170,716 (5,443) (52,098) 213,646 Net income - - - - 2,164 - - 2,164 Issuance of common shares upon the exercise of stock options net of tax benefit of $91 21 173 (217) - 109 748 704 Issuance of common shares under employee stock purchase plan 28 283 - - - - - 283 Issuance of common shares from treasury - - 200 - - 17 109 309 Conversion of stock options of acquired business to stock options of the Company - - 957 - - - - 957 Cash dividends of $.20 per common share - - - - (3,114) - - (3,114) ------- ------- ------ -------- -------- ------ ------- -------- Balance at December 31, 2000 21,020 90,861 5,563 - 169,766 (5,317) (51,241) 214,949 Net loss - - - - (3,951) - - (3,951) Net unrealized loss on securities net of tax benefit of $510 - - - (931) - - - (931) -------- Total comprehensive loss (4,882) Issuance of common shares upon the exercise of stock options net of tax benefit of $10 - - (258) - - 176 1,414 1,156 Issuance of common shares under employee stock purchase plan 26 211 - - - - - 211 Issuance of common shares from treasury - - 450 - - 84 588 1,038 Acquisition of common shares for treasury - - - - - (53) (663) (663) Cash dividends of $.20 per common share - - - - (3,169) - - (3,169) ------- ------- ------ -------- ------- ------ ------- -------- Balance at December 31, 2001 21,046 $91,072 $5,755 $ (931) $162,646 (5,110) $(49,902) $208,640 ======= ======= ====== ======== ======== ====== ======== ======== See Notes to Consolidated Financial Statements.
26 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended December 31 (in thousands)
2001 2000 1999 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (3,951) $ 2,164 $ 29,502 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 10,890 10,941 9,146 Amortization and write-off of intangibles 1,179 273 127 Provision for doubtful receivables 379 435 117 Provision for write-down of property to net realizable value 869 - - Net realized and unrealized losses on marketable securities and derivatives 1,759 1,112 825 Gain on sale of properties, net (303) (891) (1,962) Increase in cash surrender value of life insurance policies (1,203) (903) (750) Deferred income taxes (1,035) (1,758) 559 Other 901 976 175 Changes in certain assets and liabilities, net of effects of acquisitions and dispositions: Trade receivables 14,572 14,631 (13,199) Inventories 21,365 12,420 (9,908) Prepaid expenses and other (2,378) 955 (873) Accounts payable, trade (5,744) (8,237) 6,044 Income taxes - accrued and refundable 1,998 (942) (794) Accrued expenses and other liabilities 1,996 (1,244) 3,234 --------- -------- -------- Net cash provided by operating activities 41,294 29,932 22,243 --------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from: Sale of marketable securities 51,672 134,673 186,794 Sale of properties 1,800 1,931 2,596 Sale of businesses - 4,826 3,298 Payments received on notes receivable 3,244 - - Acquisitions of: Marketable securities (47,752) (121,972) (188,890) Property and equipment (4,719) (8,222) (21,400) Businesses, net of acquired cash (7,707) (34,351) - Other (922) (1,898) (297) --------- -------- -------- Net cash used in investing activities (4,384) (25,013) (17,899) --------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from short-term borrowings - 30,000 - Payments of short-term borrowings - (30,000) - Proceeds from long-term debt 13,500 - - Payments of long-term debt (22,143) (4,447) (2,427) Issuance of common shares 1,357 896 1,300 Tax benefit from stock options exercised 10 91 438 Cash dividends paid (3,169) (3,114) (3,274) Purchases of common shares for treasury (663) - (19,121) --------- -------- -------- Net cash used in financing activities (11,108) (6,574) (23,084) --------- -------- --------
27 CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED for the years ended December 31 (in thousands)
2001 2000 1999 ---- ---- ---- Increase (decrease) in cash and temporary cash investments 25,802 ( 1,655) (18,740) CASH AND TEMPORARY CASH INVESTMENTS Beginning of year 2,614 4,269 23,009 -------- -------- -------- End of year $ 28,416 $ 2,614 $ 4,269 ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 2,624 $ 2,192 $ 1,305 Income taxes 1,480 3,770 15,716 See Notes to Consolidated Financial Statements.
28 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES. NATURE OF OPERATIONS - Coachmen Industries, Inc. and its subsidiaries (the "Company") manufacture a full line of recreational vehicles and modular housing and buildings. Recreational vehicles are sold through a nationwide dealer network. The modular products (modular homes, townhouses and specialized structures) are sold to builders/dealers or directly to the end user for certain specialized modular structures. PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements include the accounts of Coachmen Industries, Inc. and its subsidiaries, all of which are wholly owned. All material intercompany transactions have been eliminated. USE OF ESTIMATES - The preparation of financial statements in conformity 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. Actual results could differ from those estimates. REVENUE RECOGNITION - For the recreational vehicle segment, the shipping terms are free on board ("FOB") shipping point and title and risk of ownership are transferred to the independent dealers at that time. Accordingly, sales are recognized as revenue at the time the products are shipped. For the modular housing and building segment, the shipping terms are generally FOB destination. Title and risk of ownership are transferred when the Company completes installation of the product. The Company recognizes the revenue at the time delivery and installation are completed. Revenue from final set-up procedures, which are perfunctory, is deferred and recognized when such set-up procedures are completed. CASH FLOWS AND NONCASH ACTIVITIES - For purposes of the consolidated statements of cash flows, cash and temporary cash investments include cash, cash investments and any highly liquid investments purchased with original maturities of three months or less. Noncash investing and financing activities are as follows: 2001 2000 1999 ---- ---- ---- Issuance of common shares, at market value, in lieu of cash compensation $ 1,038 $ 309 $469 Liabilities assumed in business acquisitions 12,728 21,926 - Liabilities assumed by buyers in the disposition of businesses - 1,414 - 29 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, CONTINUED. CONCENTRATIONS OF CREDIT RISK - Financial instruments which potentially subject the Company to credit risk consist primarily of cash and temporary cash investments and trade receivables. At December 31, 2001 and 2000, cash and temporary cash investments include $23.6 million and $.2 million, respectively, invested in a money market mutual fund. The Company has a concentration of credit risk in the recreational vehicle industry, although there is no geographic concentration of credit risk. The Company performs ongoing credit evaluations of its customers' financial condition and sales to its recreational vehicle dealers are generally subject to pre-approved dealer floor plan financing whereby the Company is paid upon delivery or shortly thereafter. The Company generally requires no collateral from its customers. Future credit losses are provided for currently through the allowance for doubtful receivables and actual credit losses are charged to the allowance when incurred. MARKETABLE SECURITIES - Marketable securities consist of public utility preferred stocks which pay quarterly cash dividends. The preferred stocks are part of a dividend capture program whereby preferred stocks are bought and held for the purpose of capturing the quarterly preferred dividend. The securities are then sold and the proceeds reinvested again in preferred stocks. The Company's dividend capture program is a tax planning strategy to maximize dividend income which is 70% excludable from taxable income under the Internal Revenue Code and related state tax provisions. As a result, a dividend capture program generally provides a higher after-tax return than other short-term investment alternatives. The Company accounts for its marketable securities under Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires certain securities to be categorized as either trading, available-for-sale or held-to- maturity. The Company's marketable securities at December 31, 2001 and 2000 are classified as available-for-sale and, accordingly, are carried at fair value with net unrealized appreciation (depreciation) recorded as a separate component of shareholders' equity. At December 31, 2001, the cost of marketable securities exceeded fair market value by approximately $931 net of deferred taxes. At December 31, 2000, cost approximated fair value and, accordingly, the Company recognized no unrealized appreciation (depreciation). The cost of securities sold is determined by the specific identification method. The Company utilizes U.S. Treasury bond futures options as protection against the impact of increases in interest rates on the fair value of the Company's investments in marketable securities (fixed rate preferred stocks). The options are marked to market with market value changes recognized in the consolidated statements of income in the period of change. 30 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, CONTINUED. Investment income consists of the following: 2001 2000 1999 ---- ---- ---- Interest income $1,079 $ 836 $1,029 Dividend income on preferred stocks 646 1,677 2,543 Net realized (losses) on sale of preferred stocks (1,252) (189) (1,220) Net realized gains (losses) on closed U.S. Treasury bond futures options 55 (821) 314 Unrealized gains (losses) on open U.S. Treasury bond futures options (52) (102) 81 ------ ----- ------ Total $ 476 $1,401 $2,747 ====== ====== ====== FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of cash and temporary cash investments, receivables and accounts payable approximated fair value as of December 31, 2001 and 2000, because of the relatively short maturities of these instruments. The carrying amount of long-term debt, including current maturities, approximated fair value as of December 31, 2001 and 2000, based upon terms and conditions currently available to the Company in comparison to terms and conditions of the existing long-term debt. The Company has investments in life insurance contracts to fund obligations under deferred compensation agreements (see Note 9). At December 31, 2001 and 2000, the carrying amount of these policies, which equaled their fair value, was $13.5 million and $12.4 million, respectively (cash surrender values of $31.0 million and $28.6 million, net of $17.5 million and $16.2 million of policy loans, respectively). At December 31, 2001 and 2000, the carrying amounts of U.S. Treasury bond futures options, which are derivative instruments, aggregated $35 and $71, respectively. The carrying amounts represent fair value since these futures options are marked to market at the end of each reporting period and gains or losses are recognized in earnings. As required by SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," the Company adopted the requirements of SFAS No. 133 effective January 1, 2001. SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The Company utilizes U.S. Treasury bond futures options, which are derivative instruments, and changes in market value are recognized in current earnings. Accordingly, due to its limited use of derivative instruments and the fact that changes in fair value are currently recognized in earnings, the adoption of SFAS No. 133 did not have a significant effect on the financial position or results of operations of the Company. INVENTORIES - Inventories are valued at the lower of cost (first-in, first-out method) or market. 31 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, CONTINUED. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is computed by the straight- line method on the costs of the assets, at rates based on their estimated useful lives as follows: land improvements 3-15 years; buildings and improvements 10-30 years; machinery and equipment 3-10 years; transportation equipment 2-7 years; and office furniture and fixtures, including capitalized computer software, 2-10 years. Upon sale or retirement of property, plant and equipment, including real estate held for sale and rental properties, the asset cost and related accumulated depreciation is removed from the accounts and any resulting gain or loss is included in income. INTANGIBLES - Prior to the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets" on January 1, 2002, intangibles, consisting principally of excess of cost over the fair value of net assets of businesses acquired ("goodwill"), had been amortized on a straight-line basis over 5 to 40 years. EVALUATION OF IMPAIRMENT OF LONG-LIVED ASSETS - In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of," the Company evaluates the carrying value of long-lived assets whenever significant events or changes in circumstances indicate the carrying value of these assets may be impaired. The Company evaluates potential impairment of long-lived assets by comparing the carrying value of the assets to the expected net future undiscounted cash inflows resulting from use of the assets. If the carrying amounts of the assets are not recoverable based on the analysis, they are reduced by the estimated shortfall of fair value to the recorded value. INCOME TAXES - The Company recognizes income tax expense in accordance with SFAS No. 109, "Accounting for Income Taxes." Deferred tax assets and liabilities are established for the expected future tax consequences of events that have been included in the financial statements or tax returns using enacted tax rates in effect for the years in which the differences are expected to reverse and is subject to ongoing assessment of realizability. RESEARCH AND DEVELOPMENT EXPENSES - Research and development expenses charged to operations were approximately $6,583, $5,959 and $5,727 for the years ended December 31, 2001, 2000 and 1999, respectively. WARRANTY EXPENSE - The Company accrues an estimated warranty liability at the time the warranted products are sold. STOCK-BASED COMPENSATION - The Company has adopted the disclosure only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," and, accordingly, accounts for its stock option plan under the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." 32 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, CONTINUED. ACCOUNTING CHANGE - Effective January 1, 1999, the Company adopted American Institute of Certified Public Accountants' Statement of Position ("SOP") No. 98-1, "Accounting for Costs of Computer Software Developed or Obtained for Internal Use". For years beginning after December 15, 1998, SOP 98-1 requires internal and external costs incurred to develop internal-use computer software during the application development stage to be capitalized and amortized over the software's useful life. Prior to January 1, 1999, these costs were expensed as incurred. During the years ended December 31, 2000 and 1999, the Company capitalized $96 and $2,591, respectively, of internal costs which prior to January 1, 1999 would have been expensed under generally accepted accounting principles. These capitalized costs were related to the Company's new enterprise computer system. The effect of this change in accounting principle for the years ended December 31, 2000 and 1999 was to increase net income by approximately $59 ($-0-- per share) and $1,399 ($.09 per share), respectively. RECLASSIFICATIONS - Certain reclassifications have been made in the fiscal 2000 and fiscal 1999 consolidated financial statements to conform to the presentation used in fiscal 2001. SHIPPING AND HANDLING COSTS - Effective January 1, 2001, the Company adopted Emerging Issues Task Force ("EITF"), EITF 00-10, "Accounting for Shipping and Handling Fees and Costs," which requires freight billed to customers to be considered as sales revenue. Previously, the Company netted freight billed to customers against delivery expenses. Net sales and delivery expenses for prior periods have been restated to conform with the new presentation. The amount of delivery revenue reclassified to net sales was $29.3 million and $30.2 million in fiscal years 2000 and 1999, respectively. The adoptions of the new EITF pronouncement had no impact on net income. VOLUME-BASED SALES INCENTIVES - Also effective January 1, 2001, the Company adopted EITF 00-22, "Accounting for Points and Certain Time or Volume-Based Sales Incentive Offers...," which required certain volume-based sales rebates to be netted against sales revenue. Previously, the Company included such rebates in selling expenses. Net sales and selling expenses for prior periods have been restated to conform with the new presentation. The amount of sales incentives reclassified to net sales was $4.7 million and $4.4 million in fiscal years 2000 and 1999, respectively. The adoption of the new EITF pronouncement had no impact on net income. 33 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, CONTINUED. NEW ACCOUNTING STANDARDS NOT YET ADOPTED - In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets," effective for fiscal years beginning after December 15, 2001. Statement No. 141 eliminates the pooling of interests method of accounting for business acquisitions and Statement No. 142 eliminates the amortization of goodwill (and intangible assets deemed to have indefinite lives) and requires the Company to evaluate goodwill for impairment on an annual basis. Any impairment of goodwill must be recognized currently as a charge to earnings in the financial statements. The Company will be required to apply the provisions of the Statements to all business combinations initiated after June 30, 2001. For goodwill and intangible assets arising from business combinations completed before July 1, 2001, the Company will be required to apply the provisions of Statement No. 142 beginning on January 1, 2002. Application of the non-amortization provisions of the Statement is expected to reduce intangibles amortization by approximately $1.2 million and increase net income by approximately $.8 million ($.05 per diluted share) per year. During 2002, the Company will perform the initial impairment tests of goodwill and indefinite lived intangible assets as of January 1, 2002. The Company has not yet determined what effect these tests will have on its consolidated results of operations or financial position. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations" for a disposal of a segment of a business. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001, with earlier application encouraged. The Company expects to adopt SFAS No. 144 as of January 1, 2002 and it has not determined the effect, if any, the adoption of the Statement will have on the Company's consolidated financial position or results of operations. 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, including related parts and supplies, and modular housing and building. The Company evaluates the performance of its segments and allocates resources to them based on pretax income. The accounting policies of the segments are the same as those described in Note 1 and there are no inter- segment revenues. Differences between reported segment amounts and corresponding consolidated totals represent corporate expenses for administrative functions and costs or expenses relating to property and equipment that are not allocated to segments. 34 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2. SEGMENT INFORMATION, CONTINUED. The table below presents information about segments used by the chief operating decision maker of the Company for the years ended December 31: 2001 2000 1999 ---- ---- ---- Net sales: Recreational vehicles $349,810 $547,651 $703,618 Modular housing and building 244,111 186,927 169,201 -------- -------- -------- Consolidated total $593,921 $734,578 $872,819 ======== ======== ======== Pretax income (loss): Recreational vehicles $(11,631) $ (4,967) $ 28,148 Modular housing and building 15,466 11,866 14,870 Other reconciling items (9,953) (4,012) 2,023 -------- -------- -------- Consolidated total $ (6,118) $ 2,887 $ 45,041 ======== ======== ======== Total assets: Recreational vehicles $ 88,629 $139,383 $166,288 Modular housing and building 97,578 100,340 37,837 Other reconciling items 102,353 56,723 81,641 -------- -------- -------- Consolidated total $288,560 $296,446 $285,766 ======== ======== ======== The following specified amounts are included in the measure of segment pretax income or loss reviewed by the chief operating decision maker: 2001 2000 1999 ---- ---- ---- Interest expense: Recreational vehicles $ 209 $ 142 $ 794 Modular housing and building 910 393 324 Other reconciling items 1,179 1,617 711 -------- -------- -------- Consolidated total $ 2,298 $ 2.152 $ 1,829 ======== ======== ======== Depreciation: Recreational vehicles $ 3,643 $ 4,662 $ 4,649 Modular housing and building 4,546 3,568 2,902 Other reconciling items 2,701 2,711 1,595 -------- --------- -------- Consolidated total $ 10,890 $ 10,941 $ 9,146 ======== ======== ======== Certain segment amounts previously reported in 2000 and 1999 have been reclassified to conform with the presentation used in 2001. 3. INVENTORIES. Inventories consist of the following: 2001 2000 ---- ---- Raw materials $ 24,224 $ 35,963 Work in process 7,866 8,244 Finished goods 48,387 53,108 -------- -------- Total $ 80,477 $ 97,315 ======== ======== 35 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 4. PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment consists of the following: 2001 2000 ---- ---- Land and improvements $ 14,103 $ 15,013 Buildings and improvements 68,980 67,198 Machinery and equipment 25,307 24,418 Transportation equipment 14,223 14,130 Office furniture and fixtures 18,427 18,270 -------- -------- Total 141,040 139,029 Less, accumulated depreciation 60,807 54,866 ------- -------- Property, plant and equipment, net $ 80,233 $ 84,163 ======== ======== 5. SHORT-TERM BORROWINGS. The Company maintains an Amended and Restated Revolving Credit Facility that provides a secured line of credit aggregating $30 million through June 30, 2003. This agreement was amended on November 5, 2001 to modify available borrowings to $30 million from $50 million, to provide certain collateral to the bank and to modify certain financial covenants to reflect current business conditions. As of December 31, 2001 and December 31, 2000, there were no borrowings outstanding under the Credit Facility. Borrowings under the Credit Facility bear interest equal to: (i) a eurodollar rate plus an applicable margin of 2.0%, or (ii) a floating rate, for any day, equal to the greater of the prime rate or the federal funds effective rate. The Company is also required to pay a facility fee of .5% per annum. The Credit Facility is secured by the accounts receivable and inventory of material subsidiaries. The Credit Facility also contains customary affirmative and negative covenants including financial covenants requiring the maintenance of a specified consolidated current ratio, fixed charge coverage ratio, leverage ratio and a required minimum net worth. At December 31, 2001 the Company was in compliance with all related covenants. At December 31, 2000, the Company was not in compliance with the interest coverage ratio. On February 9, 2001, the Lenders and Bank One, NA waived this violation pursuant to a Waiver and Amendment No. 1 to 364-Day Credit Agreement, and also reduced the aggregate commitment of the 364-day revolving credit facility from $51,667 to $16,667, changed applicable margin to .975% to 1.175% and eliminated swing line loans through March 30, 2001. 36 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 6. LONG-TERM DEBT. Long-term debt consists of the following: 2001 2000 ---- ---- Obligations under industrial development revenue bonds, variable rates (effective weighted average interest rates of 1.9% and 5.2% at December 31, 2001 and 2000, respectively), with various maturities through 2015 $11,795 $12,660 Obligations under Community Development Block Grants, fixed rates of 3.5% and 4.5% with various maturities through 2005 123 - ------- ------ Subtotal 11,918 12,660 Less, current maturities of long-term debt 917 865 ------- ------- Long-term debt $11,001 $11,795 ======= ======= Principal maturities of long-term debt during the four fiscal years succeeding 2002 are as follows: 2003 - $902; 2004 - $895; 2005 - $869 and 2006 - $865. In connection with the industrial development revenue bond obligations, the Company obtained, as a credit enhancement for the bondholders, irrevocable letters of credit in favor of the bond trustees. Under the industrial revenue bond for the Mod-U-Kraf Homes' manufacturing facility in Virginia, the issuer of the letter of credit holds a first lien and security interest on that facility. The letter of credit agreements relating to these letters of credit contain, among other provisions, certain covenants relating to required amounts of working capital and net worth and the maintenance of certain required financial ratios. At December 31, 2001, the Company was in compliance with all related covenants. Community Development Block Grants payable to the City of Osage City, Kansas aggregating $123 were obtained as part of the Kan Build acquisition and are payable in monthly installments through 2005. 7. ACCRUED EXPENSES AND OTHER LIABILITIES. Accrued expenses and other liabilities at year-end consist of the following: 2001 2000 ---- ---- Wages, salaries and commissions $ 3,860 $ 2,134 Dealer incentives 4,443 4,397 Warranty 8,391 7,796 Insurance-products and general liability, workers compensation, group health and other 7,148 4,518 Customer deposits and unearned revenues 7,318 4,769 Other current liabilities 7,686 8,374 ------- ------- Total $38,846 $31,988 ======= ======= 37 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 8. COMMON STOCK MATTERS AND EARNINGS PER SHARE. STOCK OPTION PLAN The Company has stock option plans, including the 2000 Omnibus Stock Incentive Program (the "2000 Plan") which was approved by the shareholders on May 4, 2000. The 2000 Plan provides for an additional one million common shares to be reserved for grants under the Company's stock option and award plans. The Company's stock option plan provides for the granting of options to directors, officers and eligible key employees to purchase common shares. The 2000 Plan permits the issuance of either incentive stock options or nonqualified stock options. Stock Appreciation Rights ("SARs") may be granted in tandem with stock options or independently of and without relation to options. There were no SARs outstanding at December 31, 2001. The option price for incentive stock options shall be an amount of not less than 100% of the fair market value per share on the date of grant and the option price for nonqualified stock options shall be an amount of not less than 90% of the fair market value per share on the date the option is granted. No such options may be exercised during the first year after grant, and are exercisable cumulatively in four installments of 25% each year thereafter. Options have terms ranging from five to ten years. The following table summarizes stock option activity: Weighted- Average Number Exercise of Shares Price --------- ----- Outstanding, January 1, 1999 661 $16.77 Granted 395 20.39 Canceled (83) 7.44 Exercised (107) 9.18 ----- Outstanding, December 31, 1999 866 18.94 Granted 804 7.79 Canceled (152) 18.78 Exercised (130) 4.72 ----- Outstanding, December 31, 2000 1,388 13.83 Granted 72 11.81 Canceled (268) 16.43 Exercised (176) 7.18 ----- Outstanding, December 31, 2001 1,016 13.84 ===== The granted options in 2000 included 508 options granted to holders of options to acquire shares of an acquired business, Miller Building Systems, Inc. (see Note 11). The weighted average exercise price of these converted options was $6.59 per share and such options were vested and exercisable at the date of conversion. 38 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 8. COMMON STOCK MATTERS AND EARNINGS PER SHARE, CONTINUED. Options outstanding at December 31, 2001 are exercisable at prices ranging from $4.05 to $24.88 per share and have a weighted average remaining contractual life of 3.7 years. The following table summarizes information about stock options outstanding and exercisable at December 31, 2001. Options Outstanding Options Exercisable ------------------- ------------------- Weighted- Number Average Weighted- Number Weighted- Outstanding at Remaining Average Exercisable at Average Range of December 31, Contractual Exercise December 31, Exercise Exercise Price 2001 Life Price 2001 Price -------------- ---- ---- ----- ---- ----- 4.05 - 12.00 581 5.2 8.54 345 7.17 12.01 - 17.00 127 2.3 14.96 77 15.26 17.01 - 22.00 94 0.5 20.15 90 20.22 22.01 - 24.88 214 1.7 24.78 128 24.75 ------ ---- 1,016 640 ====== ====
At December 31, 2000 and 1999 there were exercisable options to purchase 757 and 270 shares, respectively, at weighted-average exercise prices of $12.33 and $15.55, respectively. The weighted-average grant-date fair value of options granted during the years ended December 31, 2001, 2000 and 1999 were $4.33, $3.11 and $5.92, respectively. As of December 31, 2001, 1,128 shares were reserved for the granting of future stock options and awards, compared with 982 shares at December 31, 2000. The shares available for the granting of future stock options as of December 31, 2000 was revised upward to include the outstanding options exchanged as part of the Miller Building acquisition. Per the adjustment provisions of the 2000 Omnibus Stock Incentive Program, when outstanding employee stock options have been assumed in the acquisition of another corporation or business entity, the aggregate number of shares of Common Stock available for benefits under the Plan shall be increased accordingly. Had the Company adopted the provisions of SFAS No. 123, "Accounting for Stock- Based Compensation," the Company's pro forma net income (loss) and net income (loss) per share would have been: 2001 2000 1999 ---- ---- ---- Pro forma net income (loss) ($4,641) $1,588 $29,013 Pro forma net income (loss) per share: Basic (.29) .10 1.77 Diluted (.29) .10 1.77 The pro forma amounts and the weighted-average grant-date fair-value of options granted were estimated using the Black-Scholes option-pricing model with the following assumptions: 2001 2000 1999 ---- ---- ---- Risk free interest rate 4.33% 5.77% 5.49% Expected life 4.00 years 2.75 years 2.75 years Expected volatility 47.7% 46.6% 39.8% Expected dividends 1.9% 1.7% 1.1% 39 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 8. COMMON STOCK MATTERS AND EARNINGS PER SHARE, CONTINUED. STOCK AWARD PROGRAMS On October 19, 1998, the Board of Directors approved a Stock Award Program which provides for the awarding to key employees of up to 109 shares of common stock from shares reserved under the Company's stock option plan. On December 1, 1998, the Company awarded 64 shares to certain employees, subject to the terms, conditions and restrictions of the award program. For the year ended December 31, 1999, no shares were awarded, 14.4 shares were issued and 6.1 awarded shares were canceled. During the year ended December 31, 2000, no shares were awarded, 12.0 shares were issued and 7.6 awarded shares were canceled. During the year ended December 31, 2001, no shares were awarded, 9.0 shares were issued and 5.5 awarded shares were canceled. The shares under the stock awards are issuable in four annual installments of 25% beginning one year from the date of grant. The Company recognizes compensation expense over the term of the awards and compensation expense of $201, $263 and $208 was recognized for the years ended December 31, 2001, 2000 and 1999, respectively. The 2000 Plan also permits the granting of restricted and unrestricted stock awards to the Company's key employees and non-employee directors. In accordance with the provisions of the 2000 Plan, the Board of Directors may grant shares of stock to eligible participants for services to the Company. Restricted shares vest over a period of time as determined by the Board of Directors and are granted at no cost to the recipient. For restricted shares, compensation expense is recognized by the Company over the vesting period at an amount equal to the fair market value of the shares on the grant date. Compensation expense for unrestricted shares is recognized at date of grant. There were 15.1, 4.2 and 1.2 stock awards granted in 2001, 2000 and 1999, respectively. Compensation expense of $64.5, $13.7 and $4.2 was recognized in the years ended December 31, 2001, 2000 and 1999, respectively. STOCK PURCHASE PLAN The Company has an employee stock purchase plan under which a total of 472 shares of the Company's common stock are reserved for purchase by full-time employees through payroll deductions at a price equal to 90% of the market price of the Company's common stock on the purchase date. As of December 31, 2001, there were 256 employees actively participating in the plan. Since its inception, a total of 328 shares have been purchased by employees under the plan. Certain restrictions in the plan limit the amount of payroll deductions an employee may make in any one quarter. There are also limitations as to the amount of ownership in the Company an employee may acquire under the plan. EARNINGS PER SHARE Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding plus the dilutive effect of stock options and stock awards. The dilutive effect of stock options and awards did not enter into the computation of diluted earnings per share for the year ended December 31, 2001, because their inclusion would have been antidilutive. 40 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 8. COMMON STOCK MATTERS AND EARNINGS PER SHARE, CONTINUED. SHAREHOLDER RIGHTS PLAN On October 21, 1999, the Company's Board of Directors adopted a new shareholder rights plan to replace an existing rights plan that was due to expire on February 15, 2000. The new rights plan, which became effective January 12, 2000 (the "Record Date"), provides for a dividend distribution of one common share purchase right (the "Rights") for each outstanding common share to each shareholder of record on the Record Date. The Rights will be represented by common share certificates and will not be exercisable or transferable apart from the common shares until the earlier to occur of (i) ten (10) business days following a public announcement that a person or group of persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding common shares or (ii) ten (10) business days following the commencement of (or announcement of an intention to make) a tender offer or exchange offer if, upon consummation thereof, such an Acquiring Person would be the beneficial owner to 20% or more of the outstanding common shares. Upon the occurrence of the certain events and after the Rights become exercisable, each right would entitle the rightholder (other than the Acquiring Person) to purchase one fully paid and nonaccessable common share of the Company at a purchase price of $75 per share, subject to anti-dilutive adjustments. The Rights are nonvoting and expire February 1, 2010, and at any time prior to a person or a group of persons becoming an Acquiring Person, the Company's Board of Directors may redeem the Rights in whole, but not in part, at a purchase price $.01 per Right. 9. COMPENSATION AND BENEFIT PLANS. INCENTIVE COMPENSATION The Company has incentive compensation plans for its officers and other key management personnel. The amounts charged to expense for the years ended December 31, 2001, 2000 and 1999 aggregated $1,665, $1,085 and $3,344, respectively. DEFERRED COMPENSATION The Company has established a deferred compensation plan for executives and other key employees. The plan provides for benefit payments upon termination of employment, retirement, disability, or death. The Company recognizes the cost of this plan over the projected service lives of the participating employees based on the present value of the estimated future payments to be made. The plan is funded by insurance contracts on the lives of the participants, and net investments in insurance contracts aggregated $13.5 million and $12.4 million as of December 31, 2001 and 2000, respectively. The deferred compensation obligations, which aggregated $7,054 and $7,327 at December 31, 2001 and 2000, respectively, are included in other non-current liabilities, with the current portion ($302 and $367 at December 31, 2001 and 2000, respectively) included in other current liabilities. 41 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 9. COMPENSATION AND BENEFIT PLANS, CONTINUED. In connection with the two business acquisitions in 2000, which are discussed in Note 11, the Company assumed obligations under existing deferred compensation agreements. These obligations aggregated $1,268 and $1,877 at December 31, 2001 and 2000, respectively. As part of these acquisitions, the Company assumed ownership of life insurance contracts and trust accounts established for the benefit of participating executives. Such assets, which are valued at fair value, aggregated $722 and $763 at December 31, 2001 and 2000, respectively. SUPPLEMENTAL DEFERRED COMPENSATION During 2001, the Company established a supplemental deferred compensation plan (Mirror Plan) for key employees as determined by the Board of Directors. This plan allows participants to defer compensation only after they have deferred the maximum allowable amount under the Company's 401(k) Plan. The participants direct the Company to invest funds in mutual fund investments and the Company's stock. The Company matches a certain level of participant contributions in cash and Company stock. The matching contributions vest over a five year period. Participant benefits are limited to the value of the vested benefits held on their behalf. The Company also established a supplemental deferred compensation plan (SERP Plan) during 2001 for certain key executive management as determined by the Board of Directors. This plan allows participants to defer compensation without regard to participation in the Company's 401(k) plan. The participants direct the Company to invest funds in mutual fund investments and the Company's stock. The Company matches a certain level of participant contributions in cash and Company stock. The matching contributions vest after a five year period. Participant benefits are limited to the value of the vested benefits held on their behalf. Investments related to these plans and their related liabilities of $414 are recorded on the consolidated balance sheet at December 31, 2001. EMPLOYEE BENEFIT PLANS Effective January 1, 2000, the Company established a retirement plan (the "Plan"), under Section 401(k) of the Internal Revenue Code that covers all eligible employees. The Plan is a defined contribution plan and allows employees to make voluntary contributions up to 20% of annual compensation. Under the Plan, the Company may make discretionary matching contributions up to 6% of participants' compensation. Expense under the Plan aggregated $1,317 and $1,434 for the years ended December 31, 2001 and 2000, respectively. Prior to January 1, 2000, the Company sponsored a Coachmen Assisted Retirement For Employees (C.A.R.E.) program which provided a mechanism for each eligible employee to establish an individual retirement account and receive matching contributions from the Company based on the amount contributed by the employee, the employee's years of service and the profitability of the Company. Company matching contributions charged to expense under the C.A.R.E. program aggregated $735 for the year ended December 31, 1999. 42 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 10. INCOME TAXES. Income taxes (benefit) are summarized as follows for the year ended December 31: 2001 2000 1999 ---- ---- ---- Federal: Current $(1,170) $ 1,695 $13,591 Deferred ( 906) (1,564) 489 ------- ------- ------- (2,076) 131 14,080 ------- ------- ------- State: Current 38 786 1,389 Deferred (129) (194) 70 ------- ------- ------- (91) 592 1,459 ------- ------- ------- Total $(2,167) $ 723 $15,539 ======= ======= ======= The following is a reconciliation of the provision (benefit) for income taxes computed at the federal statutory rate (35% in 2001 and 1999 and 34% in 2000) to the reported provision (benefit) for income taxes: 2001 2000 1999 ---- ---- ---- Computed federal income tax (benefit) at federal statutory rate $(2,141) $ 982 $15,765 Changes resulting from: Increase in cash surrender value of life insurance contracts (444) (233) (150) Extraterritorial income exclusion/ Foreign Sales Corporation subject to lower tax rate (148) (391) (368) State income taxes, net of federal income tax benefit - 391 948 Preferred stock dividend exclusion (158) (399) (622) Goodwill amortization 306 40 - Settlement of IRS tax examinations - 216 - Other, net 418 117 ( 34) ------- ------- ------- Total $(2,167) $ 723 $15,539 ======= ======= ======= 43 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 10. INCOME TAXES, CONTINUED. The components of the net deferred tax assets are as follows: 2001 2000 ---- ---- Current deferred tax asset: Accrued warranty expense $ 3,357 $ 2,981 Inventories 589 948 Receivables 366 389 Other 3,007 4,066 ------- ------- Net current deferred tax asset $ 7,319 $ 8,384 ======= ======= Noncurrent deferred tax asset (liability): Deferred compensation $ 2,822 $ 2,931 Property and equipment and other real estate (4,947) (5,677) Intangible assets (851) (778) Other 1,719 154 ------- ------- Net noncurrent deferred tax liability $(1,257) $(3,370) ======= ======= 11. ACQUISITIONS AND DISPOSITIONS. ACQUISITIONS On February 12, 2001, the Company acquired all of the issued and outstanding shares of capital stock of Kan Build, Inc. ("Kan Build"), a manufacturer of modular buildings. The purchase price aggregated $21.6 million and consisted of $8.9 million cash paid at closing and the assumption of $12.7 million of liabilities. The excess of purchase price over fair value of assets acquired ("goodwill"), which approximated $4.1 million, is being amortized on a straight-line basis over 20 years. The acquisition was accounted for as a purchase and the operating results of Kan Build are included in the Company's consolidated financial statements from the date of acquisition. When acquired, Kan Build had facilities in Osage City, Kansas; Loveland, Colorado; and a new plant under construction in Milliken, Colorado. During the second quarter of 2001, all manufacturing operations in the Loveland, Colorado facility were relocated to the newly constructed facility in Milliken, Colorado. The lease on the Loveland, Colorado facility was subsequently terminated. Effective June 30, 2000, the Company acquired all of the issued and outstanding capital stock of Mod-U-Kraf Homes, Inc. ("Mod-U-Kraf"), a manufacturer of modular housing, located in Virginia. The purchase price aggregated $15.1 million and consisted of $9.7 million of cash paid at closing and the assumption of $5.4 million of liabilities. The excess of purchase price over fair value of assets acquired ("goodwill"), which approximated $1.5 million, is being amortized on a straight-line basis over 20 years. 44 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 11. ACQUISITIONS AND DISPOSITIONS, CONTINUED. On October 31, 2000, the Company acquired all of the issued and outstanding capital stock of Miller Building Systems, Inc. ("Miller Building"). Miller Building designs, manufactures and markets factory-built buildings for use as commercial modular buildings and telecommunication shelters. The purchase price aggregated $43.8 million and consisted of $27.3 million of cash paid at closing and the assumption of $16.5 million of liabilities. In addition to the cash purchase price and assumption of liabilities, the Company assumed Miller Building's obligations under its stock option plan by converting options to acquire Miller Building common shares into options to acquire a like number of common shares of the Company for an adjusted exercise price. The difference between per share fair value of the Company's common shares less adjusted exercise price represented additional purchase price and was accounted for as a credit to additional paid-in capital. The excess of purchase price over fair value of assets acquired ("goodwill"), which approximated $9.1 million, is being amortized on a straight-line basis over 20 years. The acquisitions of Mod-U-Kraf Homes and Miller Building have been accounted for as a purchase and the operating results of the acquired businesses are included in the Company's consolidated financial statements from the respective dates of acquisition. Unaudited pro forma financial information as if these acquisitions had occurred at the beginning of each period is as follows: 2001 2000 ---- ---- Net sales $597,444 $837,331 Net income (loss) (3,922) 4,092 Earnings (loss) per share: Basic $ (.25) $ .26 Diluted (.25) .26 DISPOSITIONS ------------ During the years ended December 31, 2000 and 1999, the Company disposed of certain business operations within its recreational vehicle segment. On January 12, 2000, the Company sold certain assets and the business operations of its automotive division (converter of vans and specialty vehicles). The sales price consisted of cash of $2.3 million and the buyer's assumption of certain liabilities. During the quarter ended September 30, 2000, the Company sold the business operations and assets of its Lux Company subsidiary. The sales price consisted of cash of $2.5 million and the buyers assumption of certain liabilities. The pretax gain on the sale, which was primarily attributable to the sale of real property, approximated $1.2 million. During the third and fourth quarters of 2000, the Company completed the closing and liquidation of four of its Company-owned dealerships pursuant to its previously announced plan to exit this line of business with the exception of two Company-owned stores which have been retained for research and development and regional service purposes. 45 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 11. ACQUISITIONS AND DISPOSITIONS, CONTINUED. During the year ended December 31, 1999, the Company sold the business operations and certain assets of two of its Company-owned dealerships. The sales proceeds consisted of $3,298 cash and a promissory note receivable of $650. The Company recognized a $650 gain on the sale of these businesses which is included in other nonoperating income. Net sales and pretax losses (including gains and losses on sale, disposal or liquidation) of these business operations were as follows: 2001 2000 1999 ---- ---- ---- Net sales $ - $ 50,355 $ 83,980 Pretax losses - (5,195) (2,473) 12. COMMITMENTS AND CONTINGENCIES. LEASE COMMITMENTS The Company leases various manufacturing and office facilities under non-cancelable agreements which expire at various dates through November 2006. Several of the leases contain renewal options and options to purchase and require the payment of property taxes, normal maintenance and insurance on the properties. Certain office and delivery equipment are also leased under various non-cancelable agreements. The above described leases are accounted for as operating leases. Future minimum annual lease commitments at December 31, 2001 aggregated $746 and are payable as follows: 2002 - $490; 2003 - $162; 2004 - $74; 2005 - $14; 2006 - $6. Total rental expense for the years ended December 31, 2001, 2000 and 1999 aggregated $1,269, $850 and $1,179, respectively. OBLIGATION TO PURCHASE CONSIGNED INVENTORIES The Company obtains vehicle chassis for its recreational and specialized 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 either assigned to a unit in the production process or 90 days have passed. At the earlier of these dates, the Company is obligated to purchase the chassis and it is recorded as inventory. At December 31, 2001 and 2000, chassis inventory, accounted for as consigned inventory, approximated $16.4 million and $16.5 million, respectively. 46 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 12. COMMITMENTS AND CONTINGENCIES, CONTINUED. CORPORATE GUARANTEES The Company was contingently liable under guarantees to financial institutions of their loans to independent dealers for amounts totaling approximately $3.1 million at December 31, 2001 and $15.1 million at December 31, 2000 (none in 1999). REPURCHASE AGREEMENTS The Company is contingently liable 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 financial institution in the event that they have repossessed them upon a dealer's default. Although the estimated contingent liability approximates $164 million at December 31, 2001 ($272 million at December 31, 2000), 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. Prior to 2000, the Company had not reported any losses under these agreements. However, in 2000 and continuing to a lesser extent through 2001, as a result of business conditions negatively affecting the recreational vehicle industry, the Company experienced some losses under repurchase agreements. Accordingly, the Company is recording an accrual for estimated losses under repurchase agreements at December 31, 2001 and 2000. SHARE REPURCHASE PROGRAMS During 2000 and 1999, the Company repurchased common shares for its treasury under share repurchase programs authorized by the Board of Directors. Under the repurchase programs, common shares are purchased from time to time, depending on market conditions and other factors, on the open market or through privately negotiated transactions. As of December 31, 2001, the Company has authorization to repurchase up to 871 additional common shares. SELF-INSURANCE The Company is self-insured for a portion of its product liability and certain other liability exposures. Depending on the nature of the claim and the date of occurrence, the Company's maximum exposure ranges from $250 to $500 per claim. The Company accrues an estimated liability based on various factors, including sales levels and the amount of outstanding claims. Management believes the liability recorded (See Note 7) is adequate to cover the Company's self-insured risk. CHANGE OF CONTROL AGREEMENTS On February 3, 2000, the Company entered into Change of Control Agreements with key executives. Under the terms of these agreements, in the event of a change in control of the Company, as defined, the Company would be obligated to pay these key executives for severance and other benefits. These agreements, as adjusted for subsequent changes in key personnel, aggregated obligations of approximately $12.4 million and $13.2 million based on salaries and benefits at December 31, 2001 and 2000, respectively. In addition, in the event of a change of control of the Company, all outstanding stock options and SARs shall become immediately exercisable, all stock awards shall immediately vest and all performance goals under incentive compensation plans shall be deemed fully achieved. 47 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 12. COMMITMENTS AND CONTINGENCIES, CONTINUED. Also on February 3, 2000, the Company established a rabbi trust, which in the event of a change of control, as defined, will be funded to cover the Company's obligations under its deferred compensation plan (see Note 9). LITIGATION The Company is involved in various legal proceedings which are ordinary routine litigations incidental to the industry and which are covered in whole or in part by insurance. Management believes that any liability which may result from these proceedings will not be significant. 13. UNAUDITED INTERIM FINANCIAL INFORMATION. Certain selected unaudited quarterly financial information for the years ended December 31, 2001 and 2000 is as follows: 2001 Quarter Ended March 31 June 30 September 30 December 31 -------- ------- ------------ ----------- Net sales $152,924 $162,359 $149,577 $129,061 Gross profit 16,122 28,059 26,141 20,240 Net income (loss) (4,940) 1,424 1,005 (1,440) Net income (loss) per common share: Basic (.31) .09 .06 (.09) Diluted (.31) .09 .06 (.09) 2000 Quarter Ended March 31 June 30 September 30 December 31 -------- ------- ------------ ----------- Net sales $201,213 $194,697 $188,474 $150,194 Gross profit 30,151 30,513 27,207 15,363 Net income (loss) 4,030 3,700 2,273 (7,839) Net income (loss) per common share: Basic .26 .24 .15 (.50) Diluted .26 .24 .15 (.50) 48 COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 13. UNAUDITED INTERIM FINANCIAL INFORMATION, CONTINUED. The fourth quarter of 2001 was adversely impacted by a $469 nonrecurring special charge which consisted of writing-down the carrying value of certain real estate not currently used in production. In addition, the 2001 fourth quarter's operating results were adversely affected by increased accruals for prior years state taxes and for estimated losses under repurchase agreements as a result of the unfavorable market conditions affecting the recreational vehicle industry. The fourth quarter of 2000 was adversely impacted by $2.6 million of nonrecurring special charges which consisted of the following: $646 for closing of the Oregon plant, $1,270 for closing and liquidation of four Company-owned retail facilities and $673 for writing down the carrying value of certain real estate not currently used in production. In addition, the 2000 fourth quarter's operating results were adversely affected by increased accruals for excess inventory quantities, warranty liabilities and estimated losses under repurchase agreements all the result of the unfavorable market conditions affecting the recreational vehicle industry. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE In June 2001, PricewaterhouseCoopers LLP ("PwC") advised the Company that it was closing its South Bend, Indiana office that had served the Company since 1986. On August 23, 2001, the Board of Directors of the Company, on the recommendation of the Audit Committee, appointed Ernst & Young LLP as the Company's independent auditors for the year ending December 31, 2001. PwC was notified of their dismissal on August 23, 2001. The reports of PwC on the Company's financial statements for the years ended December 31, 2000 and 1999, did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. In connection with the audits of the Company's financial statements for the two most recent fiscal years and through August 23, 2001, there have been no disagreements with PwC on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of PwC, would have caused them to make reference thereto in their report on the financial statements for such years. The Company filed the related Form 8-K on August 23, 2001. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) IDENTIFICATION OF DIRECTORS Information for Item 10(a) is contained on page 4 of the Company's Proxy 49 Statement dated March 27, 2002 and is incorporated herein by reference. (b) EXECUTIVE OFFICERS OF THE COMPANY See "Executive Officers of the Registrant" contained herein (c) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Information for "Section 16 (a)" Beneficial Ownership Reporting Compliance is contained on page 3 of the Company's Proxy Statement dated March 27, 2002 and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Information for Item 11 is contained under the heading "Compensation of Executive Officers and Directors" in the Company's Proxy Statement dated March 28, 2002 and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information for Item 12 is contained on pages 3 and 4 of the Company's Proxy Statement dated March 28, 2002 and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not Applicable PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) THE FOLLOWING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE ARE INCLUDED IN ITEM 8 HEREIN. 1. Financial Statements --------------------- Report of Independent Auditors Consolidated Balance Sheets at December 31, 2001 and 2000 Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2000 and 1999 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 Notes to Consolidated Financial Statements for the years ended December 31, 2001, 2000 and 1999 50 2. Financial Statement Schedule ----------------------------- Schedule II - Valuation and Qualifying Accounts 3. Exhibits --------- See Index to Exhibits (b) REPORTS ON FORM 8-K DURING THE QUARTER ENDED DECEMBER 31, 2001 Form 8-K, dated November 7, 2001, reporting an Item 5 event (a press release announcing third quarter results). SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS Balance At Charged Balance Beginning To Costs Deductions- At End Description Of Period And Expenses Describe Of Period --------- ------------ --------- ---------- Allowance for doubtful receivables - deducted from trade receivables in the consolidated balance sheets: For the year ended $ (488,000)(A) December 31, 2001 $1,066,000 $ 379,000 15,000 (B) $ 972,000 For the year ended $ (137,000)(A) December 31, 2000 $ 550,000 $ 435,000 $ 218,000 (B) $1,066,000 For the year ended December 31, 1999 $ 768,000 $ (183,000) $ (35,000)(A) $ 550,000 (A) Write-off of bad debts, less recoveries. (B) Allowance for doubtful receivables of acquired businesses. 51 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COACHMEN INDUSTRIES, INC. Date: March 29, 2002 /s/ J.P. Tomczak ----------------------------- J. P. Tomczak (Executive Vice President and Chief Financial Officer) /s/ G. L. Near ----------------------------- G. L. Near (Vice President and Controller) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities as of March 29, 2002. /s/ C. C. Skinner /s/ K. D. Corson - ------------------------------- ------------------------------ C. C. Skinner K. D. Corson (Director) (Director) (Chief Executive Officer) /s/ T. H. Corson /s/ W. P. Johnson - ------------------------------- ------------------------------ T. H. Corson W. P. Johnson (Director) (Director) /s/ F. M. Miller /s/ E. W. Miller - ------------------------------- ------------------------------ F. M. Miller E. W. Miller (Director) (Director) /s/ P. G. Lux /s/ R. J. Deputy - ------------------------------- ------------------------------ P. G. Lux R. J. Deputy (Director) (Director) /s/ G. B. Bloom /s/ D. W. Hudler - ------------------------------- ------------------------------ G. B. Bloom D. W. Hudler (Director) (Director) 52 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 January 31, 2002 (incorporated by reference to Exhibit 3.3 to the Company's Form 8-K filed February 20, 2002). (4)(a) Amended and Restated Credit Agreement dated as of March 30, 2001 (filed herewith). (4)(a)(i) Amendment No. 1 to Amended and Restated Credit Agreement dated as of November 5, 2001 (filed herewith). (4)(b) Stockholder Rights Agreement (incorporated by reference to Exhibit 1 to Form 8-A dated January 5, 2000). *(10)(a) Executive Benefit and Estate Accumulation Plan, as amended and restated effective as of September 30, 2000 (filed herewith). *(10)(b) 2000 Omnibus Stock Incentive Program (incorporated by reference to Exhibit A to the Company's Proxy Statement dated March 27, 2000 for its Annual Meeting in 2000). *(10)(b)(i) Resolution regarding Amendment of 2000 Omnibus Stock Incentive Program adopted by the Company's Board of Directors on July 27, 2000 (filed herewith) *(10)(c) Form of Change in Control Agreements for certain executive officers (Tier 1)(incorporated by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000). *(10)(d) Form of Change in Control Agreements for certain executive officers (Tier 2)( incorporated by reference to Exhibit 10(d) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000). *(10)(e) PRISM Exec(R)Model Non-Qualified Deferred Compensation Plan effective January 1, 2001 (filed herewith) (11) No Exhibit - See Consolidated Statements of Income and Note 8 of Notes to Consolidated Financial Statements, Contained herein. (16) Letter re change in certifying accountant (incorporated by reference to the Company's Form 8-K filed August 23, 2001). (21) Registrant and Subsidiaries of the Registrant. 53 (23.1) Consent of Ernst & Young LLP. (23.2) Consent of PricewaterhouseCoopers LLP. * Management Contract or Compensatory Plan. 54 EX-4.(A) 3 c01376x4a.txt AMENDED AND RESTATED CREDIT AGREEMENT Exhibit 4(a) AMENDED AND RESTATED CREDIT AGREEMENT This Agreement, dated as of March 30, 2001, is among Coachmen Industries, Inc., the Lenders, and Bank One, Indiana, N.A., as Administrative Agent. Recital: The Borrower and the Lenders desire to amend and restate the Original Agreement in its entirety. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS As used in this Agreement: "Acquisition" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company. "Advance" means a borrowing hereunder, (i) made by some or all of the Lenders on the same Borrowing Date, or (ii) converted or continued by the Lenders on the same date of conversion or continuation, consisting, in either case, of the aggregate amount of the several Loans of the same Type and, in the case of Eurodollar Loans, for the same Interest Period. The term "Advance" shall include Swing Line Loans unless otherwise expressly provided. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Agent" means Bank One in its capacity as contractual representative of the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article X. "Aggregate Commitment" means the aggregate of the Commitments of all the Lenders, as increased or reduced from time to time pursuant to the terms hereof. As of the date hereof, the Aggregate Commitment is $33,333,333.55. "Aggregate Outstanding Credit Exposure" means, at any time, the aggregate of the Outstanding Credit Exposure of all the Lenders. "Agreement" means this credit agreement, as it may be amended or modified and in effect from time to time. "Agreement Accounting Principles" means generally accepted accounting principles as in effect in the United States from time to time, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.4. "Alternate Base Rate" means, for any day, a rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per annum. "Applicable Fee Rate" means, at any time, the percentage rate per annum at which Facility Fees are accruing on the Aggregate Commitment (without regard to usage) at such time as set forth in the Pricing Schedule, provided, however, that notwithstanding the foregoing, from the Effective Date until the fifth Business Day after the Agent receives the audited financial statements of the Borrower and its Subsidiaries for the fiscal year ended December 31, 2001 pursuant to Section 6.1(i), the Applicable Fee Rate shall be 0.50% per annum. "Applicable Margin" means, with respect to Advances of any Type at any time, the percentage rate per annum which is applicable at such time with respect to Advances of such Type as set forth in the Pricing Schedule, provided, however, that notwithstanding the foregoing, from the Effective Date until the fifth Business Day after the Agent receives the audited financial statements of the Borrower and its Subsidiaries for the fiscal year ended December 31, 2001 pursuant to Section 6.1(i), the Applicable Margin with respect to Eurodollar Advances shall be 1.75% per annum and the Applicable Margin with respect to Floating Rate Advances shall be 0.50% per annum. "Arranger" means Banc One Capital Markets, Inc., a Delaware corporation, and its successors, in its capacity as Lead Arranger and Sole Book Runner. "Article" means an article of this Agreement unless another document is specifically referenced. "Authorized Officer" means any of the chief executive officer, president, chief operating officer, chief financial officer, chief accounting officer or treasurer of the Borrower, acting singly. "Available Aggregate Commitment" means, at any time, the Aggregate Commitment then in effect minus the Aggregate Outstanding Credit Exposure at such time. "Bank One" means Bank One, Indiana, N.A., a national banking association, in its individual capacity, and its successors. "Borrower" means Coachmen Industries, Inc., an Indiana corporation, and its successors and assigns. "Borrowing Date" means a date on which an Advance is made hereunder. "Borrowing Notice" is defined in Section 2.8. "Business Day" means (i) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago and New York for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system. "Capitalized Lease" of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Capitalized Lease Obligations" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Cash Equivalent Investments" means (i) short-term obligations of, or fully guaranteed by, the United States of America, (ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moody's at the time of investment therein, (iii) demand deposit accounts maintained in the ordinary course of business, (iv) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000, (v) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (i) above and entered into with a financial institution satisfying the criteria described in clause (iv) above, (vi) short-term obligations consisting of discount notes issued by the Federal National Mortgage Association (FNMA), the Federal Farm Credit Banks Funding Corporation (FFCB), the Federal Home Loan Bank System (FHLB), the Student Loan Marketing Association (SLMA) or the Federal Home Loan Mortgage Corporation (FHLMC), and (vii) shares of money market mutual funds having net assets in excess of $500,000,000 the investments of which are limited to one or more of the types of investments described in clauses (i), (ii), (iii), (iv), (v) and (vi) above, provided that such mutual funds have maturities which occur or redemption or withdrawal rights which are exercisable no later than one year from the date of investment; and provided further in the case of investments described in clauses (i) through (vi) above, that the same provide for payment of both principal and interest (and not principal alone or interest alone) and are not subject to any contingency regarding the payment of principal or interest. "Change in Control" means (i) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of the Borrower or (ii) the majority of the Board of Directors of the Borrower fails to consist of Continuing Directors. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time, and any rule or regulation issued thereunder. "Collateral Documents" means, collectively, all agreements, instruments and documents executed in connection with this Agreement that are intended to create or evidence Liens to secure the Obligations or the Guaranty of the Obligations, including, without limitation, any pledge agreement executed pursuant to the terms of Section 6.17(b). "Commitment" means, for each Lender, the obligation of such Lender to make Revolving Loans not exceeding the amount set forth opposite its name on Schedule I hereto, as it may be modified as a result of any assignment that has become effective pursuant to Section 12.3.2 or as otherwise modified from time to time pursuant to the terms hereof. "Consolidated EBIT" means Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense and (ii) expense for taxes paid or accrued, minus, to the extent included in Consolidated Net Income, extraordinary gains realized other than in the ordinary course of business, all calculated for the Borrower and its Subsidiaries on a consolidated basis. "Consolidated EBITDA" means Consolidated EBIT plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) depreciation and (ii) amortization of intangibles, all calculated for the Borrower and its Subsidiaries on a consolidated basis. "Consolidated Interest Expense" means, with reference to any period, the interest expense of the Borrower and its Subsidiaries calculated on a consolidated basis for such period. "Consolidated Net Income" means, with reference to any period, the net after-tax income (or loss) of the Borrower and its Subsidiaries calculated on a consolidated basis for such period, excluding minority interests and including only dividends actually received by the Borrower from any entity which is not a Subsidiary. "Consolidated Net Worth" means at any time the consolidated stockholders' equity of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time. "Consolidated Tangible Net Worth" means Consolidated Net Worth minus, to the extent included as assets in determining Consolidated Net Worth, the net book value of all (i) goodwill, including, without limitation, the excess of cost over book value of any asset, (ii) organization or experimental expenses, (iii) unamortized debt discount and expense, (iv) patents, trademarks, trade names and copyrights, (v) treasury stock, (vi) franchises, licenses and permits, and (vii) other assets which are deemed intangible assets under Agreement Accounting Principles. "Consolidated Total Debt" means at any time the Indebtedness of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time, including all guaranties of the Indebtedness of Persons other than the Borrower and its Subsidiaries and all Off-Balance Sheet Liabilities of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time regardless of the treatment of such guaranties or Off-Balance Sheet Liabilities under Agreement Accounting Principles. "Continuing Director" means, as of any date of determination, any member of the board of directors of the Company who (a) was a member of such board of directors on the date hereof, or (b) was nominated for election or elected to such board of directors with the approval of the Continuing Directors who were members of such board at the time of such nomination or election. "Conversion/Continuation Notice" is defined in Section 2.9. "Default" means an event described in Article VII. "Domestic Subsidiary" means any Subsidiary organized under the laws of the United States of America, any State thereof or the District of Columbia. "Effective Date" is defined in Section 4.1. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder. "ERISA Affiliate" means, with respect to any Person, any trade or business (whether or not incorporated) which, together with such Person or any Subsidiary of such Person, would be treated as a single employer under Section 414 of the Code. "Eurodollar Advance" means an Advance which, except as otherwise provided in Section 2.11, bears interest at the applicable Eurodollar Rate. "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, (i) if Reuters Screen FRBD is not available to the Agent for any reason, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, and (ii) if no such British Bankers' Association Interest Settlement Rate is available to the Agent, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the rate determined by the Agent to be the rate at which Bank One or one of its Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of Bank One's relevant Eurodollar Loan and having a maturity equal to such Interest Period. "Eurodollar Loan" means a Loan which, except as otherwise provided in Section 2.11, bears interest at the applicable Eurodollar Rate. "Eurodollar Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (ii) the Applicable Margin. "Excluded Taxes" means, in the case of each Lender or applicable Lending Installation and the Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by (i) the jurisdiction under the laws of which such Lender or the Agent is incorporated or organized or (ii) the jurisdiction in which the Agent's or such Lender's principal executive office or such Lender's applicable Lending Installation is located. "Exhibit" refers to an exhibit to this Agreement, unless another document is specifically referenced. "Facility Fee" is defined in Section 2.6(a). "Facility Termination Date" means June 30, 2003 or any earlier date on which the Aggregate Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof. "Federal Funds Effective Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "Fixed Charge Coverage Ratio" means, with reference to any period, the ratio of (a) the sum of (i) Consolidated EBITDA plus (ii) rentals minus (iii) capital expenditures made in cash to (b) the sum of (i) cash interest expense plus (ii) rentals plus (iii) cash taxes plus (iv) dividends and distributions on, and redemptions and repurchases of, the Borrower's capital stock plus (v) scheduled payments of principal on all long-term Indebtedness, in each case calculated on a consolidated basis for such period. "Floating Rate" means, for any day, a rate per annum equal to (i) the Alternate Base Rate for such day plus (ii) the Applicable Margin, in each case changing when and as the Alternate Base Rate changes. "Floating Rate Advance" means an Advance which, except as otherwise provided in Section 2.11, bears interest at the Floating Rate. "Floating Rate Loan" means a Loan which, except as otherwise provided in Section 2.11, bears interest at the Floating Rate. "Foreign Subsidiary" means any Subsidiary that is not a Domestic Subsidiary. "Guarantor" means each Subsidiary that has executed or hereafter executes the Guaranty pursuant to the terms of Section 6.17(a), and its successors and assigns. "Guaranty" means that certain Subsidiary Guaranty dated as of October 6, 2000, executed by the Guarantors in favor of the Agent, for the ratable benefit of the Lenders, as it may be supplemented, amended or modified and in effect from time to time. "Indebtedness" of a Person means, without duplication, (a) the obligations of such Person (i) for borrowed money, (ii) under or with respect to notes payable and drafts accepted which represent extensions of credit (whether or not representing obligations for borrowed money) to such Person, (iii) constituting reimbursement obligations with respect to letters of credit issued for the account of such Person or (iv) for the deferred purchase price of property or services other than current accounts payable arising in the ordinary course of business on terms customary in the trade, (b) the obligations of others, whether or not assumed, secured by Liens on property of such Person or payable out of the proceeds of or production from property now or hereafter owned or acquired by such Person, (c) the Capitalized Lease Obligations of such Person, (d) the obligations of such Person under guaranties by such Person of any Indebtedness (other than obligations for borrowed money incurred to finance the purchase of property leased to such Person pursuant to a Capitalized Lease of such Person) of any other Person, and (e) Off-Balance Sheet Liabilities of such Person. "Indebtedness" shall not include customary repurchase agreements related to dealer stock. "Interest Period" means, with respect to a Eurodollar Advance, a period of one, two, three or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. Such Interest Period shall end on the day which corresponds numerically to such date one, two, three or six months thereafter, provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day. "Investment" of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities owned by such Person; any deposit accounts and certificate of deposit owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by such Person. "Lenders" means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. Unless otherwise specified, the term "Lenders" includes Bank One in its capacity as Swing Line Lender. "Lending Installation" means, with respect to a Lender or the Agent, the office, branch, subsidiary or affiliate of such Lender or the Agent listed on the signature pages hereof or on a Schedule or otherwise selected by such Lender or the Agent pursuant to Section 2.17. "Leverage Ratio" means, as of any date of calculation, the ratio of (i) Consolidated Total Debt outstanding on such date to (ii) Consolidated EBITDA for the Borrower's then most-recently ended four fiscal quarters. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "Loan" means a Revolving Loan or a Swing Line Loan. "Loan Documents" means this Agreement, any Notes issued pursuant to Section 2.13, the Collateral Documents and the Guaranty. "Loan Party" means the Borrower and each Guarantor. "Material Adverse Effect" means a material adverse effect on (i) the business, Property, condition (financial or otherwise), results of operations, or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its obligations under the Loan Documents to which it is a party, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent or the Lenders thereunder. "Material Indebtedness" is defined in Section 7.5. "Material Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which (i) represents more than 5% of the consolidated assets of the Borrower and its Subsidiaries as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the end of the four fiscal quarter period ending with the fiscal quarter immediately prior to the fiscal quarter in which such determination is made, or (ii) is responsible for more than 5% of the consolidated net income of the Borrower and its Subsidiaries as reflected in the financial statements referred to in clause (i) above. "Material Subsidiary" means any Subsidiary of the Borrower which (i) represents more than 5% of the consolidated assets of the Borrower and its Subsidiaries as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the end of the four fiscal quarter period ending with the fiscal quarter immediately prior to the fiscal quarter in which such determination is made, or (ii) is responsible for more than 5% of the consolidated net sales or of the consolidated net income of the Borrower and its Subsidiaries as reflected in the financial statements referred to in clause (i) above. "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" means any "multiemployer plan" as defined in Section 4001(a)(3) of ERISA or Section 414(f) of the Code. "Non-U.S. Lender" is defined in Section 3.5(iv). "Note" is defined in Section 2.13. "Notice of Assignment" is defined in Section 12.3.2. "Obligations" means all unpaid principal of and accrued and unpaid interest on the Loans, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Agent or any indemnified party arising under the Loan Documents. "Off-Balance Sheet Liability" of a Person means (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability under any Sale and Leaseback Transaction which is not a Capitalized Lease, (iii) any liability under any financing lease or so-called "synthetic lease" transaction entered into by such Person, or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person, but excluding from this clause (iv) Operating Leases. "Operating Lease" of a Person means any lease of Property (other than a Capitalized Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more. "Original Agreement" means the Three Year Credit Agreement dated as of October 6, 2000, as amended, among the Borrower, the lenders from time to time party thereto and Bank One, NA, a national banking association having its principal office in Chicago, Illinois, as administrative agent. "Other Taxes" is defined in Section 3.5(ii). "Outstanding Credit Exposure" means, as to any Lender at any time, the sum of (i) the aggregate principal amount of its Revolving Loans outstanding at such time, plus (ii) an amount equal to its Pro Rata Share of the aggregate principal amount of Swing Line Loans outstanding at such time. "Participants" is defined in Section 12.2.1. "Payment Date" means the last day of each March, June, September and December. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Permitted Acquisition" means any Acquisition made by the Borrower or any of its Subsidiaries, provided that (i) as of the date of the consummation of such Acquisition, no Default or Unmatured Default shall have occurred and be continuing or would result from such Acquisition, and the representation and warranty contained in Section 5.11 shall be true both before and after giving effect to such Acquisition, (ii) such Acquisition is consummated on a non-hostile basis pursuant to a negotiated acquisition agreement approved by the board of directors or other applicable governing body of the seller or entity to be acquired, and no material challenge to such Acquisition (excluding the exercise of appraisal rights) shall be pending or threatened by any shareholder or director of the seller or entity to be acquired, (iii) the business to be acquired in such Acquisition is similar or related to one or more of the lines of business in which the Borrower and its Subsidiaries are engaged on the date hereof and is located in the United States or in Canada, and (iv) as of the date of the consummation of such Acquisition, all material approvals required in connection therewith shall have been obtained. "Person" means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means, with respect to any Person, any pension plan (other than a Multiemployer Plan) subject to Title IV of ERISA or to the minimum funding standards of Section 412 of the Code which has been established or maintained by such Person, any Subsidiary of such Person or any ERISA Affiliate, or by any other Person if such Person, any Subsidiary of such Person or any ERISA Affiliate could have liability with respect to such pension plan. "Pricing Schedule" means the Schedule attached hereto identified as such. "Prime Rate" means a rate per annum equal to the prime rate of interest announced from time to time by Bank One or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. "Prohibited Transaction" means any transaction involving any Plan which is proscribed by Section 406 of ERISA or Section 4975 of the Code. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Pro Rata Share" means, with respect to a Lender, a portion equal to a fraction the numerator of which is such Lender's Commitment and the denominator of which is the Aggregate Commitment. "Purchase Price" means the total consideration and other amounts payable in connection with any Acquisition or Investment, including, without limitation, any portion of the consideration payable in cash, the value of any capital stock or other equity interests of the Borrower or any Subsidiary issued as consideration for such Acquisition or Investment, all Indebtedness, liabilities and contingent obligation incurred or assumed in connection with such Acquisition or Investment and all transaction costs and expenses incurred in connection with such Acquisition or Investment. "Purchasers" is defined in Section 12.3.1. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, including such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event. "Required Lenders" means Lenders in the aggregate having at least 51% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding at least 51% of the Aggregate Outstanding Credit Exposure. "Reserve Requirement" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities. "Revolving Loan" means, with respect to a Lender, such Lender's loan made pursuant to its commitment to lend set forth in Section 2.1 (or any conversion or continuation thereof). "S&P" means Standard and Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. "Sale and Leaseback Transaction" means any sale or other transfer of Property by any Person with the intent to lease such Property as lessee. "Schedule" refers to a specific schedule to this Agreement, unless another document is specifically referenced. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower. "Substantial Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which (i) represents more than 10% of the consolidated assets of the Borrower and its Subsidiaries as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the end of the four fiscal quarter period ending with the fiscal quarter immediately prior to the fiscal quarter in which such determination is made, or (ii) is responsible for more than 10% of the consolidated net income of the Borrower and its Subsidiaries as reflected in the financial statements referred to in clause (i) above. "Swing Line Borrowing Notice" is defined in Section 2.5.2. "Swing Line Commitment" means the obligation of the Swing Line Lender to make Swing Line Loans up to a maximum principal amount of $2,500,000 at any one time outstanding. "Swing Line Lender" means Bank One or such other Lender which may succeed to its rights and obligations as Swing Line Lender pursuant to the terms of this Agreement. "Swing Line Loan" means a Loan made available to the Borrower by the Swing Line Lender pursuant to Section 2.5. "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes. "364-Day Credit Agreement" means the Amended and Restated 364-Day Credit Agreement dated as of the date hereof among the Borrower, the lenders from time to time party thereto, and Bank One as agent for such lenders. "Transferee" is defined in Section 12.4. "Type" means, with respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar Advance. "Unfunded Benefit Liabilities" means, with respect to any Plan as of any date, the amount of the unfunded benefit liabilities determined in accordance with Section 4001(a)(18) of ERISA. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE II ---------- THE CREDITS ----------- 2.1. Commitment. From and including the date of this Agreement and prior to the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Loans to the Borrower from time to time in amounts not to exceed in the aggregate at any one time outstanding its Pro Rata Share of the Available Aggregate Commitment, provided that at no time shall the aggregate principal amount of the Loans outstanding hereunder exceed the Aggregate Commitment. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow at any time prior to the Facility Termination Date. The Commitments to lend hereunder shall expire on the Facility Termination Date. 2.2. Required Payments; Termination. Any outstanding Advances and all other unpaid Obligations shall be paid in full by the Borrower on the Facility Termination Date. 2.3. Ratable Loans. Each Advance hereunder (other than any Swing Line Loan) shall consist of Revolving Loans made from the several Lenders ratably in proportion to the ratio that their respective Commitments bear to the Aggregate Commitment. 2.4. Types of Advances. The Advances may be Floating Rate Advances or Eurodollar Advances, or a combination thereof, selected by the Borrower in accordance with Sections 2.9 and 2.10, or Swing Line Loans selected by the Borrower in accordance with Section 2.5. 2.5. Swing Line Loans. 2.5.1. Amount of Swing Line Loans. Upon the satisfaction of the conditions precedent set forth in Section 4.2 and, if such Swing Line Loan is to be made on the date of the initial Advance hereunder, the satisfaction of the conditions precedent set forth in Section 4.1 as well, from and including the date of this Agreement and prior to the Facility Termination Date, the Swing Line Lender agrees, on the terms and conditions set forth in this Agreement, to make Swing Line Loans to the Borrower from time to time in an aggregate principal amount not to exceed the Swing Line Commitment, provided that the Aggregate Outstanding Credit Exposure shall not at any time exceed the Aggregate Commitment, and provided further that at no time shall the sum of (i) the Swing Line Lender's Pro Rata Share of the Swing Line Loans, plus (ii) the outstanding Revolving Loans made by the Swing Line Lender pursuant to Section 2.1, exceed the Swing Line Lender's Commitment at such time. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow Swing Line Loans at any time prior to the Facility Termination Date. 2.5.2. Borrowing Notice. The Borrower shall deliver to the Agent and the Swing Line Lender irrevocable notice (a "Swing Line Borrowing Notice") not later than noon (Chicago time) on the Borrowing Date of each Swing Line Loan, specifying (i) the applicable Borrowing Date (which date shall be a Business Day), and (ii) the aggregate amount of the requested Swing Line Loan which shall be an amount not less than $100,000. The Swing Line Loans shall bear interest at the Floating Rate. 2.5.3. Making of Swing Line Loans. Promptly after receipt of a Swing Line Borrowing Notice, the Agent shall notify each Lender by fax, or other similar form of transmission, of the requested Swing Line Loan. Not later than 2:00 p.m. (Chicago time) on the applicable Borrowing Date, the Swing Line Lender shall make available the Swing Line Loan, in funds immediately available in Chicago, to the Agent at its address specified pursuant to Article XIII. The Agent will promptly make the funds so received from the Swing Line Lender available to the Borrower on the Borrowing Date at the Agent's aforesaid address. 2.5.4. Repayment of Swing Line Loans. Each Swing Line Loan shall be paid in full by the Borrower on or before the fifth (5th) Business Day after the Borrowing Date for such Swing Line Loan. In addition, the Swing Line Lender (i) may at any time in its sole discretion with respect to any outstanding Swing Line Loan, or (ii) shall on the fifth (5th) Business Day after the Borrowing Date of any Swing Line Loan, require each Lender (including the Swing Line Lender) to make a Revolving Loan in the amount of such Lender's Pro Rata Share of such Swing Line Loan (including, without limitation, any interest accrued and unpaid thereon), for the purpose of repaying such Swing Line Loan. Not later than noon (Chicago time) on the date of any notice received pursuant to this Section 2.5.4, each Lender shall make available its required Revolving Loan, in funds immediately available in Chicago to the Agent at its address specified pursuant to Article XIII. Revolving Loans made pursuant to this Section 2.5.4 shall initially be Floating Rate Loans and thereafter may be continued as Floating Rate Loans or converted into Eurodollar Loans in the manner provided in Section 2.10 and subject to the other conditions and limitations set forth in this Article II. Unless a Lender shall have notified the Swing Line Lender, prior to its making any Swing Line Loan, that any applicable condition precedent set forth in Sections 4.1 or 4.2 had not then been satisfied, such Lender's obligation to make Revolving Loans pursuant to this Section 2.5.4 to repay Swing Line Loans shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Agent, the Swing Line Lender or any other Person, (b) the occurrence or continuance of a Default or Unmatured Default, (c) any adverse change in the condition (financial or otherwise) of the Borrower, or (d) any other circumstances, happening or event whatsoever. In the event that any Lender fails to make payment to the Agent of any amount due under this Section 2.5.4, the Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Agent receives such payment from such Lender or such obligation is otherwise fully satisfied. In addition to the foregoing, if for any reason any Lender fails to make payment to the Agent of any amount due under this Section 2.5.4, such Lender shall be deemed, at the option of the Agent, to have unconditionally and irrevocably purchased from the Swing Line Lender, without recourse or warranty, an undivided interest and participation in the applicable Swing Line Loan in the amount of such Revolving Loan, and such interest and participation may be recovered from such Lender together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of demand and ending on the date such amount is received. On the Facility Termination Date, the Borrower shall repay in full the outstanding principal balance of the Swing Line Loans. 2.6. Facility Fee; Reductions in Aggregate Commitment. (a) Facility Fee. The Borrower agrees to pay to the Agent for the account of each Lender a facility fee (the "Facility Fee") at a per annum rate equal to the Applicable Fee Rate on the daily amount of such Lender's Commitment (regardless of usage) from the Effective Date to and including the Facility Termination Date, payable on each Payment Date hereafter and on the Facility Termination Date. (b) Reductions in Aggregate Commitment. The Borrower may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in integral multiples of $5,000,000, upon at least three Business Days' written notice to the Agent, which notice shall specify the amount of any such reduction, provided, however, that the amount of the Aggregate Commitment may not be reduced below the aggregate principal amount of the outstanding Advances. All accrued Facility Fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder. 2.7. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in the minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess thereof), and each Floating Rate Advance (other than an Advance to repay Swing Line Loans) shall be in the minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess thereof), provided, however, that any Floating Rate Advance may be in the amount of the unused Aggregate Commitment. 2.8. Optional Principal Payments. The Borrower may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances (other than Swing Line Loans), or, in a minimum aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof, any portion of the outstanding Floating Rate Advances (other than Swing Line Loans) upon one Business Day's prior notice to the Agent. The Borrower may at any time pay, without penalty or premium, all outstanding Swing Line Loans, or, in a minimum amount of $100,000 and increments of $50,000 in excess thereof, any portion of the outstanding Swing Line Loans, with notice to the Agent and the Swing Line Lender by 11:00 a.m. (Chicago time) on the date of repayment. The Borrower may from time to time pay, subject to the payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurodollar Advances, or, in a minimum aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof, any portion of the outstanding Eurodollar Advances upon three Business Days' prior notice to the Agent. 2.9. Method of Selecting Types and Interest Periods for New Advances. The Borrower shall select the Type of Advance and, in the case of each Eurodollar Advance, the Interest Period applicable thereto from time to time. The Borrower shall give the Agent irrevocable notice (a "Borrowing Notice") not later than 10:00 a.m. (Chicago time) on the Borrowing Date of each Floating Rate Advance (other than a Swing Line Loan) and three Business Days before the Borrowing Date for each Eurodollar Advance, specifying: (i) the Borrowing Date, which shall be a Business Day, of such Advance, (ii) the aggregate amount of such Advance, (iii) the Type of Advance selected, and (iv) in the case of each Eurodollar Advance, the Interest Period applicable thereto. Not later than noon (Chicago time) on each Borrowing Date, each Lender shall make available its Revolving Loan or Revolving Loans in funds immediately available in Chicago to the Agent at its address specified pursuant to Article XIII. The Agent will make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address. 2.10. Conversion and Continuation of Outstanding Advances. Floating Rate Advances (other than Swing Line Loans) shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Advances pursuant to this Section 2.10 or are repaid in accordance with Section 2.8. Each Eurodollar Advance shall continue as a Eurodollar Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or was repaid in accordance with Section 2.8 or (y) the Borrower shall have given the Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurodollar Advance continue as a Eurodollar Advance for the same or another Interest Period. Subject to the terms of Section 2.7, the Borrower may elect from time to time to convert all or any part of a Floating Rate Advance (other than a Swing Line Loan) into a Eurodollar Advance. The Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of a Floating Rate Advance into a Eurodollar Advance or continuation of a Eurodollar Advance not later than 10:00 a.m. (Chicago time) at least three Business Days prior to the date of the requested conversion or continuation, specifying: (i) the requested date, which shall be a Business Day, of such conversion or continuation, (ii) the aggregate amount and Type of the Advance which is to be converted or continued, and (iii) the amount of such Advance which is to be converted into or continued as a Eurodollar Advance and the duration of the Interest Period applicable thereto. 2.11. Changes in Interest Rate, etc. Each Floating Rate Advance (other than a Swing Line Loan) shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is automatically converted from a Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.10, to but excluding the date it is paid or is converted into a Eurodollar Advance pursuant to Section 2.10 hereof, at a rate per annum equal to the Floating Rate for such day. Each Swing Line Loan shall bear interest on the outstanding principal amount thereof, for each day from and including the day such Swing Line Loan is made to but excluding the date it is paid, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. Each Eurodollar Advance shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined by the Agent as applicable to such Eurodollar Advance based upon the Borrower's selections under Sections 2.9 and 2.10 and otherwise in accordance with the terms hereof. No Interest Period may end after the Facility Termination Date. 2.12. Rates Applicable After Default. Notwithstanding anything to the contrary contained in Section 2.9 or 2.10, during the continuance of a Default or Unmatured Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Advance may be made as, converted into or continued as a Eurodollar Advance. During the continuance of a Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) each Eurodollar Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum and (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate in effect from time to time plus 2% per annum, provided that, during the continuance of a Default under Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above shall be applicable to all Advances without any election or action on the part of the Agent or any Lender. 2.13. Method of Payment. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrower, by noon (local time) on the date when due and shall (except with respect to repayments of Swing Line Loans) be applied ratably by the Agent among the Lenders. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. The Agent is hereby authorized to charge the account of the Borrower maintained with Bank One for each payment of principal, interest and fees as it becomes due hereunder. 2.14. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (ii) The Agent shall also maintain accounts in which it will record (a) the amount of each Loan made hereunder, the Type thereof and the Interest Period with respect thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (c) the amount of any sum received by the Agent hereunder from the Borrower and each Lender's share thereof. (iii) The entries maintained in the accounts maintained pursuant to paragraphs (i) and (ii) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided, however, that the failure of the Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms. (iv) Any Lender may request that its Loans be evidenced by a promissory note or, in the case of the Swing Line Lender, promissory notes representing its Revolving Loans and Swing Line Loans, respectively, substantially in the form of Exhibit C, with appropriate changes for notes evidencing Swing Line Loans (each a "Note"). In such event, the Borrower shall prepare, execute and deliver to such Lender such Note or Notes payable to the order of such Lender. Thereafter, the Loans evidenced by each such Note and interest thereon shall at all times (including after any assignment pursuant to Section 12.3) be represented by one or more Notes payable to the order of the payee named therein or any assignee pursuant to Section 12.3, except to the extent that any such Lender or assignee subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in paragraphs (i) and (ii) above. 2.15. Telephonic Notices. The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of the Borrower, it being understood that the foregoing authorization is specifically intended to allow Borrowing Notices and Conversion/Continuation Notices to be given telephonically. The Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is requested by the Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error. 2.16. Interest Payment Dates; Interest and Fee Basis. Interest accrued on each Floating Rate Advance shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof, on any date on which the Floating Rate Advance is prepaid, whether due to acceleration or otherwise, and at maturity. Interest accrued on that portion of the outstanding principal amount of any Floating Rate Advance converted into a Eurodollar Advance on a day other than a Payment Date shall be payable on the date of conversion. Interest accrued on each Eurodollar Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Eurodollar Advance is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on each Eurodollar Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest on Eurodollar Advances and Facility Fees shall be calculated for actual days elapsed on the basis of a 360-day year; interest on Floating Rate Advances shall be calculated for actual days elapsed on the basis of a 365/366-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (local time) at the place of payment. If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. 2.17. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions and Increases. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Commitment Increase Request, Borrowing Notice, Swing Line Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. The Agent will notify each Lender of the interest rate applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate. 2.18. Lending Installations. Each Lender may book its Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans and any Notes issued hereunder shall be deemed held by each Lender for the benefit of any such Lending Installation. Each Lender may, by written notice to the Agent and the Borrower in accordance with Article XIII, designate replacement or additional Lending Installations through which Loans will be made by it and for whose account Loan payments are to be made. 2.19. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan. 2.20. Replacement of Lender. If the Borrower is required pursuant to Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any Lender's obligation to make or continue, or to convert Floating Rate Advances into, Eurodollar Advances shall be suspended pursuant to Section 3.3 (any Lender so affected an "Affected Lender"), the Borrower may elect, if such amounts continue to be charged or such suspension is still effective, to replace such Affected Lender as a Lender party to this Agreement, provided that no Default or Unmatured Default shall have occurred and be continuing at the time of such replacement, and provided further that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Borrower and the Agent shall agree, as of such date, to purchase for cash the Advances and other Obligations due to the Affected Lender pursuant to an assignment substantially in the form of Exhibit B and to become a Lender for all purposes under this Agreement and to assume all obligations of the Affected Lender to be terminated as of such date and to comply with the requirements of Section 12.3 applicable to assignments, and (ii) the Borrower shall pay to such Affected Lender in same day funds on the day of such replacement (A) all interest, fees and other amounts then accrued but unpaid to such Affected Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Affected Lender under Sections 3.1, 3.2 and 3.5, and (B) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 3.4 had the Loans of such Affected Lender been prepaid on such date rather than sold to the replacement Lender. ARTICLE III ----------- YIELD PROTECTION; TAXES ----------------------- 3.1. Yield Protection. If, on or after the date of this Agreement, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) subjects any Lender or any applicable Lending Installation to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to any Lender in respect of its Eurodollar Loans, or (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to Eurodollar Advances), or (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation of making, funding or maintaining its Eurodollar Loans or reduces any amount receivable by any Lender or any applicable Lending Installation in connection with its Eurodollar Loans, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of Eurodollar Loans held or interest received by it, by an amount deemed material by such Lender, and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation of making or maintaining its Eurodollar Loans or Commitment or to reduce the return received by such Lender or applicable Lending Installation in connection with such Eurodollar Loans or Commitment, then, within 15 days of demand by such Lender, the Borrower shall pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction in amount received. 3.2. Changes in Capital Adequacy Regulations. If a Lender determines the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a Change, then, within 15 days of demand by such Lender, the Borrower shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender determines is attributable to this Agreement, its Loans or its Commitment to make Loans hereunder (after taking into account such Lender's policies as to capital adequacy). "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. 3.3. Availability of Types of Advances. If any Lender determines that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Advances are not available or (ii) the interest rate applicable to Eurodollar Advances does not accurately reflect the cost of making or maintaining Eurodollar Advances, then the Agent shall suspend the availability of Eurodollar Advances and require any affected Eurodollar Advances to be repaid or converted to Floating Rate Advances, subject to the payment of any funding indemnification amounts required by Section 3.4. 3.4. Funding Indemnification. If any payment of a Eurodollar Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not made on the date specified by the Borrower for any reason other than default by the Lenders, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Eurodollar Advance. 3.5. Taxes. (i) All payments by the Borrower to or for the account of any Lender or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all Taxes. If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Agent, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.5) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (b) the Borrower shall make such deductions, (c) the Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (d) the Borrower shall furnish to the Agent the original copy of a receipt evidencing payment thereof within 30 days after such payment is made. (ii) In addition, the Borrower hereby agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note ("Other Taxes"). (iii) The Borrower hereby agrees to indemnify the Agent and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the Agent or such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Agent or such Lender makes demand therefor pursuant to Section 3.6. (iv) Each Lender that is not incorporated under the laws of the United States of America or a state thereof (each a "Non-U.S. Lender") agrees that it will, not more than ten Business Days after the date of this Agreement, (i) deliver to each of the Borrower and the Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, and (ii) deliver to each of the Borrower and the Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to an exemption from United States backup withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of the Borrower and the Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by the Borrower or the Agent. All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form or amendment with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. (v) For any period during which a Non-U.S. Lender has failed to provide the Borrower with an appropriate form pursuant to clause (iv), above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (iv), above, the Borrower shall take such steps, at the expense of such Non-U.S. Lender, as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes. (vi) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrower (with a copy to the Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. (vii) If the U.S. Internal Revenue Service or any other governmental authority of the United States or any other country or any political subdivision thereof asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or properly completed, because such Lender failed to notify the Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Agent under this subsection, together with all costs and expenses related thereto (including attorneys fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent). The obligations of the Lenders under this Section 3.5(vii) shall survive the payment of the Obligations and termination of this Agreement. 3.6. Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurodollar Loans to reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar Advances under Section 3.3, so long as such designation is not, in the judgment of such Lender, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Borrower (with a copy to the Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Borrower of such written statement. The obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement. ARTICLE IV ---------- CONDITIONS PRECEDENT -------------------- 4.1. Effectiveness. This Agreement shall become effective as of the date hereof (the "Effective Date") upon receipt by the Agent of (i) counterparts of this Agreement duly executed by the Borrower and the Required Lenders, (ii) a reaffirmation of the Guaranty, in form and substance satisfactory to the Agent, duly executed by each of the Guarantors, (iii) preliminary financial statements of the Borrower and its consolidated Subsidiaries as of December 31, 2000 and for the fiscal year then ended, (iv) such other documents as the Agent or any Lender may reasonably request, (v) an amendment fee equal to 0.25% of the Aggregate Commitment hereunder for the ratable account of the Lenders in accordance with their respective Commitments hereunder, and (vi) all other fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, payment or reimbursement of all expenses required to be paid or reimbursed by the Borrower hereunder or under the Original Agreement. 4.2. Each Advance. The Lenders shall not (except as otherwise set forth in Section 2.5.4 with respect to Revolving Loans for the purpose of repaying Swing Line Loans) be required to make any Advance unless on the applicable Borrowing Date: (i) There exists no Default or Unmatured Default. (ii) The representations and warranties contained in Article V are true and correct as of such Borrowing Date except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct in all material respects on and as of such earlier date. (iii) All legal matters incident to the making of such Advance shall be satisfactory to the Lenders and their counsel. Each Borrowing Notice or Swing Line Borrowing Notice, as the case may be, with respect to each such Advance shall constitute a representation and warranty by the Borrower that the conditions contained in Section 4.2(i) and (ii) have been satisfied. ARTICLE V --------- REPRESENTATIONS AND WARRANTIES ------------------------------ The Borrower represents and warrants to the Lenders that: 5.1. Existence and Standing. Each of the Borrower and its Subsidiaries is a corporation, partnership (in the case of Subsidiaries only) or limited liability company duly and properly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted. 5.2. Authorization and Validity. Each Loan Party has the power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. The execution and delivery by each Loan Party of the Loan Documents to which it is a party and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents to which each Loan Party is a party constitute legal, valid and binding obligations of such Loan Party enforceable against such Loan Party in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally. 5.3. No Conflict; Government Consent. Neither the execution and delivery by the Loan Parties of the Loan Documents, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Subsidiaries or (ii) the Borrower's or any Subsidiary's articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, by-laws, or operating or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which the Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by the Borrower or any of its Subsidiaries, is required to be obtained by the Borrower or any of its Subsidiaries in connection with the execution and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by the Borrower of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents. 5.4. Financial Statements. The preliminary December 31, 2000 consolidated financial statements of the Borrower and its Subsidiaries heretofore delivered to the Lenders were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly present, in all material respects, the consolidated financial position of the Borrower and its Subsidiaries at such date and the consolidated results of their operations and cash flows for the fiscal year then ended, subject to normal year-end adjustments and the absence of notes. There will be no material adverse change in the audited financial statements of the Borrower for the fiscal year ended December 31, 2000 when delivered pursuant to Section 6.1(i) from the preliminary financial statements for such fiscal year delivered pursuant to Section 4.1(iii) and referred to in the preceding sentence. 5.5. Material Adverse Change. Since December 31, 2000 there has been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries which could reasonably be expected to have a Material Adverse Effect. 5.6. Taxes. The Borrower and its Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with Agreement Accounting Principles. The United States income tax returns of the Borrower and its Subsidiaries have been audited by the Internal Revenue Service through the fiscal year ended December 31, 1993. No tax liens have been filed and no claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of any taxes or other governmental charges are adequate. 5.7. Litigation and Contingent Obligations. Except as set forth on Schedule 5.7, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of any Loans. Other than any liability incident to any litigation, arbitration or proceeding which (i) could not reasonably be expected to have a Material Adverse Effect or (ii) is set forth on Schedule 5.7, the Borrower has no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4. 5.8. Subsidiaries. Schedule 5.8 contains an accurate list of all Subsidiaries of the Borrower as of the date of this Agreement, setting forth their respective jurisdictions of organization and the percentage of their respective capital stock or other ownership interests owned by the Borrower or other Subsidiaries and identifying those Subsidiaries that are Material Subsidiaries. All of the issued and outstanding shares of capital stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable. 5.9. ERISA. The Borrower, its Subsidiaries, their ERISA Affiliates and their respective Plans are in compliance in all material respects with those provisions of ERISA and of the Code which are applicable with respect to any Plan. No Prohibited Transaction and no Reportable Event has occurred with respect to any such Plan. None of the Borrower, any of its Subsidiaries or any of their ERISA Affiliates is an employer with respect to any Multiemployer Plan. The Borrower, its Subsidiaries and their ERISA Affiliates have met all of the minimum funding requirements under Section 302 of ERISA and Section 412 of the Code with respect to each of their respective Plans, if any, and have not incurred any liability to the PBGC or any Plan. The execution, delivery and performance of this Agreement and the other Loan Documents do not constitute a Prohibited Transaction. There are no unfunded benefit liabilities, determined in accordance with Section 4001(a)(18) of ERISA, with respect to any Plan of the Borrower, its Subsidiaries or their ERISA Affiliates in excess of $5,000,000 in the aggregate for all such Plans. 5.10. Accuracy of Information. No information, exhibit or report furnished by the Borrower or any of its Subsidiaries to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading. 5.11. Regulation U. Margin stock (as defined in Regulation U) constitutes less than 25% of the value of those assets of the Borrower and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder. 5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect. 5.13. Compliance With Laws. The Borrower and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property, except for any failure to comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect. 5.14. Ownership of Properties. Except as set forth on Schedule 5.14, on the date of this Agreement, the Borrower and its Subsidiaries will have good title, free of all Liens other than those permitted by Section 6.15, to all of the Property and assets reflected in the Borrower's most recent consolidated financial statements provided to the Agent as owned by the Borrower and its Subsidiaries. 5.15. Plan Assets; Prohibited Transactions. The Borrower is not an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. ss. 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of Loans hereunder gives rise to a prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to "plan assets" of the Borrower and its Subsidiaries. 5.16. Environmental Matters. In the ordinary course of its business, the officers of the Borrower consider the effect of Environmental Laws on the business of the Borrower and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to the Borrower due to Environmental Laws. On the basis of this consideration, the Borrower has concluded that Environmental Laws cannot reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 5.16, neither the Borrower nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect. 5.17. Investment Company Act. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 5.18. Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 5.19. Insurance. The Property of the Borrower and its Subsidiaries is insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar business and owning similar properties. ARTICLE VI ---------- COVENANTS --------- During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing: 6.1. Financial Reporting. The Borrower will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with generally accepted accounting principles, and furnish to the Lenders: (i) Within 90 days after the close of each of its fiscal years, an unqualified (except for qualifications relating to changes in accounting principles or practices reflecting changes in generally accepted accounting principles and required or approved by the Borrower's independent certified public accountants) audit report certified by independent certified public accountants acceptable to the Lenders, prepared in accordance with Agreement Accounting Principles on a consolidated basis for itself and its Subsidiaries, including a balance sheet as of the end of such period, related statements of income, shareholders' equity and cash flows, accompanied by (a) any management letter prepared by said accountants and (b) a certificate of said accountants that, in the course of their examination necessary for their certification of the foregoing, they have obtained no knowledge of any Default or Unmatured Default, or if, in the opinion of such accountants, any Default or Unmatured Default shall exist, stating the nature and status thereof. (ii) (ii)Within 45 days after the close of the first three quarterly periods of each of its fiscal years, for itself and its Subsidiaries, a consolidated unaudited balance sheet as at the close of each such period and consolidated statements of income and cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by its chief financial officer, chief accounting officer or treasurer. (iii) Together with the financial statements required under Sections 6.1(i) and (ii), a compliance certificate in substantially the form of Exhibit A and with schedules and attachments satisfactory in form to the Agent, signed by its chief financial officer, chief accounting officer or treasurer, showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof. (iv) Within 270 days after the close of each fiscal year, a statement of the Unfunded Liabilities of each Single Employer Plan, certified as correct by an actuary enrolled under ERISA. (v) As soon as possible and in any event within 10 days after the Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the chief financial officer, chief accounting officer or treasurer of the Borrower, describing said Reportable Event and the action which the Borrower proposes to take with respect thereto. (vi) As soon as possible and in any event within 10 days after receipt by the Borrower, a copy of (a) any notice or claim to the effect that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the release by the Borrower, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by the Borrower or any of its Subsidiaries, which, in either case, could reasonably be expected to have a Material Adverse Effect. (vii) Promptly upon the furnishing thereof to the shareholders of the Borrower, copies of all financial statements, reports and proxy statements so furnished. (viii) Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission. (ix) Such other information (including non-financial information) as the Agent or any Lender may from time to time reasonably request. 6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary to, use the proceeds of the Advances for general corporate purposes, including Permitted Acquisitions. 6.3. Notice of Default. The Borrower will, and will cause each Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect. 6.4. Conduct of Business. The Borrower will, and will cause each Subsidiary to, carry on and conduct its business in substantially the same manner and only in substantially the same fields of enterprise as it is presently conducted and, except as otherwise permitted by Section 6.12, do all things necessary to remain duly incorporated or organized, validly existing and (to the extent such concept applies to such entity) in good standing as a domestic corporation, partnership or limited liability company in its jurisdiction of incorporation or organization, as the case may be, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except to the extent that a failure to do so could not reasonably be expected to have a Material Adverse Effect. 6.5. Taxes. The Borrower will, and will cause each Subsidiary to, file on a timely basis, including allowable extensions of time to file, complete and correct United States federal and applicable foreign, state and local tax returns required by law and pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with Agreement Accounting Principles. 6.6. Insurance. The Borrower will, and will cause each Subsidiary to, maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts and covering such risks as is consistent with sound business practice, and the Borrower will furnish to any Lender upon request full information as to the insurance carried. 6.7. Compliance with Laws. The Borrower will, and will cause each Subsidiary to, comply in all material respects with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject including, without limitation, all Environmental Laws. 6.8. Maintenance of Properties. The Borrower will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times. 6.9. Inspection. The Borrower will, and will cause each Subsidiary to, permit the Agent and the Lenders, by their respective representatives and agents, to inspect any of the Property, books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Agent or any Lender may designate. 6.10. Dividends. The Borrower will not, nor will it permit any Subsidiary to, declare or pay any dividends or make any distributions on its capital stock (other than dividends payable in its own capital stock) or redeem, repurchase or otherwise acquire or retire any of its capital stock at any time outstanding, unless at the time thereof no Default or Unmatured Default has occurred and is continuing or would result therefrom, except that any Subsidiary may declare and pay dividends or make distributions to the Borrower or to another Subsidiary of the Borrower. 6.11. Indebtedness. The Borrower will not, nor will it permit any Subsidiary to, create, incur or suffer to exist any Indebtedness, except: (i) The Loans (ii) Indebtedness outstanding under the 364-Day Credit Agreement. (iii) Indebtedness existing on the date hereof and described on Schedule 6.11. (iv) Indebtedness owed to the Borrower by any Guarantor. (v) Off-Balance Sheet Liabilities and guaranties of Indebtedness of Persons other than the Borrower and its Subsidiaries, in each case incurred after receipt by the Lenders of the audited financial statements of the Borrower and its Subsidiaries for the fiscal year ending December 31, 2001 pursuant to Section 6.1(i), provided that the Leverage Ratio as of the end of the four fiscal quarter period ending immediately prior to the fiscal quarter in which any such Off-Balance Sheet Liability or guaranty is incurred, calculated on a pro forma basis as if such Off-Balance Sheet Liability or guaranty had been incurred on the last day of such four fiscal quarter period, was not greater than 2.50 to 1. (vi) Indebtedness of any Subsidiary, Indebtedness secured by a Lien on any Property of the Borrower or any Subsidiary and unsecured Indebtedness of the Borrower, in each case other than Indebtedness permitted by clause (i), (ii), (iii), (iv) or (v) above and, except as set forth below, incurred after receipt by the Lenders of the audited financial statements of the Borrower and its Subsidiaries for the fiscal year ending December 31, 2001 pursuant to Section 6.1(i), not exceeding in the aggregate an amount equal to 10% of Consolidated Tangible Net Worth, provided that, notwithstanding the foregoing, at any time after the date hereof the Borrower or any Guarantor may incur pursuant to the term of this Section 6.11(vi) Indebtedness consisting of floor plan financing, whether unsecured or secured by the inventory being financed, in an aggregate amount subject to the limitation set forth in this Section 6.11(vi) and in any event not to exceed $10,000,000 outstanding at any time. 6.12. Merger. The Borrower will not, nor will it permit any Subsidiary to, merge or consolidate with or into any other Person, except that a Subsidiary may merge (i) into the Borrower or a Wholly-Owned Subsidiary or (ii) in connection with a Permitted Acquisition. 6.13. Sale of Assets. The Borrower will not, nor will it permit any Subsidiary to, lease, sell or otherwise dispose of its Property to any other Person, except: (i) Sales of inventory and obsolete or excess assets in the ordinary course of business. (ii) Leases, sales or other dispositions of its Property that, together with all other Property of the Borrower and its Subsidiaries previously leased, sold or disposed of (other than inventory and obsolete or excess assets in the ordinary course of business) as permitted by this Section during the four fiscal quarter period ending with the fiscal quarter in which any such lease, sale or other disposition occurs, do not constitute a Material Portion of the Property of the Borrower and its Subsidiaries. (iii) Leases, sales or other dispositions of Property described in Section 6.14(iii) or in Schedule 6.13. 6.14. Investments and Acquisitions. The Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Investments (including without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefor, or to create any Subsidiary or to become or remain a partner in any partnership or joint venture, or to make any Acquisition, except: (i) Cash Equivalent Investments. (ii) Existing Investments in Subsidiaries and other Investments in existence on the date hereof and described in Schedule 6.14. (iii) Investments in corporate preferred stock rated A or better by S&P or A2 or better by Moody's at the time of investment therein, not exceeding $25,000,000 in the aggregate at any time, including any such Investments described in Schedule 6.14. (iv) Investments in any Guarantor. (v) Permitted Acquisitions, provided that (A) not less than ten days prior to the consummation of any Permitted Acquisition, the Borrower shall have delivered to the Agent, in form and substance reasonably satisfactory to the Agent, a pro forma consolidated balance sheet, income statement and cash flow statement of the Borrower and its Subsidiaries (the "Acquisition Pro Forma"), based on the Borrower's most recent financial statements delivered pursuant to Section 6.1(i) or (ii), which shall be complete and shall fairly present, in all material respects, the financial position, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with Agreement Accounting Principles, but taking into account such Permitted Acquisition and the funding of all Loans in connection therewith, and such Acquisition Pro Forma shall reflect that, on a pro forma basis, the Borrower would have been in compliance with the financial covenants set forth in Section 6.18 for the four fiscal quarter period (the "Pro Forma Period") reflected in the compliance certificate most recently delivered to the Agent pursuant to Section 6.1(iii) prior to the consummation of such Permitted Acquisition (giving effect to such Permitted Acquisition and all Loans funded in connection therewith as if made on the first day of such period) and (B) if the Purchase Price of such Permitted Acquisition exceeds $75,000,000, the Leverage Ratio for the Pro Forma Period (giving effect to such Permitted Acquisition and all Loans funded in connection therewith as if made on the first day of such period) shall not exceed 1.75 to 1; and provided further that until the Borrower shall have delivered its financial statements for the fiscal year ending December 31, 2001 pursuant to Section 6.1(i), no Permitted Acquisition individually shall have a Purchase Price in excess of $2,000,000 and the aggregate Purchase Price of all Permitted Acquisitions shall not exceed $5,000,000. (vi) Investments to the extent that the Purchase Price therefor consists of capital stock of the Borrower, other than capital stock consisting of treasury stock repurchased after June 30, 2000 or consisting of reissued stock that was repurchased and cancelled after June 30, 2000, provided that neither the Borrower nor any Subsidiary shall make any Acquisition pursuant to this Section 6.14(vi) unless it is a Permitted Acquisition, and any such Permitted Acquisition shall be subject to the second proviso set forth in Section 6.14(v). (vii) Investments not otherwise permitted by clauses (i) through (v) above, provided that at the time such Investment is made, (A) the Purchase Price for such Investment shall not exceed 5% of Consolidated Tangible Net Worth as of the end of the fiscal quarter ending immediately prior to the fiscal quarter in which such Investment is made and (B) the Purchase Price of all Investments made pursuant to this clause (vi) (including such Investment) in the aggregate shall not exceed 15% of Consolidated Tangible Net Worth as of the end of the fiscal quarter ending immediately prior to the fiscal quarter in which such Investment is made. 6.15. Liens. The Borrower will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries, except: (i) Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books. (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books. (iii) Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation. (iv) Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Borrower or its Subsidiaries. (v) Liens existing on the date hereof and described on Schedule 6.15. (vi) Liens securing Indebtedness permitted by Section 6.11(vi). (vii) Liens in favor of a collateral agent, for the equal and ratable benefit of the Lenders and the lenders under the 364-Day Credit Agreement, granted pursuant to any Collateral Document. 6.16. Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except in the ordinary course of business and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arms-length transaction. 6.17. Guarantors; Pledge of Stock of Foreign Subsidiaries. (a) The Borrower shall cause each Material Subsidiary that is a Domestic Subsidiary and each Domestic Subsidiary acquired pursuant to a Permitted Acquisition, within ten days after such Domestic Subsidiary becomes a Material Subsidiary or is so acquired, to become a Guarantor by delivering to the Agent a duly executed supplement to the Guaranty, together with such supporting documentation, including authorizing resolutions and opinions of counsel, as the Agent may reasonable request and in form and substance reasonably satisfactory to the Agent. (b) The Borrower shall pledge, or cause one or more of its Domestic Subsidiaries to pledge, to a collateral agent acceptable to the Agent, for the equal and ratable benefit of the Lenders and the lenders under the 364-Day Credit Agreement, 65% of the capital stock or other equity interests held by the Borrower and its Domestic Subsidiaries of each Foreign Subsidiary that is a Material Subsidiary or is acquired pursuant to a Permitted Acquisition, within ten days after such Foreign Subsidiary becomes a Material Subsidiary or is so acquired, pursuant to one or more pledge agreements, in each case together with supporting documentation, including authorizing resolutions and opinions of counsel (including counsel from the jurisdiction of organization of such Foreign Subsidiary), as the Agent may reasonably request, all in form and substance reasonably satisfactory to the Agent. 6.18. Financial Covenants. 6.18.1. Fixed Charge Coverage Ratio. The Borrower will not permit the Fixed Charge Coverage Ratio, determined as of June 30, 2001 for the fiscal quarter then ended, as of September 30, 2001 for the two fiscal quarter period then ended, as of December 31, 2001 for the three fiscal quarter period then ended, and as of the end of each of its fiscal quarters thereafter for the then most-recently ended four fiscal quarter period to be less than 1.50 to 1.0. 6.18.2. Leverage Ratio. The Borrower will not permit the ratio, determined as of December 31, 2001 and as of the end of each of its fiscal quarters thereafter, of (i) Consolidated Total Debt to (ii) Consolidated EBITDA for the then most-recently ended four fiscal quarter period to be greater than 2.50 to 1.0. 6.18.3. Minimum Net Worth. The Borrower will at all times maintain Consolidated Net Worth of not less than the sum of (i) 90% of an amount determined by subtracting $3,141,000 from the Borrower's Consolidated Net Worth as of December 31, 2000 as reflected in its audited financial statements for the fiscal year then ended when delivered pursuant to Section 6.1(i) plus (ii) 50% of Consolidated Net Income earned in each fiscal quarter beginning with the quarter ending June 30, 2001 (without deduction for losses) plus (iii) the amount of any addition to the consolidated shareholders' equity of the Borrower and its Subsidiaries at any time resulting from the issuance or sale of any capital stock or other equity interests by the Borrower after the date of this Agreement. 6.18.4. Minimum EBITDA. The Borrower will have Consolidated EBITDA for each of the quarterly periods set forth below not less than the amount set forth below opposite such period: Fiscal Quarter Ending Minimum Consolidated EBITDA --------------------- --------------------------- June 30, 2001 $6,057,000 September 30, 2001 $10,414,000 December 31, 2001 $8,548,000 6.19. Bank Accounts. The Borrower will at all times maintain its primary concentration and disbursement accounts with a Lender. ARTICLE VII ----------- DEFAULTS -------- The occurrence of any one or more of the following events shall constitute a Default: 7.1. Any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or in connection with this Agreement, any Loan, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made. 7.2. Nonpayment of principal of any Loan when due, or nonpayment of interest upon any Loan or of any Facility Fee or other obligations under any of the Loan Documents within five days after the same becomes due. 7.3. The breach by the Borrower of any of the terms or provisions of Sections 6.2, 6.3, 6.9, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18, or 6.19; or the breach by the Borrower of any of the terms or provisions of Section 6.1 which is not remedied within five Business Days after written notice from the Agent or any Lender. 7.4. The breach by the Borrower (other than a breach which constitutes a Default under another Section of this Article VII) of any of the terms or provisions of this Agreement or any other Loan Document which is not remedied within 30 days after written notice from the Agent or any Lender. 7.5. Failure of the Borrower or any of its Subsidiaries to pay when due any Indebtedness aggregating in excess of $5,000,000 ("Material Indebtedness"); or the default by the Borrower or any of its Subsidiaries in the performance (beyond the applicable grace period with respect thereto, if any) of any term, provision or condition contained in any agreement under which any such Material Indebtedness was created or is governed, or any other event shall occur or condition exist, the effect of which default or event is to cause, or to permit the holder or holders of such Material Indebtedness to cause, such Material Indebtedness to become due prior to its stated maturity; or any Material Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be due and payable or required to be prepaid or repurchased (other than by a regularly scheduled payment) prior to the stated maturity thereof; or the Borrower or any of its Subsidiaries shall not pay, or admit in writing its inability to pay, its debts generally as they become due. 7.6. The Borrower or any of its Subsidiaries shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate or partnership action to authorize or effect any of the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7. 7.7. Without the application, approval or consent of the Borrower or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 30 consecutive days. 7.8. Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of, all or any portion of the Property of the Borrower and its Subsidiaries which, when taken together with all other Property of the Borrower and its Subsidiaries so condemned, seized, appropriated, or taken custody or control of, during the twelve-month period ending with the month in which any such action occurs, constitutes a Substantial Portion. 7.9. The Borrower or any of its Subsidiaries shall fail within 30 days to pay, bond or otherwise discharge one or more (i) judgments or orders for the payment of money (except to the extent covered by insurance as to which the insurer has not disclaimed coverage) in excess of $5,000,000 (or the equivalent thereof in currencies other than U.S. Dollars) in the aggregate, or (ii) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith. 7.10. A Reportable Event shall occur that results in or could result in liability of the Borrower, any Subsidiary of the Borrower or their ERISA Affiliates to the PBGC or to any Plan and such Reportable Event is not corrected within ten (10) days after the occurrence thereof; or any Reportable Event shall occur which could constitute grounds for termination of any Plan of the Borrower, its Subsidiaries or their ERISA Affiliates by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer any such Plan and such Reportable Event is not corrected within ten (10) days after the occurrence thereof; or the Borrower, any Subsidiary of the Borrower or any of their ERISA Affiliates shall file a notice of intent to terminate a Plan or other proceedings shall be instituted to terminate a Plan; or the Borrower, any Subsidiary of the Borrower or any of their ERISA Affiliates shall fail to pay when due any liability to the PBGC or to a Plan; or the PBGC shall have instituted proceedings to terminate, or to cause a trustee to be appointed to administer, any Plan of the Borrower, its Subsidiaries or their ERISA Affiliates; or any Person shall engage in a Prohibited Transaction with respect to any Plan which results in or could result in liability of the Borrower, any Subsidiary of the Borrower, any of their ERISA Affiliates, any Plan of the Borrower, its Subsidiaries or their ERISA Affiliates or fiduciary of any such Plan; or the Borrower, any Subsidiary of the Borrower or any of their ERISA Affiliates shall fail to make a required installment or other payment to any Plan within the meaning of Section 302(f) of ERISA or Section 412(n) of the Code, which failure results in or could result in liability of the Borrower, any Subsidiary of the Borrower or any of their ERISA Affiliates to the PBGC or any Plan; or the Borrower, any of its Subsidiaries or any of their ERISA Affiliates shall withdraw from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; or the Borrower, any of its Subsidiaries or any of their ERISA Affiliates shall become an employer with respect to any Multiemployer Plan without the prior written consent of the Required Lenders. 7.11. The Borrower or any of its Subsidiaries shall (i) be the subject of any proceeding or investigation pertaining to the release by the Borrower, any of its Subsidiaries or any other Person of any toxic or hazardous waste or substance into the environment, or (ii) violate any Environmental Law, which, in the case of an event described in clause (i) or clause (ii), could reasonably be expected to have a Material Adverse Effect and is not remedied within 30 days. 7.12. Any Change in Control shall occur. 7.13. The Guaranty shall fail to remain in full force or effect as to any Guarantor or any action shall be taken to discontinue or to assert the invalidity or unenforceability of the Guaranty, or any Guarantor shall fail to comply with any of the terms or provisions of the Guaranty, or any Guarantor shall deny that it has any further liability under the Guaranty, or shall give notice to such effect. 7.14. Any Collateral Document shall for any reason fail to create a valid and perfected first priority security interest in any collateral purported to be covered thereby, except as permitted by the terms of any Collateral Document, or any Collateral Document shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of any Collateral Document. ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES ---------------------------------------------- 8.1. Acceleration. If any Default described in Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of the Lenders to make Loans hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Agent or any Lender. If any other Default occurs, the Required Lenders (or the Agent with the consent of the Required Lenders) may terminate or suspend the obligations of the Lenders to make Loans hereunder, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives. If, within 30 days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination. 8.2. Amendments. Subject to the provisions of this Article VIII, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of each Lender affected thereby: (i) Extend the final maturity of any Loan or forgive all or any portion of the principal amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon. (ii) Reduce the percentage specified in the definition of Required Lenders. (iii) Extend the Facility Termination Date, or reduce the amount or extend the payment date for, the mandatory payments required under Section 2.2, or increase the amount of the Commitment of any Lender hereunder, or permit the Borrower to assign its rights under this Agreement. (iv) Amend this Section 8.2. (v) Release any Guarantor or, except as provided in the Collateral Documents, release all or substantially all of the collateral covered thereby. No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent. No amendment of any provision of this Agreement relating to the Swing Line Lender or any Swing Line Loans shall be effective without the written consent of the Swing Line Lender. The Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement. 8.3. Preservation of Rights. No delay or omission of the Lenders or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Loan notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Loan shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent and the Lenders until the Obligations have been paid in full. ARTICLE IX ---------- GENERAL PROVISIONS ------------------ 9.1. Survival of Representations. All representations and warranties of the Borrower contained in this Agreement shall survive the making of the Loans herein contemplated. 9.2. Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. 9.3. Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 9.4. Entire Agreement. The Loan Documents embody the entire agreement and understanding among the Borrower, the Agent and the Lenders and supersede all prior agreements and understandings among the Borrower, the Agent and the Lenders relating to the subject matter thereof other than the fee letter described in Section 10.13. 9.5. Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns, provided, however, that the parties hereto expressly agree that the Arranger shall enjoy the benefits of the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement. 9.6. Expenses; Indemnification. (i) The Borrower shall reimburse the Agent and the Arranger for any costs, internal charges and out-of-pocket expenses (including reasonable attorneys' fees, time charges and expenses of attorneys for the Agent) paid or incurred by the Agent or the Arranger in connection with the preparation, negotiation, execution, delivery, syndication, distribution (including, without limitation, via the internet) review, amendment, modification, and administration of the Loan Documents. The Borrower also agrees to reimburse the Agent, the Arranger and the Lenders for any costs, internal charges and out-of-pocket expenses (including reasonable attorneys' fees, time charges and expenses of attorneys for the Agent, the Arranger and the Lenders, which attorneys may be employees of the Agent, the Arranger or the Lenders) paid or incurred by the Agent, the Arranger or any Lender in connection with the collection and enforcement of the Loan Documents. (ii) The Borrower hereby further agrees to indemnify the Agent, the Arranger, each Lender, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all reasonable expenses of litigation or preparation therefor whether or not the Agent, the Arranger, any Lender or any affiliate is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Loan hereunder, except to the extent that any of the foregoing is due to the gross negligence or willful misconduct of the party seeking indemnification. The obligations of the Borrower under this Section 9.6 shall survive the termination of this Agreement. 9.7. Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders. 9.8. Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles. 9.9. Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 9.10. Nonliability of Lenders. The relationship between the Borrower on the one hand and the Lenders and the Agent on the other hand shall be solely that of borrower and lender. Neither the Agent, the Arranger nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Agent, the Arranger nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. The Borrower agrees that neither the Agent, the Arranger nor any Lender shall have liability to the Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Neither the Agent, the Arranger nor any Lender shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, any special, indirect, consequential or punitive damages suffered by the Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby. 9.11. Confidentiality. Each Lender agrees to hold any confidential information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to its Affiliates and to other Lenders and their respective Affiliates, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) to regulatory officials, (iv) to any Person as requested pursuant to or as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which such Lender is a party, (vi) to such Lender's direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, and (vii) permitted by Section 12.4. 9.12. Nonreliance. Each Lender hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System) for the repayment of the Loans provided for herein. 9.13. Disclosure. The Borrower and each Lender hereby acknowledge and agree that Bank One and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with the Borrower and its Affiliates. ARTICLE X --------- THE AGENT --------- 10.1. Appointment; Nature of Relationship. Bank One, Indiana, N.A. is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the "Agent") hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Agent agrees to act as such contractual representative upon the express conditions contained in this Article X. Notwithstanding the use of the defined term "Agent," it is expressly understood and agreed that the Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that the Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders' contractual representative, the Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a "representative" of the Lenders within the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders hereby agrees to assert no claim against the Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives. 10.2. Powers. The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent. 10.3. General Immunity. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction due to the gross negligence or willful misconduct of such Person. 10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of the Borrower or any guarantor of any of the Obligations or of any of the Borrower's or any such guarantor's respective Subsidiaries. The Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by the Borrower to the Agent at such time, but is voluntarily furnished by the Borrower to the Agent (either in its capacity as Agent or in its individual capacity). 10.5. Action on Instructions of Lenders. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby acknowledge that the Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. 10.6. Employment of Agents and Counsel. The Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Agent and the Lenders and all matters pertaining to the Agent's duties hereunder and under any other Loan Document. 10.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent. 10.8. Agent's Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Agent ratably in proportion to their respective Commitments (or, if the Commitments have been terminated, in proportion to their Commitments immediately prior to such termination) (i) for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred by the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (i) no Lender shall be liable for any of the foregoing to the extent any of the foregoing resulted from the gross negligence or willful misconduct of the Agent and (ii) any indemnification required pursuant to Section 3.5(vii) shall, notwithstanding the provisions of this Section 10.8, be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement. 10.9. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless the Agent has received written notice from a Lender or the Borrower referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. 10.10. Rights as a Lender. In the event the Agent is a Lender, the Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Commitment and its Loans as any Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. 10.11. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent, the Arranger or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent, the Arranger or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. 10.12. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. The Agent may be removed at any time with or without cause by written notice received by the Agent from the Required Lenders, such removal to be effective on the date specified by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint, on behalf of the Borrower and the Lenders, a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders within thirty days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent. Notwithstanding the previous sentence, the Agent may at any time without the consent of the Borrower or any Lender, appoint any of its Affiliates which is a commercial bank as a successor Agent hereunder. If the Agent has resigned or been removed and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Agent. Upon the effectiveness of the resignation or removal of the Agent, the resigning or removed Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation or removal of an Agent, the provisions of this Article X shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Agent by merger, or the Agent assigns its duties and obligations to an Affiliate pursuant to this Section 10.12, then the term "Prime Rate" as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Agent. 10.13. Agent and Arranger Fees. The Borrower agrees to pay to the Agent and the Arranger, for their respective accounts, the fees agreed to by the Borrower, the Agent and the Arranger pursuant to that certain letter agreement dated March 6, 2001, or as otherwise agreed from time to time. 10.14. Delegation to Affiliates. The Borrower and the Lenders agree that the Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the Agent is entitled under Articles IX and X. 10.15. Collateral Releases. The Lenders hereby empower and authorize the Agent to execute and deliver to the Borrower on their behalf any agreements, documents or instruments as shall be necessary or appropriate to effect any releases of Collateral Documents which shall be permitted by the terms hereof or of any other Loan Document or which shall otherwise have been approved by the Required Lenders (or, if required by the terms of Section 8.2, all of the Lenders) in writing. ARTICLE XI ---------- SETOFF; RATABLE PAYMENTS ------------------------ 11.1. Setoff. In addition to, and without limitation of, any rights of the Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or any Affiliate of any Lender to or for the credit or account of the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part thereof, shall then be due. 11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Loans (other than payments received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Loans held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Loans. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their Loans. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. ARTILCE XII ----------- BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS ------------------------------------------------- 12.1. Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents and (ii) any assignment by any Lender must be made in compliance with Section 12.3. The parties to this Agreement acknowledge that clause (ii) of this Section 12.1 relates only to absolute assignments and does not prohibit assignments creating security interests, including, without limitation, (x) any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender which is a fund, any pledge or assignment of all or any portion of its rights under this Agreement and any Note to its trustee in support of its obligations to its trustee; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3. The Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided, however, that the Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan or which holds any Note to direct payments relating to such Loan or Note to another Person. Any assignee of the rights to any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan. 12.2. Participations. 12.2.1. Permitted Participants; Effect. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Loans and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. 12.2.2. Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan or Commitment in which such Participant has an interest which would require consent of all of the Lenders pursuant to the terms of Section 8.2 or of any other Loan Document. 12.2.3. Benefit of Setoff. The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. 12.3. Assignments. 12.3.1. Permitted Assignments. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations under the Loan Documents. Such assignment shall be substantially in the form of Exhibit B or in such other form as may be agreed to by the parties thereto. The consent of the Borrower and the Agent shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof; provided, however, that if a Default has occurred and is continuing, the consent of the Borrower shall not be required. Such consent shall not be unreasonably withheld or delayed. Each such assignment with respect to a Purchaser which is not a Lender or an Affiliate thereof shall (unless each of the Borrower and the Agent otherwise consents) be in an amount not less than the lesser of (i) $5,000,000 or (ii) the remaining amount of the assigning Lender's Commitment (calculated as at the date of such assignment) or outstanding Loans (if the applicable Commitment has been terminated). 12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent of an assignment, together with any consents required by Section 12.3.1, and (ii) payment of a $4,000 fee to the Agent for processing such assignment (unless such fee is waived by the Agent), such assignment shall become effective on the effective date specified in such assignment. The assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Loans under the applicable assignment agreement constitutes "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by the Borrower, the Lenders or the Agent shall be required to release the transferor Lender with respect to the percentage of the Aggregate Commitment and Loans assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.2, the transferor Lender, the Agent and the Borrower shall, if the transferor Lender or the Purchaser desires that its Loans be evidenced by Notes, make appropriate arrangements so that new Notes or, as appropriate, replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment. 12.4. Dissemination of Information. The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries, including without limitation any information contained in any Reports; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.11 of this Agreement. 12.5. Tax Treatment. If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.5(iv). ARTICLE XIII ------------ NOTICES ------- 13.1. Notices. Except as otherwise permitted by Section 2.14 with respect to borrowing notices, all notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Agent, at its address or facsimile number set forth on the signature pages hereof, (y) in the case of any Lender, at its address or facsimile number set forth in its administrative questionnaire or (z) in the case of any party, at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower in accordance with the provisions of this Section 13.1. Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section; provided that notices to the Agent under Article II shall not be effective until received. 13.2. Change of Address. The Borrower, the Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto. ARTICLE XIV ----------- COUNTERPARTS ------------ This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Borrower, the Agent and the Lenders and each party has notified the Agent by facsimile transmission or telephone that it has taken such action. ARTICLE XV ---------- CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL . -------------------------------------------------------------- 15.1 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET SEQ., BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS OR THE CITY IN WHICH THE PRINCIPAL OFFICE OF THE AGENT OR SUCH LENDER OR AFFILIATE, AS THE CASE MAY BE, IS LOCATED. 15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. SCHEDULE I COMMITMENTS Lender Commitment - ------ ---------- Bank One, Indiana, N.A. $ 8,602,150.65 Fleet National Bank 6,451,612.90 KeyBank National Association 6,451,612.90 1st Source Bank 3,225,806.45 National City Bank of Indiana 3,225,806.45 The Northern Trust Company 3,225,806.45 Bank Hapoalim B.M., Chicago Branch 2,150,537.75 ------------ Total $33,333,333.55 PRICING SCHEDULE APPLICABLE MARGIN LEVEL I LEVEL II LEVEL III LEVEL IV STATUS STATUS STATUS STATUS - -------------------------------------------------------------------------------- Eurodollar Rate 0.75% 0.875% 1.00% 1.25% Floating Rate 0% 0% 0% 0% APPLICABLE FEE RATE LEVEL I LEVEL II LEVEL III LEVEL IV STATUS STATUS STATUS STATUS - -------------------------------------------------------------------------------- Facility Fee 0.25% 0.25% 0.375% 0.375% For the purposes of this Schedule, the following terms have the following meanings, subject to the final paragraph of this Schedule: "Financials" means the annual or quarterly financial statements of the Borrower delivered pursuant to Section 6.1(i) or (ii). "Level I Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, the Leverage Ratio is less than 1.00 to 1.00. "Level II Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status and (ii) the Leverage Ratio is less than 1.50 to 1.00. "Level III Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status or Level II Status and (ii) the Leverage Ratio is less than 2.00 to 1.00. "Level IV Status" exists at any date if the Borrower has not qualified for Level I Status, Level II Status or Level III Status. "Status" means either Level I Status, Level II Status, Level III Status or Level IV Status. The Applicable Margin and Applicable Fee Rate shall be determined in accordance with the foregoing table based on the Borrower's Status as reflected in the then most recent Financials. Adjustments, if any, to the Applicable Margin or Applicable Fee Rate shall be effective five Business Days after the Agent has received the applicable Financials. If the Borrower fails to deliver the Financials to the Agent at the time required pursuant to Section 6.1, then the Applicable Margin and Applicable Fee Rate shall be the highest Applicable Margin and Applicable Fee Rate set forth in the foregoing table until five days after such Financials are so delivered. EX-4.(A)(I) 4 c01376x4ai.txt AMENDMENT NO. 1 Exhibit 4(a)(i) AMENDMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT This Amendment No. 1 (this "Amendment") is entered into as of November 5, 2001 by and among COACHMEN INDUSTRIES, INC., an Indiana corporation (the "Borrower"), the undersigned lenders (collectively, the "Lenders") and BANK ONE, INDIANA, N.A., both as one of the Lenders and as Administrative Agent (the "Agent") on behalf of itself and the other Lenders. RECITALS: WHEREAS, the Borrower, the Lenders and the Agent are parties to that certain Amended and Restated Credit Agreement dated as of March 30, 2001 (the "Credit Agreement"); and WHEREAS, the parties hereto desire to amend the Credit Agreement in certain respects more fully described below; NOW, THEREFORE, in consideration of the premises herein contained and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. DEFINED TERMS. Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to such terms in the Credit Agreement. SECTION 2. AMENDMENTS TO CREDIT AGREEMENT. Upon the effectiveness of this Amendment in accordance with the provisions of Section 3 below, the Credit Agreement is hereby amended as set forth in this Section 2 below: SECTIION 2.1. Article I of the Credit Agreement is hereby amended as follows: (a) The definitions of the following defined terms are amended in their entirety to read as follows: "Aggregate Commitment" means the aggregate of the Commitments of all the Lenders, as increased or reduced from time to time pursuant to the terms hereof. As of the date hereof, the Aggregate Commitment is $30,000,000. "Applicable Fee Rate" means 0.50% per annum. "Applicable Margin" means, with respect to Eurodollar Advances, 2.00% per annum, and with respect to Floating Rate Advances, 0.00% per annum. "Collateral Documents" means, collectively, all agreements, instruments and documents executed in connection with this Agreement that are intended to create or evidence Liens to secure the Obligations or the Guaranty of the Obligations, including, without limitation, the Security Agreement and any pledge agreement executed pursuant to the terms of Section 6.17(b). "Commitment" means, for each Lender, the obligation of such Lender to make Revolving Loans not exceeding the amount set forth opposite its name on Amended Schedule I hereto, as it may be modified as a result of any assignment that has become effective pursuant to Section 12.3.2 or as otherwise modified from time to time pursuant to the terms hereof. "Fixed Charge Coverage Ratio" means, with reference to any period, the ratio of (a) the sum of (i) Consolidated EBITDA plus (ii) rentals minus (iii) capital expenditures made in cash to (b) the sum of (i) cash interest expense plus (ii) rentals plus (iii) cash taxes (net of tax refunds received) plus (iv) dividends and distributions on, and redemptions and repurchases of, the Borrower's capital stock plus (v) scheduled payments of principal on all long-term Indebtedness, in each case calculated on a consolidated basis for such period. "Guaranty" means that certain Amended and Restated Subsidiary Guaranty dated as of November 5, 2001, executed by the Guarantors in favor of the Agent, for the ratable benefit of the Lenders, as it may be supplemented, amended or modified and in effect from time to time. "Material Subsidiary" means any Subsidiary of the Borrower which (i) represents more than 5% of the consolidated assets of the Borrower and its Subsidiaries as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the end of the four fiscal quarter period ending with the fiscal quarter immediately prior to the fiscal quarter in which such determination is made, or (ii) is responsible for more than 5% of the consolidated net sales or of the consolidated net income of the Borrower and its Subsidiaries as reflected in the financial statements referred to in clause (i) above; provided that a Subsidiary shall not be deemed to be a Material Subsidiary solely as a result of being responsible for more than 5% of the consolidated net income of the Borrower and its Subsidiaries unless such Subsidiary's pre-tax income for the relevant period on an unconsolidated basis was at least $250,000. Notwithstanding the foregoing, COA Finance shall not be deemed to be a Material Subsidiary. "Required Lenders" means Lenders in the aggregate having at least 60% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding at least 60% of the Aggregate Outstanding Credit Exposure. (b) The definitions of "Consolidated Tangible Net Worth," "Pricing Schedule" and "364-Day Credit Agreement" are deleted in their entirety, and the following new defined terms are added to Article I: "COA Finance" means COA Finance Company, LTD, a Bermuda company, and its successors and assigns. "Collateral Sharing Agreement" means the Collateral Sharing Agreement dated as of November 5, 2001, among Bank One, as Collateral Agent, the Agent, and Bank One and Bank One, Michigan as the issuers of certain letters of credit described therein, as it may be supplemented, amended or modified and in effect from time to time "Current Ratio" means, as of any date of calculation, the ratio of current assets to current liabilities, calculated for the Borrower and its Subsidiaries on a consolidated basis. "Security Agreement" means the Security Agreement dated as of November 5, 2001, among the Borrower and the Guarantors, as Grantors, and Bank One, as Collateral Agent, as it may be supplemented, amended or modified and in effect from time to time. SECTION 2.2. Section 5.4 of the Credit Agreement is amended in its entirety to read as follows: 5.4. Financial Statements. The December 31, 2000, March 31, 2001 and June 30, 2001 consolidated financial statements of the Borrower and its Subsidiaries heretofore delivered to the Lenders were prepared in accordance with generally accepted accounting principles in effect on the respective dates such statements were prepared and fairly present, in all material respects, the consolidated financial position of the Borrower and its Subsidiaries at such dates and the consolidated results of their operations and cash flows for the respective periods then ended, subject in the case of the March 31, 2001 and June 30, 2001 financial statements to normal year-end adjustments and the absence of notes. SECTION 2.3. Section 5.8 of the Credit Agreement is amended by adding the word "Amended" immediately before the reference to "Schedule 5.8" therein. SECTION 2.4. Section 6.2 of the Credit Agreement is amended in its entirety to read as follows: 6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary to, use the proceeds of the Advances for working capital and other general corporate purposes, provided, however, that proceeds of the Advances shall not be used for Permitted Acquisitions or other Investments otherwise permitted by Section 6.14(v) unless consented to by the Required Lenders. SECTION 2.5 Section 6.11 of the Credit Agreement is amended in its entirety to read as follows: 6.11. Indebtedness. The Borrower will not, nor will it permit any Subsidiary to, create, incur or suffer to exist any Indebtedness, except: (i) The Loans. (ii) Indebtedness existing on the date hereof and described on Schedule 6.11. (iii) Indebtedness owed by COA Finance to the Borrower and Indebtedness owed by any other Subsidiary to COA Finance, provided that Indebtedness owed by any Guarantor to COA Finance shall be subordinated to the payment of the obligations of such Guarantor pursuant to the Guaranty on terms satisfactory to the Agent in form and substance. (iv) Indebtedness owed to the Borrower by any Guarantor. (v) Off-Balance Sheet Liabilities and guaranties of Indebtedness of Persons other than the Borrower and its Subsidiaries, in each case incurred after receipt by the Lenders of the financial statements of the Borrower and its Subsidiaries for the nine-month period ending September 30, 2001 pursuant to Section 6.1(ii), provided that the Leverage Ratio as of the end of the three fiscal quarter period ending September 30, 2001, in the case of any such Off-Balance Sheet Liability or guaranty incurred during the fiscal quarter ending December 31, 2001, or as of the end of the four fiscal quarter period ending immediately prior to the fiscal quarter in which any such Off-Balance Sheet Liability or guaranty is incurred, in the case of any such Off-Balance Sheet Liability or guaranty incurred after December 31, 2001, calculated on a pro forma basis as if such Off-Balance Sheet Liability or guaranty had been incurred on the last day of such three fiscal quarter period or four fiscal quarter period, as applicable, was not greater than 2.50 to 1. (vi) Indebtedness of any Subsidiary, Indebtedness secured by a Lien on any Property of the Borrower or any Subsidiary and unsecured Indebtedness of the Borrower, in each case other than Indebtedness permitted by clause (i), (ii), (iii), (iv) or (v) above and, except as set forth below, incurred after receipt by the Lenders of the audited financial statements of the Borrower and its Subsidiaries for the nine-month period ending September 30, 2001 pursuant to Section 6.1(ii), not exceeding $10,000,000 in the aggregate, provided that, notwithstanding the foregoing, at any time after the date hereof the Borrower or any Guarantor may incur pursuant to the terms of this Section 6.11(vi) Indebtedness consisting of floor plan financing, whether unsecured or secured by the inventory being financed, in addition to the limitation set forth above in this Section 6.11(vi), but not to exceed $10,000,000 in the aggregate outstanding at any time. SECTION 2.6. Section 6.13 of the Credit Agreement is amended by adding the word "Amended" immediately before the reference to "Schedule 6.13" in clause (iii) thereof. SECTION 2.7. Section 6.14 of the Credit Agreement is amended by amending clauses (v), (vi) and (vii) thereof in their entirety to read as follows: (v) Permitted Acquisitions and other Investments in joint ventures or minority interests in other Persons, provided that not less than ten days prior to the consummation of any Permitted Acquisition, the Borrower shall have delivered to the Agent, in form and substance reasonably satisfactory to the Agent, a pro forma consolidated balance sheet, income statement and cash flow statement of the Borrower and its Subsidiaries (the "Acquisition Pro Forma"), based on the Borrower's most recent financial statements delivered pursuant to Section 6.1(i) or (ii), which shall be complete and shall fairly present, in all material respects, the financial position, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with Agreement Accounting Principles, but taking into account such Permitted Acquisition, and such Acquisition Pro Forma shall reflect that, on a pro forma basis, the Borrower would have been in compliance with the financial covenants set forth in Section 6.18 for the four fiscal quarter period (the "Pro Forma Period") reflected in the compliance certificate most recently delivered to the Agent pursuant to Section 6.1(iii) prior to the consummation of such Permitted Acquisition (giving effect to such Permitted Acquisition as if made on the first day of such period). Cash used by the Borrower and its Subsidiaries as part or all of the Purchase Price for any Permitted Acquisition or other Investment pursuant to this Section 6.14(v) (A) shall be cash on hand at the time of such Investment in an amount in excess of the aggregate principal amount of all outstanding Loans at such time and (B) shall not exceed $15,000,000 in the aggregate on a cumulative basis for all such Investments. All Indebtedness incurred by the Borrower and its Subsidiaries as part or all of the Purchase Price for any such Investment must comply with Section 6.11. (vi) Investments to the extent that the Purchase Price therefor consists of capital stock of the Borrower, other than capital stock consisting of treasury stock repurchased after June 30, 2000 or consisting of reissued stock that was repurchased and cancelled after June 30, 2000, provided that neither the Borrower nor any Subsidiary shall make any Acquisition pursuant to this Section 6.14(vi) unless it is a Permitted Acquisition. (vii) Investments consisting of Indebtedness permitted by Section 6.11(iii). SECTION 2.8. Section 6.15 of the Credit Agreement is amended by amending clause (vii) thereof in its entirety and adding a new clause (viii) thereto as follows: (vii) Liens granted pursuant to the Security Agreement in favor of Bank One, as collateral agent, for the equal and ratable benefit of the Agent and the Lenders under this Agreement and Bank One as the issuer of certain letters of credit described in the Collateral Sharing Agreement. (viii) Liens granted pursuant to any Collateral Document other than the Security Agreement to secure the Obligations or the obligations of the Guarantors under the Guaranty. SECTION 2.9. Section 6.17 of the Credit Agreement is amended in its entirety to read as follows: 6.17. Guarantors; Pledge of Stock of Foreign Subsidiaries. (a) The Borrower shall cause each Material Subsidiary that is a Domestic Subsidiary and each Domestic Subsidiary acquired pursuant to a Permitted Acquisition, within ten days after such Domestic Subsidiary becomes a Material Subsidiary or is so acquired, to become a Guarantor by delivering to the Agent a duly executed supplement to the Guaranty and to become a grantor under the Security Agreement by delivering to the Agent a duly executed supplement to the Security Agreement in the form of Annex I thereto, together in each case with such supporting documentation, including authorizing resolutions and opinions of counsel and such documents as may be necessary or appropriate to perfect the Lien of the Security Agreement, as the Agent may reasonably request and in form and substance reasonably satisfactory to the Agent. (b) The Borrower shall pledge, or cause one or more of its Domestic Subsidiaries to pledge, to the Agent, for the ratable benefit of the Lenders, 65% of the capital stock or other equity interests held by the Borrower and its Domestic Subsidiaries of each Foreign Subsidiary that is a Material Subsidiary or is acquired pursuant to a Permitted Acquisition, within ten days after such Foreign Subsidiary becomes a Material Subsidiary or is so acquired, pursuant to one or more pledge agreements, in each case together with supporting documentation, including authorizing resolutions and opinions of counsel (including counsel from the jurisdiction of organization of such Foreign Subsidiary), as the Agent may reasonably request, all in form and substance reasonably satisfactory to the Agent. SECTION 2.10. Section 6.18 of the Credit Agreement is amended by amending Sections 6.18.2, 6.18.3 and 6.18.4 thereof in their entirety to read as follows: 6.18.2. Leverage Ratio. The Borrower will not permit the ratio, determined as of September 30, 2001, of (i) Consolidated Total Debt to (ii) Consolidated EBITDA for the then most-recently ended three fiscal quarter period to be greater than 2.50 to 1.0, and will not permit the Leverage Ratio, determined as of December 31, 2001 and as of the end of each of its fiscal quarters thereafter, to be greater than 2.50 to 1.0. 6.18.3. Minimum Net Worth. The Borrower will at all times maintain Consolidated Net Worth of not less than the sum of (i) $188,784,000 plus (ii) 50% of Consolidated Net Income earned in each fiscal quarter beginning with the quarter ending September 30, 2001 (without deduction for losses) plus (iii) the amount of any addition to the consolidated shareholders' equity of the Borrower and its Subsidiaries at any time resulting from the issuance or sale of any capital stock or other equity interests by the Borrower after the date of this Agreement. 6.18.4. Current Ratio. The Borrower will not permit the Current Ratio at any time to be less than 2.00 to 1.0. SECTION 2.11. Article VI of the Credit Agreement is further amended by adding at the end thereof a new Section 6.20 to read as follows: 6.20. COA Finance. The Borrower will not permit COA Finance to have any material liabilities other than Indebtedness owed to the Borrower or to own any material Property other than Investments consisting of loans to other Subsidiaries of the Borrower and Cash Equivalent Investments, provided that Cash Equivalent Investments held by COA Finance shall not exceed $500,000 in the aggregate at any time. SECTION 2.12. Section 7.3 of the Credit Agreement is amended in its entirety to read as follows: 7.3. The breach by the Borrower of any of the terms or provisions of Sections 6.2, 6.3, 6.9, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18, 6.19 or 6.20; or the breach by the Borrower of any of the terms or provisions of Section 6.1 which is not remedied within five Business Days after written notice from the Agent or any Lender. SECTION 2.13. Section 8.2 of the Credit Agreement is amended by amending clause (v) thereof in its entirety to read as follows: (v) Release any Guarantor or, except as provided in the Loan Documents, release all or substantially all of the collateral covered thereby. SECTION 2.14. The Credit Agreement is further amended by deleting the Pricing Schedule in its entirety and by amending Schedule I, Schedule 5.8 and Schedule 6.13 in their entirety to read as set forth in Amended Schedule I, Amended Schedule 5.8 and Amended Schedule 6.13, respectively, attached hereto. SECTION 3. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective and be deemed effective as of the date hereof (the "Amendment Effective Date") if, and only if, each of the following conditions shall have been satisfied: SECTION 3.1. The Agent shall have received (i) counterparts of this Amendment duly executed by the Borrower and the Lenders, (ii) each of the other documents listed on the List of Closing Documents attached hereto as Exhibit A, in each case in form and substance satisfactory the Agent, and (iii) such other documents as the Agent or any Lender may reasonably request. SECTION 3.2. The Agent shall have received from the Borrower (i) an amendment fee equal to 0.25% of the Aggregate Commitment under the Credit Agreement as amended hereby for the ratable account of the Lenders in accordance with their respective Commitments under the Credit Agreement as amended hereby, (ii) all accrued Facility Fee under the Credit Agreement to but not including the Amendment Effective Date with respect to the Commitments of the lenders under the Credit Agreement, other than the Lenders party hereto, and (iii) all other fees and other amounts due and payable on or prior to the Amendment Effective Date, including, to the extent invoiced, payment or reimbursement of all expenses required to be paid or reimbursed by the Borrower under the Credit Agreement, either before or after giving effect to this Amendment. SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Lenders that, as of the Amendment Effective Date after giving effect to this Amendment, (a) there exists no Default or Unmatured Default, and (b) the representations and warranties contained in Article VI of the Credit Agreement are true and correct as of the Amendment Effective Date after giving effect to this Amendment, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty was true and correct on and as of such earlier date. SECTION 5. DIRECTION BY LENDERS. The Lenders hereby authorize and direct the Agent to execute and deliver on behalf of the Lenders the Collateral Sharing Agreement dated as of November 5, 2001 in the form of Exhibit B attached hereto. SECTION 6. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT. SECTION 6.1. Upon the effectiveness of this Amendment pursuant to Section 3 hereof, on and after the Effective Date each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import and each reference to the Credit Agreement in each Loan Document shall mean and be a reference to the Credit Agreement as modified hereby. SECTION 6.2. Except as specifically waived or amended herein, all of the terms, conditions and covenants of the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. SECTION 6.3. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of (i) any right, power or remedy of any Lender or the Agent under the Credit Agreement or any of the other Loan Documents, or (ii) any Default or Unmatured Default under the Credit Agreement. SECTION 7. Termination of Prior Lenders. The parties hereto acknowledge and agree that, upon the effectiveness of this Amendment pursuant to Section 3 hereof, the following lenders that were parties to the Credit Agreement but are not parties to this Amendment shall have no further commitment or other obligations under the Credit Agreement as amended hereby: Fleet National Bank KeyBank National Association The Northern Trust Company SECTION 8. CHOICE OF LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS. SECTION 9. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 10. HEADINGS. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. [N WITNESS WHEREOF, the Borrower, the Agent and the Lenders have caused this Amendment to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. COACHMEN INDUSTRIES, INC. By: _________________________________ Name: Thomas J. Martini Title: Treasurer BANK ONE, INDIANA, N.A., as a Lender and as Administrative Agent By: _________________________________ Name: Title: 1ST SOURCE BANK, as a Lender By: _________________________________ Name: Title: NATIONAL CITY BANK OF INDIANA, as a Lender By: _________________________________ Name: Title: AMENDED SCHEDULE I COMMITMENTS Lender Commitment - ------ ---------- Bank One, Indiana, N.A. $16,000,000 1st Source Bank $ 7,000,000 National City Bank of Indiana $ 7,000,000 Total $30,000,000 EX-10.(A) 5 c01376x10a.txt EXECUTIVE BENEFIT AND ESTATE ACCUMULATION PLAN Exhibit 10(a) COACHMEN INDUSTRIES, INC. EXECUTIVE BENEFIT AND ESTATE ACCUMULATION PLAN (Amended and Restated Effective as of September 30, 2000) Coachmen Industries, Inc., an Indiana corporation ("Company"), hereby amends and restates the Executive Benefit and Estate Accumulation Plan ("Plan") by action of its Board of Directors, as adopted and ratified on the 20th day of October, 2000 with effect as of the 30th day of September, 2000, for the purpose of appropriately compensating, motivating and retaining certain executives of the Company and its subsidiaries to the end that their contributions to the growth and success of the Company's business will continue. I. DEFINITIONS AND CERTAIN PROVISIONS 1.1 "Agreement" means that written agreement (substantially in the form attached to this Plan) entered into between the Company and the Employee to carry out the Plan with respect to such Employee. 1.2 "Employee" means any employee of the Company (or subsidiary or affiliated company) who has been selected to participate in the Plan and enters into an Agreement. 1.3 "Service" means continuous full-time or substantially full-time service with the Company as an employee. 1.4 A "Year of Service" means a complete year of continuous service with the Company. A "Year" is a period of twelve (12) consecutive calendar months. 1.5 "Eligible Benefit Date" means the date upon which the Employee would become eligible for Normal Benefits (as provided in Section 3.1) if his service with the Company were terminated. To be eligible for Normal Benefits with respect to any Benefit Unit, the Employee must have participated in the Plan for eight (8) years or completed his deferrals of the Total Employee's Deferral Amount with respect to such Benefit Unit and have (a) attained age sixty (60) and been employed by the Company for fifteen (15) years; (b) attained age fifty-five (55) and been employed by the Company for twenty (20) years; or (c) attained age sixty-five (65). An Employee shall also be eligible for Normal Benefits with respect to any Benefit Unit if at any time following a Change in Control of the Company, the Employee is terminated by the Company without Cause or the Employee terminates employment for Good Reason. The Eligible Benefit Date shall be determined separately for each Benefit Unit. 1.6 "Retirement Date" means the date of termination of service of the Employee subsequent to, or coincident with, his Eligible Benefit Date. 1.7 "Termination of Service" means the Employee's ceasing his service with the Company for any reason whatsoever, whether voluntary or involuntary, except death. 1.8 "Committee" means the Administrative Committee appointed to manage and administer the Plan pursuant to Section 4.1. 1.9 "Beneficiary" means the person or persons designated by an Employee pursuant to Section 3.6. 1.10 References to an Employee's or Beneficiary's age are to his or her chronological age. 1.11 "T Bill Rate" means the average bond equivalent interest rate for ninety (90) days U.S. Treasury Bills for the week including the first day of each month as provided by the Company averaged over the applicable period. 1.12 "Disability" means any termination of service before an Employee attains age sixty (60) which the Committee, in its complete and sole discretion, determines is by reason of an Employee's total and permanent disability. If an Employee makes application for disability benefits under the Social Security Act, as now in effect or as hereafter amended, and qualifies for such benefits, he shall be presumed to qualify as totally and permanently disabled under this Plan. The Committee may require the Employee to submit to an examination by a competent physician or medical clinic selected by the Committee. On the basis of such medical evidence, the determination of the Committee as to whether or not a condition of total and permanent disability exists shall be conclusive. To constitute disability, the same must be continuous for at least six (6) months and must commence after the Employee has become a participant in the Plan and must commence before the Employee attains age sixty (60). 1.13 "Benefit Unit" means each separate unit of participation by an Employee under the Plan. A separate Benefit Unit shall exist with respect to the Total Employee's Deferral Amount associated with each separate annual election or special "rollover" election. A separate Exhibit A to the Agreement shall be completed for each separate Benefit Unit. 1.14 "Total Employee's Deferral Amount" means the total aggregate deferral amount which the Employee has agreed to invest with respect to a particular Benefit Unit under the Plan. 1.15 "Deferred Benefit Account" means the separate account maintained for each Employee for each Benefit Unit as defined in Section 2.1 of the Agreement. 1.16 "Change in Control" of the Company shall mean the occurrence of any of the following: (i) any "person" (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding the Company, its affiliates, any qualified or non-qualified plan maintained by the Company or its affiliates, and any Passive Investor) becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under such Act), directly or indirectly, of securities of the Company representing more than 20% of the combined voting power of the Company's then outstanding securities; (ii) during a period of 24 months, a majority of the Board of Directors of the Company ceases to consist of the existing membership or successors nominated by the existing membership or their similar successors; (iii) shareholder approval of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than sixty percent (60%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iv) shareholder approval of either (a) a complete liquidation or dissolution of the Company or (b) a sale or other disposition of all or substantially all of the assets of the Company, or a transaction having similar effect. For these purposes, "Passive Investor" shall mean any person who becomes a beneficial owner of 20% or more of the combined voting power of the Company's then outstanding securities solely because (a) of a change in the aggregate number of voting shares outstanding since the last date on which the person acquired beneficial ownership of any voting shares, or (b) (I) the person acquired beneficial ownership of the shares based on calculations correctly performed and using the Company's most current reports publicly on file with the Securities and Exchange Commission which indicated that acquisition of the shares would not cause the persons to become the beneficial owner of 20% or more of the voting shares then outstanding, and (II) the person had no notice or reason to believe that acquisition of the shares would result in the person becoming the beneficial owner of 20% or more of the voting shares then outstanding, and (III) the person sells a number of shares that reduced the person's beneficial ownership of the voting shares to less than 20% of the voting shares outstanding within ten (10) business days after receiving notice from the Company that the 20% threshold had been exceeded. 1.17 "Cause" shall mean the Employee's: (i) fraud, misappropriation, embezzlement or other willful and knowing act of material misconduct against the Company or any of its affiliates; (ii) substantial and willful failure to render services in accordance with the terms of Employee's employment, provided that (a) a demand for performance of services has been delivered to the Employee by the Board of Directors of the Company at least 30 days prior to termination identifying the manner in which such Board of Directors believes that the Employee has failed to perform and (b) the Employee has thereafter failed to remedy such failure to perform within thirty (30) days after delivery of such demand for performance; (iii) willful and knowing violation of any rules or regulations of any governmental or regulatory body material to the business of the Company; or (iv) conviction of or plea of nolo contendere to a felony. 1.18 "Good Reason" shall mean any of the following which occurs subsequent to a Change in Control of the Company without Employee's prior consent: (i) any adverse change or reduction in Employee's authorities, duties or responsibilities (including reporting responsibilities); the assignment to Employee of any duties or work responsibilities; or any removal of Employee from, or failure to reappoint or reelect him to any office; (ii) a reduction in or failure to pay any portion of Employee's annual base salary or annual bonus (except for failure to meet reasonable conditions for receipt of the bonus) as in effect on the date of the Change in Control or as the same may be increased from time to time thereafter; (iii) the failure by Company to provide Employee with compensation and benefits (including, without limitation, incentive, bonus and other compensation plans and any vacation, medical, hospitalization, life insurance, dental or disability benefit plan), or cash compensation in lieu thereof, which are, in the aggregate, no less favorable than those provided by Company to Employee immediately prior to the occurrence of the Change in Control, other than an isolated, immaterial, and inadvertent failure not taken in bad faith and which are remedied by the Company promptly after receipt of a reasonable written notice thereof given by Employee; (iv) Employee being required to relocate to a principal place of employment more than fifty (50) miles from his place of employment immediately prior to the occurrence of a Change of Control. 1.19 "Special Company Credits" means the total amount added to Deferred Benefit Account. II. EMPLOYEE COMPENSATION REDUCTION 2.1 Employee Compensation. In order to participate in any Benefit Unit under the Plan, an Employee shall execute the Agreement and irrevocably elect to reduce the amount of his compensation to be earned following the effective date of the Plan in the amounts and with respect to the years specified in paragraph 4 and Schedule A of the Agreement. A separate Exhibit A to the Agreement shall be completed for each separate Benefit Unit. The original effective date of the Plan was June 1, 1984, and the first year of the Plan ended on December 31, 1984. Thereafter, the Plan year will be a calendar year basis. Any eligible Employee electing to participate in a Benefit Unit under the Plan during the first Plan year made an election prior to the effective date of the Plan. Thereafter, any eligible Employee electing to participate in a Benefit Unit under the Plan during a subsequent Plan year shall make an election prior to the beginning of such Plan year. 2.2 Special Rollover. In its sole discretion, the Committee may permit an Employee to make a special "rollover" election to transfer amounts which were previously deferred under the Company's Management Incentive Plan to this Plan. In such event the Committee shall establish and maintain a separate Rollover Deferred Benefit Account for each Employee who makes a rollover transfer to this Plan. Such Rollover Deferred Benefit Account shall be deemed to bear interest at the same rate and subject to the same conditions as other Deferred Benefit Accounts pursuant to paragraph 6 of the Agreement. Each Employee who makes a rollover transfer to a Rollover Deferred Benefit Account shall be treated for purposes of determining benefits under the Plan as having a Benefit Unit with respect to which (a) the amount of the rollover transfer shall be treated as the "Total Employee's Deferral Amount" and (b) the total Employee's Deferral Amount shall be treated as completed. 2.3 Special Company Credit: The Administration Committee (as hereinafter defined) may authorize the Company to credit an Employee's Deferred Benefit Account with a Special Company Credit in such amount(s), at such time(s), on such terms and subject to such conditions as the Committee, in its discretion, shall determine. The Company shall be under no obligation to credit or continue to credit any such amount(s), and may modify the terms and conditions applicable to any amount(s) not theretofore credited, to an Employee's Deferred Benefit Account. To qualify for Company Special Credits, a participant shall be an employee who is terminating his employment or would be unable to qualify for the eligibility provisions for Normal Benefits due to extraordinary circumstances, such as early retirement at Company's request. III. BENEFITS 3.1 Normal Benefit. Subject to the Employee's continuation in Service until his Eligible Benefit Date, the Company shall pay to the Employee monthly as compensation for services rendered prior to such date the amount per annum specified in paragraph 7 of the Agreement for twenty (20) consecutive years. The first such payment shall be made on the last day of the first full calendar month following the month during which the Employee reaches his Retirement Date. 3.2 Continuation of Normal Benefit. If an Employee has reached his Eligible Benefit Date and dies prior to receiving payment of all of his Normal Benefit, his Beneficiary shall be entitled to receive the remaining Normal Benefit payments, if any, that would have been paid to the Employee if the Employee had survived until he had received two hundred forty (240) monthly payments of Normal Benefits. 3.3 Alternate Benefit. In lieu of the Normal Benefit, if the Employee continues in Service until his Eligible Benefit Date, the Employee may elect in writing, at any time before the end of the Plan year preceding his Retirement Date, to receive a lump sum payment of the balance of his Retirement Deferred Benefit Accounts for all of his Benefit Units calculated as provided in paragraphs 2.1 and 7 of the Agreement. Payment of the Alternate Benefit shall be made within thirty (30) days following the Employee's Retirement Date. No Survivor Benefits or other benefits shall be payable under the Plan after the Employee receives payment of the Alternate Benefit. 3.4 Termination Benefits. Except as provided in Section 3.5, upon any Termination of Service of the Employee before his Eligible Benefit Date, the Company shall pay to the Employee as compensation for services rendered prior to his Termination of Service the following, subject to paragraph 8 of the Agreement: (a) A lump sum equal to the amounts by which his compensation has been reduced pursuant to paragraph 4 of the Agreement, plus any amounts contributed by the Company toward funding of the Company's obligation to the Employee for payment of the termination benefit, plus interest on the aforesaid amounts at the T Bill Rate (or at the Retirement Interest Yield, as defined in paragraph 2.3(a) of the Agreement, with respect to any Benefit Unit which the Employee has participated in for at least eight (8) years and has completed his deferrals of the Total Employee's Deferral Amount) credited in the manner provided in paragraph 8 of the Agreement (the "Termination Benefit"). For the purpose of the Plan, the date of making reductions in the compensation paid to the Employee shall be specified by the Committee, and all reductions in compensation paid to the Employee during the Plan year shall be considered to have been made not later than the last day of the applicable Plan year. Payment of the Termination Benefit shall be made within thirty (30) days following Termination of Service. (b) The Committee, in its sole discretion, may elect to make payment of the amount set forth in subparagraph (a) above in five (5) consecutive annual installments, the first of which shall be paid within thirty (30) days following Termination of Service. Interest shall continue to be credited on the unpaid amounts as provided in paragraph 8 of the Agreement. 3.5 Survivor Benefits. If the Employee dies while in the Service of the Company and prior to his Eligible Benefit Date, the Company shall pay to the Employee's Beneficiary in annual installments for a period of twenty (20) years the survivor benefit described in paragraph 9(a) of the Agreement. The first of such payments shall be paid on the last day of the first full calendar month following the month of the Employee's death. If the Employee was eligible to receive the Normal Benefit at his death, his Beneficiary shall be entitled to receive the remaining Normal Benefit payments, and thereafter his surviving spouse (if any) shall receive two-thirds of his annual Normal Benefit for the remainder of her lifetime; provided, however, that in the event the surviving spouse is more than three (3) years younger than the Employee at the time of his death, the benefit payable to the surviving spouse shall be reduced on an actuarial basis. No Survivor Benefits or other benefits shall be payable under the Plan after an Employee receives payment of the Alternate Benefit as provided in Section 3.3. There shall be a 50% or 100% reduction in Survivor Benefits with respect to a Benefit Unit in the event of a 50% or 100% withdrawal, respectively, from such Benefit Unit pursuant to Section 3.8. 3.6 Recipients of Payments; Designation of Beneficiary. All payments to be made by the Company under the Plan shall be made to the Employee during his lifetime provided that if the Employee dies prior to the completion of such payments, then all subsequent payments under the Plan shall be made by the Company to the beneficiary or beneficiaries designated in accordance with this Section. The Employee may from time to time change the designated beneficiary or beneficiaries by filing a new designation in writing with the Committee. In the event the Employee shall designate more than one (1) beneficiary, the Employee shall also designate the percentage of benefit to be paid to each. If no designation shall be in effect at the time when any benefits payable under this Plan become due, the beneficiary shall be determined pursuant to paragraph 12(c) of the Agreement. 3.7 Disability Benefits. If the Employee becomes disabled as hereinbefore defined while in the Service of the Company prior to the time when the Employee would be entitled to the Normal Benefit and prior to attainment of age sixty (60), the Company shall pay to the Employee during the period such disability continues, in monthly installments, the annual disability benefit described in paragraph 10 of the Agreement until the Employee has attained age sixty (60), at which time the Employee shall be entitled to receive Normal Benefits or Alternate Benefits as defined in Sections 3.1 and 3.3 hereof even though the Employee may not meet the length of service or the length of participation provisions hereof. The disability benefit shall be paid in accordance with paragraph 10 of the Agreement and shall be prorated for any period of less than one (1) year, and the first monthly payment of disability benefits shall be on the last day of the sixth full calendar month following the onset of such disability. 3.8 Withdrawals. (a) A Participant who is in active Service may elect at any time to receive an immediate lump sum payment of either 50% or 100% of the balance of his Deferred Benefit Accounts for all of his Benefit Units, reduced by a penalty, which shall be forfeited to the Company, equal to ten percent (10%) of the portion (50% or 100%) of the balance of such Deferred Benefit Accounts to be withdrawn, in lieu of payments in accordance with the form previously elected by the Participant. (b) A Participant who is no longer in active Service or a Beneficiary of a deceased Participant may elect at any time to receive an immediate lump sum payment of 100% of the balance of his interest in Deferred Benefit Accounts for all Benefit Units, reduced by a penalty, which shall be forfeited to the Company, equal to ten percent (10%) of his interest in the balance of such Deferred Benefit Accounts, in lieu of payments in accordance with the form previously elected by the Participant. (c) Upon a finding that a Participant or Beneficiary has suffered a Financial Hardship, the Administrative Committee may, in its sole discretion, permit withdrawals under paragraphs (a) or (b) above without imposing any penalty. Applications for hardship withdrawals and determinations thereon by the Administrative Committee shall be in writing, and a Participant or Beneficiary may be required to furnish written proof of the Financial Hardship. A "Financial Hardship" shall mean an immediate and heavy financial need of the Participant or Beneficiary, determined by the Administrative Committee on the basis of written information supplied by the Participant or Beneficiary, in accordance with such standards as are, from time to time, established by the Administrative Committee. (d) All withdrawals shall result in a termination of the Benefit Unit, if 100% of the Deferred Benefit Account is withdrawn, or reduction of the Benefit Unit, if 50% of the Deferred Benefit Account is withdrawn, which shall be treated in the manner described in paragraph 13(a) or (b) of the Agreement, respectively. 3.9 Withholding and Employment Taxes. To the extent required by the law in effect at the time payments are made, the Company shall withhold any taxes required to be withheld by the federal or any state or local government from payments made hereunder. IV. CONDITIONS RELATED TO BENEFITS 4.1 Administration of Agreement. The Board of Directors shall appoint an Administrative Committee consisting of one or more persons to administer the Plan and to interpret and apply its provisions in accordance with its terms. The Committee shall select the Employees who are eligible to participate in the Plan. A member of the Committee shall not vote or act upon any matter which relates solely to such member as an Employee. In the absence of the appointment of an Administrative Committee, references herein to the Committee shall mean the Board of Directors of the Company. 4.2 Rights on Termination of Service. Except as expressly provided in this Plan, the Company shall not be required or liable to make any payment under this Plan subsequent to the Termination of Service of the Employee. 4.3 No Right to Company Assets. Neither the Employee nor any other person shall acquire by reason of the Plan or Agreement any right in or title to any assets, funds or property of the Company whatsoever including, without limiting the generality of the foregoing, any specific funds or assets which the Company, in its sole discretion, may set aside in anticipation of a liability hereunder, nor in or to any policy or policies of insurance on the life of the Employee owned by the Company. No trust shall be created in connection with or by the execution or adoption of this Plan or the Agreement, and any benefits which become payable hereunder shall be paid from the general assets of the Company. The Employee shall have only a contractual right to the amounts, if any, payable hereunder unsecured by any asset of the Company. 4.4 No Employment Rights. Nothing herein shall constitute a contract of continuing service or in any manner obligate the Company to continue the services of the Employee or obligate the Employee to continue in the service of the Company, and nothing herein shall be construed as fixing or regulating the compensation payable to the Employee. 4.5 Company's Right to Terminate. The Company reserves the sole right to terminate the Plan and/or the Agreement pertaining to the Employee at any time prior to the commencement of payment of his benefits or the occurrence of an event which entitles him to payment of his benefits, provided, however, that the Company may only terminate the Agreement pertaining to the Employee if it terminates the Agreements of all similarly situated Employees. In the event of any such termination, the Employee shall be entitled to the amount specified in Section 3.4 of this Plan at the time of termination of the Plan and/or his Agreement. If such termination occurs after a Change in Control (a) the amount specified in Section 3.4 shall be calculated using the Retirement Interest Yield, and (b) each Employee participant shall also receive a lump sum payment equal to fifteen percent (15%) of the Employee's base salary and target annual bonus for the year of termination times the multiple of base salary and target annual bonus used in determining the Employee's severance benefits under the Employee's Change in Control Agreement. If the Employee is not party to a Change in Control Agreement, the multiple shall be one and one-half. For these purposes, "target annual bonus" shall mean the bonus Employee could have earned under the Company's bonus program for senior management for the fiscal year of the Company in which his date of termination occurs if the goals established in connection with such bonus program had been achieved at the "expected" level. If the Company fails to make a payment required under the Plan after a Change in Control, the Plan shall be deemed terminated and each Employee shall receive the payments described above. 4.6 Protective Provisions. The Employee will cooperate with the Company by furnishing any and all information requested by the Company in order to facilitate the payment of benefits hereunder, taking such physical examinations as the Company may deem necessary and taking such other actions as may be requested by the Company. If the Employee refuses to cooperate, the Company shall have no further obligation to the Employee under the Plan or his Agreement. In the event of the Employee's suicide during the first two (2) years of his deferral period for any Benefit Unit or if the Employee makes any material misstatement of information or non-disclosure of medical history, then benefits may be payable to the Employee under the Plan in a reduced amount, in the Company's sole discretion, provided that the benefits shall at least be equal to the aggregate amounts deferred under the Plan by the Employee. 4.7 Offset. If at the time payments or installments of payments are to be made hereunder the Employee or the beneficiary or both are indebted or obligated to the Company, then the payments remaining to be made to the Employee or the beneficiary or both may, at the discretion of the Company, be reduced by the amount of such indebtedness or obligation; provided, however, that an election by the Company not to reduce any such payment or payments shall not constitute a waiver of its claim for such indebtedness or obligation. 4.8 Arbitration. Any controversy or claim arising out of or relating to this Plan or the Agreement, or the breach thereof, shall be settled by arbitration in accordance with the Commercial Arbitration, and judgement upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The arbitration shall occur in Elkhart, Indiana. The fees and expenses of any arbitration shall be awarded by the arbitrator(s). V. MISCELLANEOUS 5.1 Nonassignability. Neither the Employee nor any other person shall have any right to commute, sell, assign, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are and all rights to which are expressly declared to be unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by the Employee or any other person, or be transferable by operation of law in the event of the Employee's or any other person's bankruptcy or insolvency. 5.2 Gender and Number. Wherever appropriate herein, the masculine may mean the feminine and the singular may mean the plural or vice versa. 5.3 Notice. Any notice required or permitted to be given under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, and if given to the Company, delivered to the principal office of the Company, directed to the attention of the President of the Company. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification. 5.4 Amendments. This Plan and any Agreements pursuant to this Plan shall be subject to amendment from time to time as the Board of Directors, in its sole discretion and upon advice of counsel, shall deem necessary or desirable to accomplish the intended purposes of the Plan and to avoid unintended burdens upon the Company which may arise from changes in law or regulations becoming effective after the date of approval of this Plan, or arising from adverse business conditions or for any other reason. Such amendments shall become effective only on and after the date of adoption of such amendments and shall operate prospectively only and may not be more adverse to an Employee than if the Plan or his Agreement were terminated pursuant to Section 4.5 of the Plan. In no event may the Company amend the Plan and/or the Agreement of any Employee to adversely affect any vested rights of an Employee without the consent of the Employee. 5.5 Invalid Provisions. If any provision or provisions of this Plan or of any Agreement shall be determined to be invalid, such invalid provision or provisions shall not affect any other provisions of this Plan or of the Agreements, and all other provisions shall remain in full force and effect. VI. FUNDING UPON CHANGE IN CONTROL The Company, immediately before or coincident with a Change in Control of the Company, shall fully fund its obligations under this Plan by de4livering assets to the Trustee of the Coachmen Industries, Inc. Executive Benefit and Estate Accumulation Trust created pursuant to an agreement dated April 14, 2000 between the Company and the Northern Trust Company equal in value to the sum of (a) the Company's accrued liability to participants in the Plan as of December 31, 1999, and (b) the amount of compensation deferred by the participants from December 31, 1999 to the date of funding plus the amount of the Company's contribution required with respect to the amount deferred and interest on the amounts deferred and contributed at the Retirement Interest Yield, less (c) any amounts paid out to participants from December 31, 1999 to the date of funding. An independent third party selected by the Company's independent auditors shall determine the amount of funding required upon the Change in Control. The Company shall also fund its obligations with respect to Employee contributions made after a Change in Control by transferring Company assets to the Trustee on or before the last day of each Plan year equal in value to the amount of compensation deferred by the participants during the Plan year plus the amount of the Company's contribution required with respect to the amount deferred and interest on the amounts deferred and contributed at the Retirement Interest Yield, less any amounts paid out to participants during the Plan year. The Company may transfer life insurance policies which it owns, cash, irrevocable letters of credit, performance bonds or other assets, rights or agreements to satisfy this funding requirement. IN WITNESS WHEREOF, the Company has adopted this amended and restated Executive Benefit and Estate Accumulation Plan, on October 20, 2000, effective as of the 30th day of September, 2000. Further, on October 20, 2000, the undersigned certifies that the Board of Directors appointed the Compensation Committee of the Board of Directors as the Administrative Committee under the Plan, and delegated to the Compensation Committee authority to amend the plan within its discretion and pursuant to Section 5.4 Amendments of the plan. COACHMEN INDUSTRIES, INC. By__________________________________ Richard M. Lavers Its Secretary EX-10.(B)(I) 6 c01376x10bi.txt RESOLUTION Exhibit 10(b)(i) RESOLUTION REGARDING AMENDMENT OF 2000 OMNIBUS STOCK INCENTIVE PROGRAM RESOLVED, that the Coachmen Industries, Inc. 2000 Omnibus Stock Incentive Program approved by the shareholders at the May 4, 2000 Annual Shareholders Meeting and adopted by the Board of Directors, is hereby amended by adding the following to the end of Subsection (a) Exercise Price, of Section 6. Stock Options: In no event shall the Committee either cancel any outstanding Stock Option for the purpose of reissuing the option to the participant at a lower exercise price, or reduce the option price of an outstanding option. EX-10.(E) 7 c01376x10e.txt PRISM EXEC(R) MODEL Exhibit 10(e) PRISM Exec(R) Model Non-Qualified Deferred Compensation Plan Part A Joinder Agreement - -------------------------------------------------------------------------------- NOTICE: Establishment of any non-qualified deferred compensation plan has significant tax consequences to both the Employer(1) and participating Employees. These tax consequences may be adverse if the non-qualified deferred compensation plan is not appropriately designed pursuant to Internal Revenue Service and Department of Labor requirements. Use of this Model Non-Qualified Deferred Compensation Plan is specifically conditioned upon receipt by KeyCorp or one of its affiliates of written acknowledgment by an attorney, accountant, or other tax professional representing the Employer that (i) they have reviewed this document (and related documents) to ascertain the tax ramifications of its use; (ii) that those ramifications have been discussed with the Employer; and, (iii) that the Employer understands and assumes all responsibility relating to the tax consequences of using this document. - -------------------------------------------------------------------------------- All provisions selected in this Part A - Joinder Agreement of the PRISM Exec(R) Model Non-Qualified Deferred Compensation Plan are to be interpreted in conjunction with Part B - Basic Provisions and Part C - Schedules, which are incorporated by this reference. The Employer, designated below, hereby establishes a non-qualified deferred compensation plan for all Eligible Employees as defined in this Joinder Agreement pursuant to the terms of Part B - Basic Provisions of the PRISM Exec(R) Model Non-Qualified Deferred Compensation Plan A. Employer Information: (1) Name: Coachmen Industries, Inc. (2) Address: 2831 Dexter Avenue (3) Address: Elkhart, IN 46514 (4) Attention: Leslie Thimlar Telephone: (219) 262-0123 (5) Employer Taxpayer Identification Number: 35-1101097 - -------- 1 Terms that are capitalized are defined in Part B - Basic Provisions of the PRISM EXEC(R)MODEL NON-QUALIFIED DEFERRED COMPENSATION PLAN. B. Basic Plan Provisions: (1) Plan Name (select one): (a) /X/ This plan is established effective January 1, 2001, (the "Effective Date") as a non-qualified deferred compensation plan and trust to be known as Coachmen Industries, Inc. Supplemental Deferred Compensation Plan (the "Plan"). (b) / / If selected, this Plan is a restatement, effective , 19, (the "Effective Date") of a previously existing plan, originally effective , 19. Notwithstanding anything in the prior plan to the contrary, as of the effective date of the restatement, this document shall be the exclusive instrument defining the terms of the Plan. (2) Committee Members(2): / / If selected, the Employer may not change the membership of the Committee without the consent of / / all, / / a majority of, the Participants. (3) Plan Year shall mean the twelve consecutive month period ending on December 31, 2001, and each anniversary thereof. If the Effective Date of this Plan is not twelve months prior to the initial Plan Year end specified, a short first Plan Year shall result, which shall have only that impact as described in Part B - Basic Provisions of the PRISM Exec(R) Model Non-Qualified Deferred Compensation Plan. (4) Coverage: - -------------------------------------------------------------------------------- NOTICE: Only those Employees who are considered part of a "select group of management or other highly compensated employees" as defined by the Department of Labor in Reg. ss.2520.104-23 should be included as participants. Inclusion of employees not falling within the DOL "top-hat" exemption may cause the Plan to be within the purview of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), requiring compliance with certain minimum coverage, participation, and funding requirements. - -------------------------------------------------------------------------------- - --------- 2 Committee members direct the day to day operation of the Plan. If no Committee members are specified, the Employer shall assume responsibility for the operations of the Plan. Only those Employees described below shall be eligible to be selected as a Participant in this Plan: See attached Schedule B Those Eligible Employees who have been selected as Participants in the Plan shall be designated on the attached Schedule B, which shall be modifiable to include, or exclude Eligible Employees pursuant to the terms of this Plan. Subject to the approval of the Trustee, and notwithstanding the terms of this Plan, the Employer may enter into an agreement with each Participant, specifying the terms and conditions of participation, which shall not, without the written consent of the Trustee, supersede any provisions contained herein. (5) Contributions: The Employer may make contributions to this Plan, for the benefit of the Participant, as may be elected below (select as many as applicable): (a) /X/ In its discretion, the Employer may contribute Employer Basic Contributions to the Plan. To the extent authorized, Employer Basic Contributions shall be allocated to the accounts of Participants as may be specified in the attached Schedule C. (b) / / Participants, as authorized by the Compensation Plan Sponsor of the Board, shall be entitled to enter into a Salary Reduction Agreement providing for a reduction in the Participant's Compensation and Salary Reduction Contributions to be made to the Plan. (i) The minimum Salary Reduction Contribution amount shall be 1 % of the Participant's Compensation. (ii) The maximum Salary Reduction Contribution amount shall be 15% or 20 % of the Participant's Compensation, depending upon the allowance for Contributions by each Employee Group participating in the Plan. The Employer may require a Participant to also participate in any qualified Plan offered by the Employer as a condition to making Salary Reductions in this Plan. (iii) / / If selected, a portion of the Salary Reduction Contributions made on behalf of a Participant may be distributed from the Trust to a qualified retirement plan complying with the provisions of Code ss.401(k). (iv) For purposes of Salary Reduction Contributions, Compensation shall be defined to not include: (a) / / Bonuses (b) / / Commissions (c) / / Taxable fringe benefits identified below: (d) / / Other items of remuneration identified below: (c) /X/ The Employer shall make Employer Matching Contributions to the Plan, in an amount as specified below: (i) / / An amount, equal to __% of each Participant's Salary Reduction Agreement amount, however, no match shall be made on a Participant's Salary Reduction Contributionsin excess of __% (or $____ ) of the Participant's Compensation. (ii) / / The Employer shall make contributions to the Plan, in an amount determined by resolution of the Board of Directors on an annual basis. The Board resolution shall provide for the percentage and/or amount of Salary Reduction Contributions to be matched and the maximum percentage and/or amount of Salary Reduction Agreement amounts eligible for matching. The Matching Contribution, if any is made, may vary among the Employee Groups participating in the Plan. Matching Contributions may be made in cash, in Employer Stock ("Matched Stock Account") or any combination of cash and stock. (iii) / / Employer Matching Contributions shall be allocated to the accounts of Participants (select one): (a) /X/ as of each pay period for which a contribution was made pursuant to a Salary Reduction Agreement. (b) / / semi-monthly. (c) / / as of the last day of the month preceding the month in which the contribution was made. (d) / / as of the last day of the Plan quarter preceding the quarter in which the contribution was made. (e) / / as of the last day of the Plan Year. (d) /X/ Participants shall be entitled to enter into a Salary Reduction Agreement providing for a reduction in the Participant's Bonus Compensation and a Bonus Contribution to be made to the Plan. (e) /X/ Subject to the approval of the Trustee, and notwithstanding the terms of this Plan, the Employer may enter into an agreement with each Participant, specifying that Employer Special Contributions be made to the Plan and allocated to the Account of the Participant. Any such agreements shall be disclosed on the attached Schedule D (6) Forfeiture Provisions: (a) Vesting provisions: Group "A" Participants shall vest under (g) below. Group "B" Participants shall vest under (f) below. (i) The percentage of a Participant's Account (attributable to Employer Contribution Amounts) to be vested in him or her upon completion of the specified number of Years of Service shall be: Completed Years of Service 1 2 3 4 5 6 7 ----- ----- ------ ----- ---- ----- ---- (a) / / 100% --- ----- (b) / / --- --- 100% ----- (c) / / --- 20% 40% 60% 80% 100% ----- ------ ----- ---- ----- (d) / / --- --- 20% 40% 60% 80% 100% ------ ----- ---- ----- ---- (e) / / 10% 20% 30% 40% 60% 80% 100% ----- ----- ----- ----- ---- ----- ---- (f) /X/ 20% 40% 60% 80% 100% --- ----- ----- ----- ---- (g) /X/ 0% 0% 0% 0% 100% ---- (h) / / Full and immediate vesting upon entry into the Plan (i) / / As per the schedule attached as Schedule E (ii)Year of Service for vesting shall mean: (a) /X/ The same as a Year of Service is defined and calculated for purposes of the Coachmen Industries, Inc. 401(k) Retirement Plan (a qualified plan sponsored by the Employer). (b) / / a consecutive 12 month period of service computed on the basis of:. (i) / / the period commencing on each annual anniversary of the Employee's date of hire and ending on the next annual anniversary of the Employee's Employment Commencement Date (ii) / / the Plan Year, commencing with the first Plan Year beginning after the Employee's Employment Commencement Date. (iii) Vesting Years of Service shall be counted for all years of service of the Employee with the employer beginning with: (a) / / The Employee's Employment Commencement Date (b) / / The later of the Employee's Employment Commencement Date or the effective date of this Plan (c) /X/ The date the Employee becomes a Participant in this Plan (iv) Notwithstanding the provisions of this Item of the Joinder Agreement, a Participant shall become fully vested in his Accounts attributable to Employer Contributions: (a) / / if the Participant's job is eliminated without the Participant being offered a comparable position elsewhere with the Employer. (b) /X/ upon a Change of Control (as defined in Part B - Basic Provisions) (c) / / for such reason as is described below: (b) / / If selected, the Employer has imposed other conditions of forfeiture with respect to the Participant's Accounts. Those conditions of forfeiture are set forth on the attached Schedule F. (7) Distributions: (a) Payment of Benefits. Benefits shall be paid in such form as may be specified below. To the extent that more than one form of benefit is authorized, the Participant shall, prior to the commencement of participation in the Plan, irrevocably elect in writing the form in which benefits will be paid. (i) /X/ Single lump sum (ii) /X/ Installments (as specified in Part B - Basic Provisions) (iii) /X/ Other (specify): A Participant may elect to receive Employer Stock that is not Matched Stock on an In-Kind basis, provided appropriate tax withholding is recovered. A Participant will receive Matched Stock on an In-Kind Basis only. (b) Time for payment of benefits. Benefits shall be payable at the times specified below. To the extent that more than one time for the payment of benefits is authorized, the Participant shall, prior to the commencement of participation in the Plan, irrevocably elect in writing the time benefits will be paid. (i) / / At age (specify): (ii) /X/ Upon termination of employment with the Employer (iii) /X/ Within three (3) Years after a Change of Control / / If selected, upon a Change of Control as defined in Schedule H, the Employer shall be obligated to fully fund the Trust within __ ___ Year after a Change in Control (iv) /X/ Other (specify): After a "Change of Control" as defined in Schedule H has occurred, and prior to the three (3) year period described in (iii) above, distributions will be made at the request of the Participant within thirty days of the request being submitted to the Employer after termination of employment. (c) Hardship Distributions (i) / / If selected, in addition to receiving distributions of Employer Basic Contributions, Employer Special Contributions, and Employer Matching Contributions as may be irrevocably elected in the Participant's initial Enrollment Form, a Participant may request to receive a distribution on account of a severe financial hardship, pursuant to the provisions of Part B - Basic Provisions. If a hardship distribution is allowed, the Participant will forfeit an amount equal to ____% of the amount received. (ii) / / If selected, in addition to receiving distributions of Salary Reduction Contributions and Bonus Deferral Contributions as may be irrevocably elected in the Participant's initial Enrollment Form, a Participant may request to receive a distribution on account of a severe financial hardship, pursuant to the provisions of Part B - Basic Provisions. (8) Investments: (a) Participants may make an election to deem the Participant's Account(s) to be invested among the Investment Funds. Such election may be changed: (i) / / Once during each business day that the Trustee and the New York Stock Exchange are open. (ii) / / Once during each calendar month. (iii) /X/ Once during each quarter of the Plan Year. (iv) / / Once during each rolling ___ day period. (b) The Participant will designate into which Investment Funds all contributions to their accounts are deemed invested, except the following: (i) / / Employer Basic Contributions (ii) / / Employer Special Contributions (iii) /X/ Employer Matching Contributions (iv) / / Salary Reduction Contributions (v) / / Bonus Deferral Contributions (c) /X/ If selected, and to the extent a selection is made above, the Employer shall attach a Schedule G specifying how the contributions so specified shall be invested among the Investment Fund. (d) /X/ If selected, the Participant shall be restricted in the use of the Employer Stock Fund as an Investment Fund for designating the investment of their account balance as described on the attached Schedule G (9) Trustee: The Trustee of this Plan shall be KeyBank National Association (a bank or trust company affiliated with KeyCorp within the meaning of Internal Revenue Code ss.1504). IN WITNESS WHEREOF, this Plan, which consists of this Part A - Joinder Agreement, Part B - Basic Provisions, and Part C - Schedules (which are specifically incorporated by this reference), is adopted by appropriate corporate action this _____ day of ___________, 2000. Employer: Coachmen Industries, Inc. By: ----------------------------------------------------------------------------- and - -------------------------------------------------------------------------------- PRISM Exec(R) Model Non-Qualified Compensation Plan Part B Basic Provisions All provisions selected in this Part B - Basic Provisions of the PRISM Exec(R) Model Non-Qualified Deferred Compensation Plan are to be interpreted in conjunction with options selected in Part A - Joinder Agreement, of which this Part B is an integral part. Article I Establishment/Purpose ss.1.01 Purpose: This Plan is intended to permit the Employer (and each Affiliate who adopts this Plan) to establish an unfunded, non-qualified deferred compensation plan for a select group of its management or highly compensated employees. Accordingly, it is intended that this Plan be exempt from the provisions of Parts 2, 3 and 4 of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). ss.1.02 Adoption of Plan: The Employer may adopt this Plan by completing Part A - - Joinder Agreement, and Part C - Schedules, and adopting those parts along with this Part B - Basic Provisions by executing the document pursuant to appropriate corporate authority. Parts A, B and C together form the Plan document and may not be used independently of each other. This document (and all of its component parts) may only be used as part of the PRISM Exec(R) Model Non-Qualified Deferred Compensation Plan services offered by KeyCorp, or one of its affiliates. Article II Definitions When used in this document or in Part A - Joinder Agreement or Part C - Schedules, of the PRISM Exec(R) Model Non-Qualified Deferred Compensation Plan, the following words shall have the meanings defined below, unless the context clearly indicates otherwise: ss.1.01 Account: The bookkeeping accounts maintained by the Service Provider on behalf of the Employer, with appropriate sub-accounts, to reflect (i) Salary Deferral Contributions contributed to the Plan, as may be elected by each Participant; (ii) Employer Contributions (whether Employer Matching Contributions, Employer Basic Contributions or Employer Special Contributions), each as adjusted for investment experience, transfers, withdrawals and distributions made in accordance with this Plan. ss.1.02 Affiliate: Any entity which is part of (i) a controlled group of corporations or business pursuant to Code ss.ss.414(b) or (c); (ii) an affiliated service group pursuant to Code ss.414(m); or, (iii) any other entity required to be aggregated with the Employer pursuant to Code ss.414(o). ss.1.03 Beneficiary: Any person who is designated by a Participant to receive payment of benefits under this Plan, to the extent available, after the Participant's death. The Participant may specify his or her Beneficiaries on a form approved by the Committee, and may make such changes to his Beneficiary designation at such times as may be allowed by the Committee. Notwithstanding anything in this Plan to the contrary, if the Participant designates his or her spouse as a Beneficiary of benefits payable hereunder, and the Participant's marriage to that spouse is later terminated (whether by divorce, annulment, dissolution, or otherwise), the Participant's designation of his or her spouse as a Beneficiary shall be null and void, and the portion of the Participant's benefits that would, but for this provision be payable to the Participant's spouse will be payable as designated in the Participant's Beneficiary designation, as if the spouse had predeceased the Participant. ss.1.04 Bonus Compensation: Any item of Compensation (without regard to the exclusion of bonuses as may be elected by the Employer in the Joinder Agreement) that would be payable to a Participant as a bonus but for the existence of a Salary Reduction Agreement executed by a Participant authorizing deferral of Bonus Compensation. ss.1.05 Bonus Deferral Contributions: Those contributions to the Plan, as authorized in the Joinder Agreement, made pursuant to ss.4.01 of this Part B - Basic Provisions, and allocated to the Accounts of Participants entering into a Salary Reduction Agreement authorizing deferral of Bonus Compensation.. ss.1.06 Board: The Board of Directors (or other governing board) of the Employer. ss.1.07 Change of Control: A Change of Control shall be deemed to have occurred (if applicable) upon the happening of the criteria specified by the Employer in the attached Schedule H. ss.1.08 Code: The Internal Revenue Code of 1986, and amendments thereto. ss.1.09 Committee: The Committee as provided for in this Plan, which shall have the authority to direct the operations of the Plan. To the extent that the Employer does not appoint a Committee, the Employer shall have the duty of the day to day administration of the Plan. ss.1.10 Compensation: An Employee's base salary (unreduced by deferrals made on a pre-tax basis to any plan maintained under Code ss.ss.401(k) or 125) plus, to the extent elected in the Joinder Agreement, one or more of the following: (i) cash bonuses; (ii) commissions; (iii) taxable fringe benefits; or (iv) such other items of remuneration as may be excluded for Plan purposes described in the Joinder Agreement. ss.1.11 Disability: The inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. The permanence and degree of such impairment shall be supported by medical evidence. The Employer shall determine the existence of a Disability based on its current disability policy, applied on a uniform and nondiscriminatory basis. ss.1.12 Effective Date: The date the Plan was originally effective (which will be the date of its establishment, or such other later date as may be specified in the Joinder Agreement. ss.1.13 Eligible Employee: An Employee who falls within the classification designated by the Employer in the Joinder Agreement to be eligible to be selected as a Participant in this Plan ss.1.14 Employee: Any employee, including any self employed individual, of the Employer maintaining the Plan. ss.1.15 Employer: The Employer specified in the Joinder Agreement and any successor to the business of the Employer establishing the Plan. No other employer shall be considered an Employer for purposes of this Plan unless (i) such other employer consents in writing to being an Employer with respect to this Plan; and, (ii) such other employer is related to the Employer by virtue of being in a parent-subsidiary or brother-sister controlled group with the Employer, pursuant to Code ss.ss.414(b) or (c) ss.1.16 Employer Basic Contributions: Those contributions to the Plan, as authorized in the Joinder Agreement, made pursuant to ss.4.01 of this Part B - Basic Provisions, allocated to the Accounts of Participants pursuant to Schedule B. ss.1.17 Employer Contribution: An Employer Basic Contribution, Employer Matching Contribution, or Employer Special Contribution. ss.1.18 Employer Matching Contributions: Those contributions to the Plan, as authorized in the Joinder Agreement, made pursuant to ss.4.01 of this Part B - Basic Provisions, allocated as a matching contribution to the Salary Reduction Contributions or Bonus Deferral Contributions. ss.1.19 Employer Special Contribution: Those contributions to the Plan, as authorized in the Joinder Agreement, made pursuant to ss.4.01 of this Part B - Basic Provisions, allocated pursuant to the provisions of an agreement entered into between the Employer and a Participant described on Schedule D. ss.1.20 Employment Commencement Date: The date on which an Employee first is employed by the Employer. ss.1.21 Investment Fund: One of the funds provided for in this Plan, as selected by the Employer on the Investment Fund Designation Form. ss.1.22 Investment Fund Designation Form: The form on which the Employer selects Investment Funds available for the investment of assets held in Trust, which is an integral part of the Trust Agreement. ss.1.23 Joinder Agreement: Part A of this Plan, which is an integral part of the Plan and contains those elections selected by the Employer in establishment of this Plan. ss.1.24 Participant: An Eligible Employee who has been selected to participate in the Plan and who has contributions credited to his or her Account. An individual who has an Account in the Plan shall continue to be a Participant despite no longer being an Eligible Employee. ss.1.25 Plan: The non-qualified deferred compensation plan established by the Employer through the PRISM Exec(R) Model Non-Qualified Deferred Compensation Plan which is intended to be a "top-hat" plan, as defined in Department of Labor Regulation ss.2520.104-23, and exempt from the provisions of Parts 2, 3 and 4 of Title I of the Employee Retirement Income Security Act of 1974, as amended. ss.1.26 Plan Year: The twelve month period ending on the date specified in the Joinder Agreement, which shall be the fiscal year of the Plan. Unless otherwise elected in the Joinder Agreement, the Plan Year shall be the calendar year. ss.1.27 Salary Reduction Agreement: An irrevocable election of the Participant to forego payment of Compensation in exchange for the Employer's promise to pay benefits pursuant to this Plan. ss.1.28 Salary Reduction Contribution: A contribution made to this Plan pursuant to the Employer's obligation to provide certain benefits in consideration of a Participant entering into a Salary Reduction Agreement. Such Salary Reduction Agreement, to be valid, must (i) be in writing, signed by the Participant prior to the start of the Plan Year to which it relates (except that an Eligible Employee may enter into a Salary Reduction Agreement effective for the remainder of the Plan Year in which the Participant's participation in the Plan commences, provided that any reduction in compensation specified in the Salary Reduction Agreement has effect only with respect to compensation not yet earned or payable); (ii) take effect as of the start of the following Plan Year (or the date the Participant commences participation in the Plan, if later); (iii) be irrevocable during the Plan Year in which it is in effect (except that a Salary Reduction Agreement may be revoked in its entirety with respect to the remainder of the Plan Year upon election of the Participant); and (iv) be on a form and submitted as prescribed by the Committee Any Salary Reduction Agreement in effect as of the last day of a Plan Year shall be deemed automatically renewed for each succeeding Plan Year unless a proper election modifying or terminating the prior Salary Reduction Agreement is duly filed with the Committee during the period of time prescribed by the Committee ss.1.29 Schedules: Part C of this Plan which contains additional information concerning the operation of Plan, as referenced by the Joinder Agreement. ss.1.30 Service Provider: An affiliate of KeyCorp that provides certain administrative services in connection with the operation of the Plan, pursuant to an administrative services agreement entered into between the Employer and the Service Provider. ss.1.31 Trust Agreement: An agreement entered into between the Trustee and the Employer providing for fiduciary services in connection with a grantor trust established in connection with this Plan. ss.1.32 Trustee: The trustee designated in the Trust Agreement, or its successors and assigns. The Trustee shall be an affiliate of KeyCorp. The Trustee shall not be a party to the Plan, and its responsibilities shall be governed exclusively by the Trust Agreement. ss.1.33 Year of Service: A consecutive 12 month period of continuous service in the employ of the Employer commencing on (i) the Employee's Employment Commencement Date; (ii) the effective date of the Employer's establishment of this Plan; or (iii) the date the Employee becomes a Participant in the Plan. Article III Eligibility and Participation ss.3.01 Eligibility: From among those Employees designated as Eligible Employees by the Employer in the Joinder Agreement, the Board (or its designee) shall select those who shall become Participants in the Plan. The Board may impose such terms and conditions upon such an Employee prior to becoming a Participant, which shall be communicated to the Employee, in writing, prior to commencement of participation. An Eligible Employee shall commence Participation as of any date specified by the Board. ss.3.02 Participation: A Participant shall commence participation in Plan upon completion of an appropriate Salary Reduction Agreement specifying that his or her compensation be reduced, or by being credited with an Employer Contribution in his or her Account. Article IV Contributions/Accounts ss.4.01 Contributions: As may be selected in the Joinder Agreement, the Employer shall credit each Participant's Account with: a) Salary Reduction Contributions: The amount of any Salary Reduction Contribution elected by the Participant in a Salary Reduction Agreement for the Plan Year; b) Bonus Deferral Contributions: The amount of any Bonus Deferral Contribution elected by the Participant in a Salary Reduction Agreement for the Plan Year; c) Employer Basic Contributions: An amount, as determined in the discretion of the Employer, which will be allocated to the Accounts of Participant's pursuant to Schedule C; d) Employer Matching Contributions: An amount, as may be specified in the Joinder Agreement, computed as a matching amount to any contribution made pursuant to a Salary Reduction Agreement. e) Employer Special Contributions: An amount as may be specified in an agreement between the Employer and a Participant, as disclosed in Schedule D. Benefits payable pursuant to this Plan shall be calculated with reference to the amount of contributions credited to the Participant's Account, together with any adjustments made thereto pursuant to the provisions of this Plan. ss.4.02 Participant Accounts: Each Participant shall have established an Account (with sub-accounts as may be appropriate) which shall reflect any contributions credited pursuant to ss.4.01 of this Plan. All contribution credits shall be bookeeping entries only and shall not constitute an actual allocation of any assets of the Employer, or be deemed to create any trust, custodial account, or deposit with respect to any assets which may be utilized to satisfy the obligation of the Employer to provide the benefits specified in this Plan. ss.4.03 Unsecured Obligation: The obligation of the Employer to provide benefits pursuant to this Plan shall be the sole unsecured promise of the Employer with respect to this Plan. Notwithstanding the foregoing, the Employer may establish a trust, pursuant to a Trust Agreement, for the purpose of setting aside funds to provide for the payment of benefits under this Plan. However, the assets of the Trust shall at all times remain subject to the claims of the general creditors of the Employer, and no Participant or Beneficiary shall have any claim or right with respect to the assets held in the Trust, except to the extent that the Participant or Beneficiary is a general creditor of the Employer. Notwithstanding anything in this Plan (or the Trust Agreement) to the contrary, if elected in the Joinder Agreement, upon a Change of Control, the Employer shall fully fund its obligations under this Plan by making sufficient contributions to the Trust, within the time limit specified in the Joinder Agreement. ss.4.04 Investments: To the extent that the Employer establishes a Trust, such contributions made to the Trust shall be invested in one or more Investment Funds as specified by the Employer in Schedule A. It shall be the investment policy of the Employer to have Trust Assets invested in such Investment Funds so as to provide sufficient assets to fund Employer's obligation to provide benefits under this Plan. At the discretion of the Employer, Participants may be entitled to request that their Accounts be adjusted (for investment gains and losses, as if invested) in accordance with a deemed investment election of a Participant. Deemed investment elections may be made with respect to existing Account balances, current contributions to the Participant's Account, shall be subject to any limitations imposed by the Committee from time to time, shall be made by such means as the Employer and Trustee may agree, and may include use of Trustee's interactive voice response system, known as KeyInvest(R). The Trustee shall make such adjustments in Participants' Accounts to reflect any investment gains or losses such Participants' Accounts would experience if funds were actually invested pursuant to the Participant's election. Participants may make changes in deemed investment elections at such time, and in such manner (including through the use of KeyInvest(R)) as may be specified by the Committee from time to time. Any deemed investment election, or changes to deemed investment elections, shall remain in effect until further changed by the Participant. Article V Benefits/Distributions ss.5.01 Benefits: A Participant shall be entitled to receive a benefit, when payable pursuant to the terms of this Plan, in an amount equal to the total value of all contributions credited to his or her Account, adjusted for any deemed investment gains or losses, multiplied by the Vested Percentage (if any), less any amount forfeitable, as specified below. All benefit payments shall be made by the Employer, except as may be provided for in the Trust Agreement. All appropriate taxes, as determined by the Employer, shall be withheld from any payment distribution, as may be required by law, and remitted to the appropriate taxing authority by the Employer, or its agent. ss.5.02 Vested Percentage: The Vested Percentage shall be the amount specified in the Joinder Agreement, based on the number of Years of Service the Participant has been credited with, at the time benefits are payable. The Vested Percentage shall be applied only with respect to Employer Contributions credited to the Participant's Account. Participants shall be fully vested in Account balances attributable to Salary Reduction Contributions and Bonus Deferral Contributions. ss.5.03 Form of Payment: Payment of benefits under this Plan shall be made in one (or more) of the following forms, as may be elected by the Employer in the Joinder Agreement (or the Participant): a) A single lump sum payment, in cash b) Equal (sum certain) installment payments over an expected period as elected by the Participant prior to commencement of participation. Notwithstanding the foregoing, the actual period over which installment payments will extend will be based on the Participant's Account balance. Installment payments shall be payable over a period of at least 10 years. c) Such other form as may be elected by the Employer (and described in the Schedules), and if applicable, as Elected by the Participant prior to commencement of Participation. ss.5.04 Commencement of Payment: Payment of benefits shall commence (or occur) at the time specified by the Employer in the Joinder Agreement (and, as appropriate, as elected by the Participant). ss.5.05 Hardship Distributions: Prior to the time a benefit becomes payable pursuant to ss.5.04, the Employer, if it has authorized hardship distributions in the Joinder Agreement, in its sole discretion, may elect to distribute all or any portion of a Participant's benefit to the Participant on account of a severe financial hardship. For purposes of this section, a severe financial hardship shall exist in the event the Employer determined that the Participant requires a distribution to meet an immediate and heavy financial obligation resulting from illness of the Participant (or a dependent), casualty loss, or other similar extraordinary event beyond the control of the Participant, which cannot be satisfied through other means. If the Committee authorizes a hardship distribution to a Participant, the Participant's account in the Plan will be debited by the amount of the distribution as well by an additional amount equal to the amount elected in the Joinder Agreement, as a penalty to be forfeited and returned to the Employer if the trust is revocable at the time, or if not revocable, then the forfeited amounts shall continue to be held in trust until full satisfaction of all of Employer's obligation under this Plan. ss.5.05 Death Distributions: To the extent not forfeited pursuant to the terms of this Plan, upon the death of the Participant, any benefit to which the Participant would be entitled to (but for his or her death) shall be paid, in any manner as authorized by the Employer in the Joinder Agreement (and if applicable, as elected by the Participant) to the Participant's Beneficiary, or Beneficiaries. To the extent the Participant has not designated Beneficiaries to receive his or her benefits pursuant to this Plan, the Participant's benefits (or the portion thereof not so payable to a Beneficiary) shall be paid to the Participant's estate. Article VI Forfeiture ss.6.01 Non-vested Amounts: Any portion of the Participant's Account which is not vested at the time the Participant terminates employment with the Employer shall be deemed forfeited. To the extent that the Employer has made a contribution to a trust in connection with respect to this Plan, the amount of any such contributions held in trust deemed forfeited pursuant to this provision shall be returned to the Employer if the trust is revocable at the time, or if not revocable, then the forfeited amounts shall continue to be held in trust until full satisfaction of all of Employer's obligations under this Plan. ss.6.02 Other Forfeitures: If elected in the Joinder Agreement, a Participant's benefits (without regard to the Vested Percentage) may be forfeited on the terms and conditions established by the Employer on Schedule F. Article VII Administrative Provisions ss.7.01 Committee: The Committee, as designated by the Employer in the Joinder Agreement, shall be the administrator of the Plan, charged with responsibility for the day to day operations of the Plan, to interpret its provisions, implement operational policies and shall have such other authority as may be delegated to them by the Employer. To the extent that the Employer does not name a Committee in the Joinder Agreement, the Employer shall be the administrator, and shall designate such persons from time to time, as may be required to administer the Plan. The Committee may delegate any of its powers, authorities or responsibilities for the administration of the Plan to any other person or committee so designated by it in writing. The Committee may employ such agents as may be necessary for the effective operation of the Plan, including but not limited to attorneys, accountants, service providers, and other agents. No member of the Committee shall be personally liable to any person for any action taken or omitted in connection with the interpretation of the Plan, or its operation, unless attributable to that person's own willful misconduct, gross negligence, or lack of good faith. Members of the Committee shall not participate in any action with respect to benefits they may receive as Participants in this Plan. ss.7.02 Procedures: The Committee may establish such procedures as are reasonably necessary for the implementation and operation of this Plan. To the extent that such procedures are not directly in conflict with the terms of the Plan, they shall be binding in all respects on the Participants. ss.7.03 Costs of Administration: The Employer shall pay all costs of administering this Plan. To the extent that such costs are not paid in a reasonably timely manner, they shall be considered a charge against any Trust established in connection with the establishment of this Plan. Article VIII Miscellaneous ss.8.01 Amendment or Termination: The Employer reserves the right to amend or terminate this Plan at any time, in any respect, retroactively or prospectively, by written instrument adopted by the Board. No amendment or termination of the Plan shall reduce, diminish, or otherwise alter the right of a Participant or Beneficiary to benefits to which he or she was entitled, had the Participant terminated employment with the Employer on the day before the effective date of the amendment or termination. ss.8.02 Spendthrift Provisions: Participants and Beneficiaries shall have no right of anticipation of any benefits hereunder, and may not sell, transfer, assign, pledge, attach, or otherwise alienate any benefits payable hereunder. Any such attempt at alienation shall be void, and not obligate the Employer, Committee, Trustee, their agents or designees, except to the extent provided for in this Plan. ss.8.03 Non-contractual Plan: Nothing contained in this Plan shall be construed as a commitment or agreement on the part of the Employer to continue the employment of any person employed by the Employer; to continue employment of any person at any rate of pay or salary; or diminish the right of the Employer to discharge any Employee. The provisions of this Plan shall not operate as a guarantee that sufficient assets will exist for the Employer to pay any benefits pursuant to this Plan. Participants shall be general creditors of the Employer with respect to benefits payable hereunder. ss.8.04 Severability: To the extent that any provision of this Plan is deemed to be unenforceable, or would in any way cause this Plan to be subject to Parts 2, 3 or 4 of Title I of the Employee Retirement Income Security Act of 1974, as amended, it shall be deemed severed from this Plan, of no further force or effect, and shall not affect any other provision of this Plan which shall continue without the offending provision. ss.8.05 Governing Law: The provisions of this Plan shall be governed by the laws of the state in which the Employer has its principle place of business. ss.8.06 Corporate Successors: This Plan shall not automatically be terminated upon the sale, transfer, merger, or other conveyance of the Employer to, or with, another entity, but shall survive unless amended or terminated pursuant to the provisions of this Plan. PRISM Exec(R) Model Non-Qualified Deferred Compensation Plan Part C Schedules Schedule A Investment Fund Designation Coachmen Industries, Inc. (the Employer), implementing the Coachmen Industries, Inc. Supplemental Deferred Compensation Plan (the "Plan"), hereby designates the following Investment Funds from among the investment fund options available for use with the PRISM Exec(R) Model Non-Qualified Deferred Compensation Plan, available for the investment of Plan assets held for Participant's benefit: (a) The Victory Financial Reserves Fund ----------------------------------- (b) The Victory Balanced -------------------- (c) The Victory Value Fund ---------------------- (d) The Victory Growth Fund ----------------------- (e) The Victory Stock Index Fund ---------------------------- (f) The Victory NASDAQ 100 Index Fund --------------------------------- (g) Janus Adviser International Growth Fund --------------------------------------- (h) Janus Enterprise Fund --------------------- (i) Janus Worldwide Fund -------------------- (j) Janus Balanced Fund ------------------- (k) Janus Twenty Fund ----------------- (l) INVESCO Dynamics Fund --------------------- (m) INVESCO Technology II Fund -------------------------- (n) MAS Mid Cap Growth Advisor Fund ------------------------------- (o) Berger Small Company Growth Fund -------------------------------- (p) Franklin Small Cap Growth Fund ------------------------------ (q) PIMCO Long Term U.S. Government Administrative Fund --------------------------------------------------- (r) PIMCO Total Return Administrative Fund -------------------------------------- (s) The American Funds Group: Intermediate Bond Fund of America ----------------------------------------------------------- (t) The American Funds Group: High Income Fund ------------------------------------------ (u) The American Funds Group: Fundamental Investors Fund ---------------------------------------------------- (v) The American Funds Group: Growth Fund of America ------------------------------------------------ (w) AIM Blue Chip Fund ------------------ (x) Dreyfus Mid Cap Value Fund -------------------------- (y) Dreyfus Premier Mid Cap Stock Fund ---------------------------------- /x/ In addition, if selected, an Employer Stock Fund will also be available. In making the selection of Investment Funds, the Employer hereby confirms and acknowledges that: o The Employer has had made available to it copies of the prospectuses (to the extent required under applicable federal securities law and regulation) for each investment fund available for selection by adopting employers of the PRISM Exec(R) Model Non-Qualified Deferred Compensation Plan, and has received copies of each such prospectus for the Investment Funds selected; o The Employer acknowledges that the Trustee of the Plan may receive certain fees for services provided to, or on behalf of an Investment Fund, or the sponsors or distributors thereof, pursuant to plans of distribution adopted by the fund under the provisions of Rule 12b-1 of the Investment Company Act of 1940, and further acknowledges that (i) such fee, if paid, is appropriate for services rendered to the fund, and when aggregated with other fees for service payable to the Trustee constitutes reasonable compensation for the Trustee's services to the Plan; o The Employer further acknowledges that it has selected the Investment Funds on its determination, and that it has not relied on any representations or recommendations from the Trustee or any of its employees in selecting the Investment Funds. The Trustee agrees to follow the Employer's direction with respect to offering the Investment Funds available for the investment of Plan assets. In Witness Whereof, the Employer, by its duly authorized representative, has executed this document in connection with adoption of the Plan utilizing the PRISM Exec(R) Model Non-Qualified Deferred Compensation Plan services, as provided by the Trustee. Employer: Coachmen Industries, Inc. By: ------------------------------------------------ Title: --------------------------------------------- Schedule B Eligible Employees The following is a description of the Employees eligible to be selected as Participants pursuant to the terms of the Plan: Such Employees as the Board may from time to time select as eligible to participate. The Board may group such Participants into "Employee Groups" as the Board deems appropriate for purposes of the Plan. Those Participants in each "Employee Group" shall be designated in an exhibit to this document. Schedule C Basic Contribution Allocation The following is the method of allocation of Employer Basic Contributions among the accounts of Participants in the Plan: The method of allocation of the Basic Allocation shall be determined each year by the Board. There shall be no requirement that a Basic Contribution be made each year. There is no requirement that Employer Basic Contributions be made, or if made, that it be made in the same amount or for any or all Participants in the Plan. Schedule D Employer Special Contributions The following describes the nature, eligible Participants, and other pertinent information concerning any authorized Employer Special Contributions The method of allocation of any Employer Special Allocation shall be at the discretion of the Board for each year that an Employer Special Allocation is made. There is no requirement that any Employer Special Allocation be made, or if made, that it be made in the same amount or for any or all Participants in the Plan. Schedule E Vesting Provisions The following describes the contributions subject to vesting pursuant to the terms of the Plan, and the vesting schedule that is to be used for such contributions: A Participant's Account balances will become fully vested, provided no forfeiture event as described as outlined in Schedule F has occurred, upon the occurrence of any of the following: 1. Upon change of control as described in Schedule H. 2. Upon completion of the vesting schedule set forth in Part A. Section B.(6) of the Joinder Agreement. 3. Upon reaching the Normal Retirement Age and termination of employment. 4. Upon becoming disabled as defined by the Sponsor. 5. Upon death prior to the commencement of payment of benefits. Schedule F Forfeiture Provisions The following describes the conditions under which a Participant may forfeit all, or any portion of the benefits provided under the terms of the Plan, and includes the contribution type to which the provision applies: 1. Termination of employment prior to completing the Vesting Schedule requirements of Part A. Section B.(6) of the Joinder Agreement or prior to a Change of Control (as defined in Schedule H hereafter) shall result in a forfeiture of non-vested Employer Basic, Employer Special, or Employer Matching Contributions to the Plan Sponsor. 2. A Participant's Employer Basic, Employer Special, or Employer Matching Contributions Account balances shall be forfeited in their entirety upon the occurrence of a Triggering Event related to the Participant. A "Triggering Event" occurs if a Participant, without the express written consent of the Employer and within six (6) months of termination of employment with the Employer or its affiliates, if any, works in any capacity for or on behalf of any direct competitor of the Employer or of any of its affiliates and during such time violates his or her Business Protection Agreement with the Employer or its affiliates, including the post termination of employment restrictions on competition with the Employer, solicitation of the Employer's employees, or solicitation of the Employer's or its affiliate's vendors or customers (regardless of the enforceability of any such restrictions. This provision is expressly waived in the event that a "Change of Control" as defined in Schedule H has occurred. Schedule G Investment Direction The following describes the restrictions placed on the ability of Participants to make an election to deem their Accounts invested, including the type of contributions so restricted: A. A Participant may request a re-allocation of the investments on a quarterly basis for all Investment Funds except for the Matched Common Stock portion of the Employer Matching Contributions. B. A Participant shall be restricted in requesting a re-allocation of the Employer Matching Contributions Account balance attributable to the contributions of Employer common stock (hereafter referred to as "Matched Stock") in the following manner: 1. No re-allocation of Matched Stock may occur until the Participant has attained age fifty-five (55) years. 2. Beginning with the calendar year in which the Participant attains age fifty-five (55) years, or in any calendar year thereafter until the Participant attains age sixty-five (65) years, a Participant may re-allocate up to twenty percent (20%) of his or her Matched Stock balance among the other Investment Funds available in the Plan. 3. There shall be no restrictions on re-allocation of the Matched Stock balance upon the earlier occurrence of (1) the date the Participant turns sixty-five (65) years of age, (2) the Participant's death, or (3) upon a "Change of Control" as defined in Schedule H. C. A Participant who elects to receive his or her Matched Stock Account balance by an In-Kind Distribution may not sell or transfer such shares until the Participant has attained age fifty-five (55) years. D. In no event may a Participant in the Plan be eligible to exercise any voting rights on Employer stock that is in the Plan, whether in the Matched Stock portion or any other portion of the assets. Schedule H Change of Control Change of Control shall be defined, for purposes of the Plan and Trust, as follows: "Change in Control" of the Employer (Coachmen Industries, Inc.) shall mean the occurrence of any of the following: (i) any "person" (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding the Employer, its affiliates, and any qualified or non-qualified plan maintained by the Company or its affiliates) becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated such Act), directly or indirectly, of securities of the Employer representing more than 20% of the combined voting power of the Employer's then outstanding securities; (ii) during a period of 24 months, a majority of the Board of Directors of the Employer ceases to consist of the existing membership or successors nominated by the existing membership or their similar successors; (iii) shareholder approval of a merger or consolidation of the Employer with any other corporation, other than a merger or consolidation which would result in the voting securities of the Employer outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than sixty percent (60%) of the combined voting power of the voting securities of the Employer or such surviving entity outstanding immediately after such merger or consolidation; or (iv) shareholder approval of either (A) a complete liquidation or dissolution of the Employer or (B) a sale or other disposition of all or substantially all of the assets of the Employer, or a transaction having a similar effect. Schedule I Timing and Manner of Payment of Account Balances, Miscellaneous Matters Related to the Plan The Joinder Agreement, the Basic Plan Provisions, Schedules A through H to the Joinder Agreement, and the Trust Agreement, except as modified herein, shall control the operation of the Plan. The following provisions, notwithstanding anything to the contrary in the above Plan documents, shall govern the distribution timing, manner of distribution, potential Employee an Employer Contributions to the Plan and operation of the Plan as outlined below: 1. Upon termination of employment with the Company or its affiliates, if any, the Participant may receive his or her Employee Deferral Account balances as soon as practicable in conformity with the Company's payroll practices. 2. Six months after termination of employment with the Company or any of its affiliates, if any, the Participant may receive his or her Matching Account, Employer Basic or Employer Special Contributions balance that has not been forfeited pursuant to the provisions of Schedule F hereto. 3. If there occurs a "Change of Control" as defined in Schedule H, the Company shall direct the Trustee to remit any amounts necessary to pay any taxes that may be due for such distribution to the Participant within the time period described in the Joinder Agreement. After remittance of the tax reimbursement to the Company, the Trustee shall remit the balance of the remaining account balances maintained on behalf of the Participant directly to the Participant. The Trustee shall not be responsible for the preparation of any tax reporting materials, nor the remittance of any such taxes, to any tax authorities. Such responsibilities shall be exclusively the responsibility of the Employer. This provision shall ONLY be applicable if a "Change of Control" has occurred. All other distributions of Participant balances shall be completed pursuant to Article 2(a) of the Trust Agreement. 4. If there occurs a "Change of Control" as defined in Schedule H, in addition to other requirements of the Plan, the Company's Board of Directors may take any additional actions deemed reasonably necessary or desirable to accomplish the stated purposes of this Plan, and the Committee may cause the contribution by the Company of an amount equal to up to three (3) years of additional Participant Contributions for select Employee Group "A" as determined by the Plan Sponsor, along with the Matching Contributions to the Plan that would have been paid on such Participant Contributions, as if the Participants in Employee Group "A" had contributed the maximum fifteen percent (15%) of base salary and Bonus or Incentive Compensation each year. 5. Employer Stock contributed to the Plan as a Employer Matching Contributions ("Matched Stock") shall be valued initially as the closing price on the Employer's common stock as provided on the New York Stock Exchange Composite Transactions Tape for the first trading day immediately preceding the contribution, as reported in the Wall Street Journal, Midwest Edition. 6. Nothing herein shall prevent the maintenance in the Participants Accounts of fractional shares. 7. All dividends payable on Employer's common stock shall be reinvested in additional shares of common stock of Coachmen Industries, Inc. Such additional shares purchased with the dividends attributable to shares held in the Matched Stock Fund will become a portion of the Matched Stock Fund. Such shares purchased with dividends attributable to non-Matched Stock Fund investments will become a part of the Employer stock held in the Employee Deferral, Employer Basic, Employer Special or non-Matched Stock Fund portion of the Employer Matching Contributions Accounts. 8. The Employer shall exercise any voting rights attributable to Employer common stock held in the Plan and shall direct the Trustee in the voting of such shares. Exhibit "A" to Schedule B of the Joinder Agreement Employees designated to be in the Plan as Group "A" Participants shall be administered within the following parameters: 1. Group A Participants are eligible to participate in the Plan effective: 01/01/01. 2. Participants may defer no more than 15% of base salary and Incentive or Bonus Compensation into this Plan, but such Participants are not required to first contribute to the qualified plan to be eligible to defer in this Plan. Additionally, if the Participants in the Plan do elect to participate in both this Plan and the qualified Plan, they may not defer more than 20% of their Compensation aggregated between this Plan and the qualified Plan. 3. Until modified by the Committee or the Board, Participants in this Group shall receive the Employer Matching Contribution in the form of 50% cash and the remaining 50% in Employer common stock. 4. Vesting for purposes of Employer Contributions to the Plan shall be based upon a five (5) Year "cliff" vesting schedule as defined in the Joinder Agreement. 5. Normal Retirement for Group "A" Participants shall be upon attainment of age 65. 6. The initial Employees to be included in Group "A" are as follows: Claire C. Skinner James E. Jack Richard M. Lavers John T. Trant James P. Skinner Steven E. Kerr Michael R. Terlep, Jr. William M. Angelo Exhibit "B" to Schedule B of the Joinder Agreement Employees designated to be in the Plan as Group "B" Participants shall be administered within the following parameters: 1. Participants in Group "B" are eligible to Participate effective: 01/01/01. 2. Participants may defer no more than 15% of base salary and Bonus Compensation into this Plan provided that the combined contributions between the Plan and the Coachmen Industries, Inc. 401(k) Retirement Plan may not exceed 20% of the Participant' Compensation. 3. Participants in Group "B" shall vest in Employer Contributions to the Plan on the 5 Year graded vesting schedule provided in the Joinder Agreement. 4. The initial Employees to be included in Group "B" are as follows: Donald P. Rockwell James O. Baxter Leslie G. Thimlar Charles W. Bower Robert J. Adasiak Michael S. Bear Donald A. Medd Gerald L. McCarthy Gary L. Near Lawton E. Tinley, III Eric F. Heaton Richard K. Roush Clinton F. Rumble Kevin G. Gipson John Helm Delvin D. Herr Neil B. Sayers Carel Whiteside Dale Powell Rick Bedell EX-21 8 c01376x21.txt REGISTRANT AND SUBSIDIARIES OF THE REGISTRANT Exhibit 21 Registrant and Subsidiaries of the Registrant Percent of Voting State of Securities Owned Organization By the Registrant ------------ ----------------- Coachmen Industries, Inc. (Registrant) Indiana 100% Coachmen Operations, Inc. Indiana 100% Consolidated Leisure Industries, LLC Indiana 100% Consolidated Building Industries, LLC Indiana 100% Coachmen Recreational Vehicle Company, LLC Indiana 100% Coachmen RV Company of Georgia, LLC Georgia 100% Georgie Boy Mfg, LLC Indiana 100% GBMD, Inc. (Inactive) Indiana 100% Viking Recreational Vehicles, LLC Michigan 100% Northwoods RV Country, Inc. (Inactive) Michigan 100% Shasta Industries, LLC (Inactive) Indiana 100% Michiana Easy Livin' Country, LLC Indiana 100% Colfax Country RV, LLC North Carolina 100% All American Homes, LLC Indiana 100% All American Homes of Colorado, LLC Colorado 100% All American Homes of Indiana, LLC Indiana 100% All American Homes of Ohio, LLC Ohio 100% All American Homes of Iowa, LLC Iowa 100% All American Homes of Kansas, LLC Kansas 100% All American Homes of North Carolina, LLC North Carolina 100% All American Homes of Tennessee, LLC Tennessee 100% Mod-U-Kraf Homes, LLC Virginia 100% Willow Woods Homes, LLC Kansas 100% Miller Building Systems, Inc. Delaware 100% Miller Building Systems of Indiana, Inc. Indiana 100% Miller Building Systems of Pennsylvania, Inc. Indiana 100% Miller Building Systems of South Dakota, Inc. South Dakota 100% Miller Construction Services, Inc. Indiana 100% United Structures, Inc. New York 100% Miller Building Systems of Kansas, Inc. (Inactive) Kansas 100% P.M.E. Pacific Systems, Inc. (Inactive) California 100% Consolidated Business Development, LLC Indiana 100% Prodesign, LLC Indiana 100% Coachmen Technology Services, Inc. Indiana 100% Coachmen Transportation and Leasing, Inc. Indiana 100% COA Aviation, Inc. Indiana 100% Coachmen Administrative Services, Inc. Indiana 100% COA Financial Services, Inc. Delaware 100% COA Finance Company, LTD Bermuda 100% Coachmen Foreign Sales Corporation U.S. Virgin Islands 100% Coachmen Properties, Inc. Indiana 100% Coachmen Industries of Texas, Inc. Texas 100% Coachmen Industries of California, Inc. California 100% Rover Industries, Inc. Ohio 100% Clarion Motors Corporation (Inactive) Indiana 100% Coachmen Casualty Insurance Company (Inactive) Arizona 100% Gulf Coast Easy Livin' Country, Inc. (Inactive) Florida 100% Coachmen Industries of Oregon, Inc. (Inactive) Oregon 100% Coachmen Properties of Georgia, Inc. Georgia 100% EX-23.1 9 c01376x231.txt CONSENT OF ERNST & YOUNG LLP Exhibit 23.1 Consent of Independent Auditors - ------------------------------- Board of Directors and Shareholders Coachmen Industries, Inc. We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-52378) pertaining to the Retirement Plan and Trust of Coachmen Industries, Inc., 2000 Omnibus Stock Incentive Program and Supplemental Deferred Compensation Plan, Registration Statement (Form S-8 No. 333-59251) pertaining to the 1994 Omnibus Stock Incentive Program, Registration Statement (Form S-8 No. 2-64572) pertaining to the Employee Stock Purchase Plan of Coachmen Industries, Inc. and in the related Prospectus of our report dated February 1, 2002, with respect to the consolidated financial statements and financial statement schedule included in this Annual Report (Form 10-K) of Coachmen Industries, Inc. for the year ended December 31, 2001. /s/ Ernst & Young LLP Grand Rapids, MI March 25, 2002 EX-23.2 10 c01376x232.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP Exhibit 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS - ---------------------------------- We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-52378, No. 333-59251 and No. 2-64572) of Coachmen Industries, Inc. of our report dated February 2, 2001, except for the information in Note 5, for which the date is February 9, 2001, and Note 11, for which the date is February 12, 2001, relating to the consolidated financial statements and financial statement schedule at December 31, 2000 and for each of the two years in the period ended December 31, 2000, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP Indianapolis, Indiana March 25, 2002 -----END PRIVACY-ENHANCED MESSAGE-----