-----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, SqY5BkmIYIzvBBTLwaReroPIRb8yH2Ia0ICYl0y0SITEtnxClf+ro/an1x49Ozef qVXcg8M3IhA9CYnR31nsfQ== 0001104659-03-004733.txt : 20030321 0001104659-03-004733.hdr.sgml : 20030321 20030321171720 ACCESSION NUMBER: 0001104659-03-004733 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFFINITY GROUP HOLDING INC CENTRAL INDEX KEY: 0001038622 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AMUSEMENT & RECREATION SERVICES [7900] IRS NUMBER: 592922099 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-26389 FILM NUMBER: 03612832 BUSINESS ADDRESS: STREET 1: 64 INVERNESS DRIVE EAST CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037927284 MAIL ADDRESS: STREET 1: 64 INVERNESS DR EAST CITY: ENGLEWOOD STATE: CO ZIP: 80112 10-K 1 j8667_10k.htm 10-K

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-K

(Mark One)

 

 

ý

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

 

 

For the fiscal year ended December 31, 2002     OR

 

 

o

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

 

 

For the transition period from              to              

 

Commission File Number   333-26389

 


 

AFFINITY GROUP HOLDING, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

59-2922099

(State of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

64 Inverness Drive East
Englewood, CO  80112

 

(303) 792-7284

(Address of principal executive offices)

 

(Registrant’s telephone number including area code.)

 


 

SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:  NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:

11% Senior Notes Due 2007

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

YES  ý        NO  o

 

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

 

Class

 

Outstanding as of
March 21, 2003

Common stock, $.01 par value

 

100

 

DOCUMENTS INCORPORATED BY REFERENCE: Documents Referenced on Exhibit Index

 

 



 

PART I

 

ITEM 1:  BUSINESS

 

 

General

 

Except where the context indicates otherwise, the term “Company”, or “AGHI” means Affinity Group Holding, Inc. and its predecessors and subsidiaries.

 

The Company is a member-based direct marketing organization with complementary retail outlets across the country.  The Company’s club members form a receptive audience to which it sells products, services, merchandise and publications targeted to the recreational interests of club members.  The Company’s three principal lines of business are (i) club memberships and related products, services and club magazines, (ii) specialty retail merchandise distributed primarily through its Camping World retail supercenters, mail order catalogs and the Internet, and (iii) subscription magazines and other publications including directories.  The Company’s affinity groups are principally comprised of recreational vehicle owners, campers, outdoor recreationists and, to a lesser extent, golfers.  See Footnote 12 in the Notes to Consolidated Financial Statements for financial information about the Company’s segments.

 

At December 31, 2002, there were approximately 1.8 million dues paying members enrolled in the Company’s clubs, remaining level with 2001.  The paid circulation per issue of the Company’s general circulation magazines is estimated at approximately 934,000 with an aggregate readership estimated at 5.1 million at December 31, 2002.  The Company believes its club members have favorable demographic characteristics and comparatively high renewal rates.  Total revenues of the Company were $431.1 million for the year ended December 31, 2002, compared to $405.4 million for the year ended December 31, 2001, representing a 6.4% increase.

 

 

Business Strategy

 

The Company’s business strategy is to increase (i) the enrollment of its clubs through internal growth and acquisitions, (ii) the sales of its products and services to club members and the general public through improving and expanding its distribution channels and by developing and enhancing its product and service offerings, and (iii) the circulation of its publications by introducing new magazines and acquiring publications which are complementary to the Company’s recreational market niche.  The Company also seeks to realize operational efficiencies through the integration of acquired businesses.

 

Enhance Club Membership Enrollment

 

The Company seeks to increase the number of its club members through maximizing renewals by establishing an optimal mix of channels for soliciting new members and re-acquiring inactive members.  These channels include an internet presence through RV.Net.  Management believes that the participation levels and renewal rates of club members reflect the benefits derived from membership.  In order to maintain high participation rates in its clubs, the Company continuously evaluates member satisfaction and actively responds to changing member preferences through the enhancement or introduction of new membership benefits including products and services.  The Company also uses alternative channels for acquiring club members.  This is achieved through the use of two separate call centers, promotion in the publication titles it owns, through the national

 

1



 

network of Camping World supercenters, mail order catalogs, and the Internet.

 

Acquire and Develop Other Affinity Groups

 

The Company believes that the experience it has accumulated in managing its existing recreational affinity groups is applicable to the management of other recreational interest organizations.  As a result, the Company conducts ongoing evaluations for developing or acquiring affinity groups for which it can build membership enrollment and to which it can market products and services.

 

Increase Sales of Products and Services

 

The Company seeks to increase the sale of its products and services due to their profitability and the favorable impact such programs have on club membership growth and retention.  Management continues to pursue the substantial opportunity which exists in marketing its clubs and ancillary products and services through the national network of Camping World supercenters and mail order catalogs.  This cross-club potential is exemplified by the significant percentage of Good Sam Club members which currently subscribe to one or more of the Company’s products and services, such as the emergency road service program and the extended vehicle warranty program.  Management also believes that the Good Sam Club members who are not currently members of Camping World’s President’s Club represent a focused group of customers to which it will market Camping World’s RV accessory merchandise.  The Company regularly studies the feasibility of introducing new products and services.

 

Management also believes a substantial opportunity exists to expand the number of Camping World stores by developing retail partnerships with RV dealerships across North America.  By establishing Camping World stores alongside or within existing independent dealerships, an expanded number of customers are provided with access to the vast array of products and services available under the Affinity Group umbrella and traffic is increased for our dealer partners.

 

Improve Operating Performance

 

The Company seeks to achieve operating efficiencies by selectively acquiring and developing recreational affinity groups which enable the Company to increase membership enrollment and to realize cost savings.  The Company also seeks to enhance its importance with third party providers of products and services by maintaining high membership enrollment levels in such programs, thereby increasing the fees it receives from such vendors.

 

Expand Niche Recreational Publications

 

The Company seeks to expand its presence as a dominant publisher in select recreational niches through the introduction of new magazine formats and the acquisition of other publications in its market or in complementary recreational market niches.  Publications in complementary niches may also provide the Company with the opportunity to launch new membership clubs, to market its products and services to members of new clubs and to develop other products and services which meet the special needs of such members.  The Company believes overall circulation of its magazines is an important factor in determining the amount of revenues it can obtain from advertisers.

 

RV Industry

 

The use of recreational vehicles (“RVs”) and the demand for club memberships and related products

 

2



 

and services may be influenced by a number of factors including general economic conditions, the availability and price of propane and gasoline, and the total number of RVs.  The Company believes that both the installed base of RVs and the type of RV owned (full service vehicles excluding van conversions) are the most important factors affecting the demand for its membership clubs, merchandise, products and services.  Based on the most recent survey conducted in 2001 by the National Survey of the RV Consumer of the University of Michigan (the “Survey”), the number of households owning RVs is projected to increase from 6.9 million in 2001 to nearly 8.0 million in 2010.  The Survey also indicates that the percentage of households owning RVs during this period will rise slightly from 7.6% to 7.8%.

 

According to the Survey, the average RV owner is 49 years old.  RV ownership also increases with age reaching its highest percentage level among those 55 to 64 years old.  Households in this age group are projected to increase from 14.3 million in 2001 to 20.7 million in 2010.  RV ownership also is concentrated in the western United States, an area in which the population growth rate continues to be greater than the national average.  The Survey also indicates that RV ownership is associated with higher than average annual household income, which among RV owners was approximately $56,000 per annum as compared to the national average of $42,000 per annum.

 

The average age and annual household income of the Company’s club members in 2001 were 57 years and $57,000, respectively, based on member survey data compiled by the Company.  The Company believes that the demographic profile of its typical club member, coupled with a demographic trend towards an aging population will have a favorable impact on RV ownership and the demand for club memberships and related products and services.

 

Membership Clubs

 

The Company operates the Good Sam Club, Coast to Coast Club, and Camping World’s President’s Club for RV owners, campers and outdoor vacationers, and the Golf Card Club for golf enthusiasts.  The membership clubs form a receptive audience to which the Company markets its products and services.

 

The following table sets forth the number of members at December 31, 2002, annual membership dues and average annual renewal rates during the period of 1998 to 2002 for each club:

 

Membership Club

 

Number of Members at
December 31, 2002(1)

 

Annual Fee(2)

 

Average Renewal
Rate(3)

 

Good Sam Club

 

960,600

 

$  12 - $  25

 

70

%

 

 

 

 

 

 

 

 

Coast to Coast Club

 

139,800

 

$  80 - $  90

 

71

%

 

 

 

 

 

 

 

 

President’s Club

 

626,000

 

$  15 - $  20

 

67

%

 

 

 

 

 

 

 

 

Golf Card Club

 

79,400

 

$  49 - $  65

 

64

%

 


(1)               Also Includes multi-year and lifetime members.

(2)               For a single member, subject to special discounts and promotions.

(3)               Excludes members having lifetime memberships.

 

In addition to regular memberships, the Company also sells multi-year memberships.  Management believes that multi-year memberships provide several advantages, including the up-front receipt of dues in cash, reduced membership costs and a strengthened member commitment.

 

3



 

Beginning in 1992, the Company began selling lifetime memberships for the Good Sam Club.  As of December 31, 2002, the average price for a lifetime membership was $330 with 121,413 members registered.  Based on an actuarial analysis of the lifetime members, the Company expects the average length of a lifetime membership to be 18 years.

 

Good Sam Club

 

The Good Sam Club, founded in 1966, is a membership organization for owners of recreation vehicles.  The Good Sam Club is the largest RV club in North America with approximately 960,600 member families and over 1,900 local chapters as of December 31, 2002.  The average renewal rate for Good Sam Club members was approximately 70% during the period 1998 through 2002.  The Company has focused on selling higher margin multi-year memberships which, among other advantages, reduces the cost of membership renewal.  At December 31, 2002, the average length of time for participation in the Good Sam Club was almost 7 years with most club members purchasing annual memberships.

 

Membership fees range from $12 to $25, subject to the term and type (acquisition or renewal).  The benefits of club memberships include: discounts for overnight stays at approximately 1,650 participating RV parks and campgrounds; discounts on the purchase of supplies and accessories for recreation vehicles at nearly 100 RV service centers; a free annual subscription to Highways, the club’s regular news magazine; discounts on other Company publications; trip routing and mail-forwarding; and access to products and services developed for club members.  Based on typical usage patterns, the Company estimates that Good Sam Club members realize estimated annual savings from discounts of $158.

 

The Good Sam Club establishes quality standards for RV parks and campgrounds participating in its discount program.  Campgrounds and parks participating in the Good Sam program benefit from increased occupancy and sales of camping related products.  The Company believes it has established considerable penetration of those for-profit RV parks and campgrounds which meet its quality standards for participation in the discount program.

 

The following table lists the number of club members and RV parks and campgrounds from 1998 through 2002 at which discounts for members were available at December 31st of the respective year:

 

 

 

Year Ended December 31

 

 

 

2002

 

2001

 

2000

 

1999

 

1998

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Good Sam Members (1)

 

960,600

 

946,800

 

949,600

 

970,100

 

936,200

 

 

 

 

 

 

 

 

 

 

 

 

 

Lifetime members included above

 

121,400

 

119,000

 

114,800

 

109,900

 

102,800

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of RV campgrounds offering discounts to Good Sam members

 

1,650

 

1,650

 

1,747

 

1,775

 

1,682

 

 


(1)               A member consists of a household.

 

4



 

Coast to Coast

 

The Coast to Coast Club operates the largest reciprocal use network of private RV resorts in North America.  The Company offers a series of membership benefits depending upon pricing and program type under the Coast to Coast name.  Members of Coast to Coast belong to a private RV resort owned and operated by parties unrelated to the Company.  Club members may use the participating resorts in the Coast to Coast network on a reservation or space available basis.  At December 31, 2002, there were over 139,800 member families in the Coast to Coast Club.  Approximately 383 private RV resorts nationwide participated in the Coast to Coast reciprocal use programs as well as a network of about 572 open to the public affiliated campgrounds.  These private resorts are designed primarily for RV owners, but typically provide camping or lodging facilities, comprised of RVs, cabins, park models, and condominiums.  For an initial membership fee plus annual maintenance fees, both paid by the customer to the resort, the private resorts provide an RV site with water, sewer and electrical hook-ups and recreational amenities, such as swimming, tennis or fishing, or proximity to theme parks or other recreational activities.  The Company has established quality criteria for resorts to join and remain in the Coast to Coast networks.

 

For standard annual renewal dues from $79.95 for a single year membership to $189.95 for a multiple-year membership, Coast to Coast Club members receive the following benefits: discounts for overnight stays at participating resorts and campgrounds; an annual subscription to Coast to Coast Magazine; the Coast to Coast Directory providing information on the participating resorts; discounts on other Company publications; access to discount hotels and travel services; and access to ancillary products and services developed for club members.

 

The Company believes that resorts participating in the Coast to Coast networks view access to reciprocating member resorts as an incentive for their customers to join their resort.  Because a majority of Coast to Coast club members own RVs, access to participating resorts throughout North America can be an important complement to local resort membership.  Based on typical use patterns, the Company estimates that Coast to Coast members realize estimated annual savings from these discounts of over $200 from discounted overnight stay accommodations at participating resorts.  The average annual renewal rate for members of the Coast to Coast Club after the initial one-year membership (which is generally paid by the member resort not the club member) was approximately 71% during the period 1998 through 2002.

 

The following table sets forth the number of members in Coast to Coast Club and resorts participating in the reciprocal use program, and the number of public resorts extending discounts to Coast to Coast members at December 31st of the respective year:

 

 

 

Year Ended December 31

 

 

 

2002

 

2001

 

2000

 

1999

 

1998

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of member families in Coast to Coast Club

 

139,800

 

157,200

 

178,100

 

194,600

 

229,900

 

 

 

 

 

 

 

 

 

 

 

 

 

Participating private resorts

 

383

 

360

 

360

 

400

 

369

 

Participating public resorts

 

572

 

624

 

590

 

529

 

571

 

 

Membership in the Coast to Coast Club declined 11.1% from 2001 to 2002, and 39.2% from 1998 to 2002.  Changing travel patterns, and an increase in RV production and sales for 2003 and beyond, are positive indicators for growth in this sector of the travel and leisure industry.  With the advent of mixing park models and certain types of manufactured homes in traditional membership parks, current participating resorts are selling to more non-RV’ers with positive results.

 

5



 

President’s Club

 

Camping World’s President’s Club program, which was established in 1986, has grown to 626,000 members.  President’s Club memberships may initially be obtained for one, two or three years at a cost of $20, $35 or $50, respectively.  The average life (including renewals) of a club membership is three years and approximately 88% are enrolled for one year.  President’s Club members receive a 10% discount on the purchase of all of Camping World’s merchandise and installation fees and also receive special mailings, including newsletters and flyers offering selected products and services at special prices.

 

The following table lists the number of President’s Club members and number of retail stores at year-end for 1998 through 2002 for the respective year:

 

 

 

Year Ended December 31

 

 

 

2002

 

2001

 

2000

 

1999

 

1998

 

 

 

 

 

 

 

 

 

 

 

 

 

Camping World’s President’s Club Members

 

626,000

 

596,500

 

581,700

 

560,200

 

524,300

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of stores (1)

 

30

 

30

 

30

 

30

 

29

 

 


(1)  Includes supercenters and one 1,800 square foot retail showroom located within the Bakersfield, California distribution center.

 

Golf Card Club

 

The Golf Card Club, founded in 1974, had approximately 79,400 members at December 31, 2002.  The major attraction for membership is the financial savings which members receive when playing at one of over 3,800 participating golf courses located throughout the US and Canada. The annual membership fee varies with the length and type (single or double) of membership.  The Company believes that the participating golf courses providing playing privileges to club members represent the largest number of golf courses participating in a discount program in North America.  None of the participating golf courses are owned or operated by the Company.

 

Members of the Golf Card Club receive the following benefits:  (i) minimum of two rounds annually of free or discounted golf at over 3,800 participating golf courses, (ii) discounted vacation packages at 225 “Stay and Play” resorts, (iii) car rental discounts from National and Alamo, (iv) annual subscription to Golf Traveler member publication, published four times per year, (v) Annual Directory of Affiliated Courses and Resorts, (vi) one-year Quest membership (hotel discount card), (vii) access to 150 local Grasshopper Clubs for tournaments and social activities, (viii) opportunity to play in Member-Guest Tournaments, and (ix) chance to test (and keep) select golf products.

 

Daily-fee, semi-private and privately-owned golf courses participate in the Golf Card program.  The program is attractive to participating courses because it builds traffic and helps fill empty tee times during off-peak hours.  In addition, participating courses receive promotion of their golf course in Golf Traveler member publication, the Annual Directory, and the club website www.golfcard.com.  Members also purchase other merchandise or services when exercising their playing privileges.  In this manner, the Golf Card members tend to provide incremental revenue to the golf courses.  Based on surveys conducted by the Company, members realize savings on green fees, ranging from $150 to $250 annually, which significantly exceed the cost of membership.

 

The standard annual membership fee is $59 for a single membership and $99 for a double membership.  Multi-year memberships range from a single two-year for $118 to a three-year double

 

6



 

of $267.  The average renewal rate for Golf Card Club members at December 31, 2002 was approximately 64% for the period 1998 to 2002.

 

The following table lists the number of Golf Card members, participating golf courses and “Stay and Play” resorts at December 31st of each respective year:

 

 

 

Year Ended December 31

 

 

 

2002

 

2001

 

2000

 

1999

 

1998

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Members in the Golf Card Club (1)

 

79,400

 

82,300

 

93,900

 

93,600

 

111,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Participating Golf Courses

 

3,800

 

3,300

 

3,300

 

3,300

 

3,400

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of “Stay and Play” Golf Resorts

 

225

 

241

 

251

 

264

 

300

 

 


(1)  A single membership counts as one member and a double membership as two members.

 

The decline in membership reflects increased competition from local discount programs.  During 2002, Golf Card implemented new direct mail marketing collateral which lifted the acquisition response rate by 147%, and the result was a 60% increase in revenue per new member added versus a year ago.

 

Membership Products and Services

 

The Company’s 1.8 million club members form a receptive audience to which it sells products and services targeted to the recreational interests of its club members.  The Company promotes products and services which either address special needs arising in the activities of the club members or appeal generally to persons with the demographic characteristics of club members.  The two most established products are the emergency road service (“ERS”) and the vehicle insurance programs.  Most of the Company’s products and services are provided by third parties who pay the Company a marketing fee, with the exception of ERS where the Company assumes the risk of incurred claims.

 

Emergency Road Service  (ERS)

 

The Company promotes various emergency road service products to its existing membership programs, as well as to non-club members.  The ERS programs provide towing and roadside assistance for subscribers with annual dues ranging from $79.95 to $99.95.  The Company developed ERS initially for Good Sam Club members in 1984 and currently 26% of the Good Sam Club membership is enrolled in the Good Sam ERS program.  The Company believes it is important to target the diversified market niches with identifiable products that offer a full range of benefits.  The Company currently markets these products through direct mail, advertising in publications, campground directories, space ads, Internet and telemarketing.

 

7



 

The table below sets forth the total enrollment in the various ERS programs as of December 31, for each year indicated:

 

 

 

Year Ended December 31

 

 

 

2002

 

2001

 

2000

 

1999

 

1998

 

 

 

 

 

 

 

 

 

 

 

 

 

ERS Enrollment

 

348,400

 

345,100

 

341,600

 

331,700

 

329,900

 

 

For the fifth year in a row, enrollment in the various ERS programs has grown through promotional and marketing efforts which have attracted new members and improved renewal rates.  Combined enrollment in the programs has increased 3,300 members or approximately 1% over 2001.

 

Vehicle Insurance Programs

 

The Company offers two vehicle insurance programs.  The Vehicle Insurance Program (“VIP”) is marketed primarily to the Good Sam Club and Coast to Coast clubs.  The Motor Vehicle Program (“MVP”) is marketed to President’s Club members.  These programs offer cost-effective collision and liability insurance suitable to the demographic characteristics and vehicle usage patterns of its various club members.  At December 31, 2002, the two programs had approximately 230,600 members, which represented a 16.6%, 2.9 % and 8.0% penetration, respectively, of the Good Sam Club, Coast to Coast clubs, and President’s Club.  During the period 1998 to 2002, the average annual renewal rate of members participating in these insurance programs was approximately 87%.  The Company’s marketing fee revenue is based on the amount of written premiums and the insurance provider assumes all claim risks.

 

The table below sets forth the total number of policies in force, the dollar amount of written premiums paid to insurance providers, and the marketing fees generated for each year indicated:

 

 

 

Year Ended December 31

 

 

 

2002

 

2001

 

2000

 

1999

 

1998

 

 

 

 

 

 

 

 

 

 

 

 

 

Total policies in force

 

230,600

 

234,600

 

231,200

 

235,100

 

246,500

 

 

 

 

 

 

 

 

 

 

 

 

 

Written premiums paid to insurance providers (millions)

 

$

249.2

 

$

240.4

 

$

231.3

 

$

236.3

 

$

252.9

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing fees (millions)

 

$

19.1

 

$

18.0

 

$

19.2

 

$

20.8

 

$

16.5

 

 

Management believes the decrease in total policies for the period 2001 to 2002 is the result of lower renewal rates caused by higher insurance rates.

 

Other Products and Services

 

Other products and services marketed to club members include credit cards, vehicle financing, supplemental health and life insurance, financial services and extended vehicle warranties.  Most of these services are provided to club members by third parties who pay the Company a marketing fee.

 

The RV financing program is administered by Ganis Credit Corporation (“Ganis”).  The number of Ganis RV loans to the Company’s club members decreased by 16% from 2001 to 2002 primarily due to a less aggressive competitive stance on offered interest rates for the first half of 2002 combined with a smaller incremental interest rate reduction versus prior year.

 

In 1996 the Company launched the Continued Service Plan, a private label extended vehicle warranty program for RV’s.  Total marketing fees for 2002 increased 40% over 2001, for a total of $11.0 million.

 

8



 

The program had 22,700 policies in force as of December 31, 2002.  Sales of new policies are derived from direct mail marketing, Company magazine print ads, Internet and E-mail solicitations, and retail kiosks in Camping World stores.  Renewing policies represent 35% of the total sales in 2002.

 

In addition, the Company is evaluating other products and services that club members may find attractive.  When introducing new products and services, the Company concentrates on products and services provided by third parties, which it can market without significant capital investment by the Company, and for which it receives a marketing fee from the service provider based on sales volume.  The Company seeks to utilize the purchasing power of its club members to obtain products and services at attractive prices.

 

 

Publications

 

The Company produces and distributes a variety of publications for select markets in the recreation and leisure industry, including general circulation periodicals, club magazines, directories, and RV industry trade magazines.  Revenues are recognized from the sale of advertising, subscriptions and direct sales of some of the publications.  The Company believes that the focused audience of each publication is an important factor in attracting advertisers.

 

9



 

The following chart sets forth the circulation and frequency of the Company’s publications:

 

 

 

 

 

 

 

Publication

 

2002
Circulation

 

Number of Issues
Published Each Year

 

 

 

 

 

 

 

PAID CIRCULATION MAGAZINES:

 

 

 

 

 

American Rider

 

61,879

 (1)

8

 

ATV Sport

 

63,410

 (1)

6

 

Bowhunting World

 

77,220

 (1)

9

 

MotorHome

 

146,799

 (1)

12

 

REV

 

51,423

 (1)

4

 

Rider

 

119,280

 (1)

12

 

SnowGoer

 

69,126

 (1)

6

 

Snow Week

 

19,371

 (1)

16

 

Trailer Life

 

284,427

 (1)

12

 

Woman Rider

 

41,230

 (1)

4

 

 

 

 

 

 

 

CONTROLLED CIRCULATION - Business:

 

 

 

 

 

Archery Business

 

11,000

 (2)

7

 

Campground Management

 

11,700

 (2)

12

 

PowerSports Business

 

11,000

 (2)

16

 

PowerSports Business Directory

 

6,114

 (2)

4

 

RV Business

 

19,275

 (2)

12

 

Boating Industry

 

23,193

 (2)

6

 

 

 

 

 

 

 

CONTROLLED CIRCULATION - Consumer:

 

 

 

 

 

ATV Magazine

 

234,600

 (3)

6

 

Cruising Rider

 

124,679

 (3)

4

 

Snowmobile

 

491,813

 (3)

3

 

Watercraft World

 

147,597

 (3)

6

 

 

 

 

 

 

 

FREE DISTRIBUTION:

 

 

 

 

 

Thunder Press- North

 

26,000

 (4)

12

 

Thunder Press- East

 

23,000

 (4)

12

 

Thunder Press- West

 

46,000

 (4)

12

 

Woodall Specials

 

119,000

 (4)(5)

2

 

Woodall’s Regional News Tabloids

 

192,746

 (4)(5)

12

 

 

 

 

 

 

 

ANNUALS:

 

 

 

 

 

 

 

 

 

 

 

Trailer Life Campground/RV Park & Services Directory

 

243,231

 (1)

1

 

Trailer Life’s RV Buyers Guide

 

108,081

 (1)

1

 

World Snowmobile Association

 

52,906

 (4)

1

 

Woodall Buyer’s Guide

 

68,272

 (1)

1

 

Woodall Campground Directory

 

295,160

 (1)

1

 

Woodall Tenting Directory

 

27,031

 (1)

1

 

Woodall Go & Rent... Rent & Go

 

85,000

 (4)

1

 

 

 

 

 

 

 

CLUB MAGAZINES:

 

 

 

 

 

Coast to Coast Magazine

 

162,554

 (6)

8

 

Golf Traveler

 

83,573

 (6)(7)

6

 

Highways

 

954,999

 (6)

11

 

RV View

 

607,584

 (6)

5

 

 


(1)  Paid circulation, may include supplemental qualified controlled

(2)  Trade publication distributed to industry-specific groups.

(3)  Qualified and limited paid.

(4)  Includes limited paid.

(5)  Distribution to RV outlets, including campgrounds and dealerships.

(6)  Limited to club members and promotional copies.  The price is included in the membership fee.

(7)  Only one magazine is issued when two members are from the same household.

 

10



 

Paid Circulation Magazines

 

American Rider, introduced in November 1993, is targeted to owners and operators of Harley-Davidson motorcycles.

 

ATV Sport was introduced May 1998 and targets recreational and racing sport quad riders.

 

Bowhunting World is the archery equipment authority which provides information on new equipment reviews and maintenance techniques, and features articles which discuss ethical hunting, hunting rights, and pertinent legislative issues.

 

MotorHome is a monthly periodical for owners and prospective buyers of motorhomes which has been published since 1968 with a paid circulation of approximately 147,000 in 2001.  MotorHome features articles on subjects such as product tests, travel and tourist attractions.

 

REV magazine is written for people who ride off-road motorcycles for fun and recreation.  Published quarterly, Rev magazine covers the lifestyle, motorcycles, and accessories that make “off-roading” America’s fastest-growing family sport.  From destinations and riding techniques to aftermarket product evaluations and bike tests, Rev magazine is about the way most people like to ride: for fun!

 

Rider is a monthly magazine for motorcycle touring enthusiasts and has been published since 1974.  Each issue focuses on motorcycles, personalities, technical subjects, travel notes and other features of interest to this recreational affinity group.

 

SnowGoer is designed for the sport’s highly active participants and provides detailed equipment and product critiques and maintenance tips.

 

Snow Week is the central source of information for the competition and high-performance snowmobiling market segment.  The publication provides timely, year-round articles on racing, performance enhancing products, technical assistance, new product introductions, and general industry information.

 

Trailer Life, initially published in 1941, is the leading consumer magazine for the RV industry with a paid circulation of approximately 284,000 in 2002.  Trailer Life features articles on subjects including product tests, travel and tourist attractions.

 

Woman Rider was introduced in 2000 and filled an important void in motorcycle publications.  Readers learn about new products from the female point of view and discover more about the lifestyle of motorcycling.

 

 

Controlled Circulation Magazines- Business

 

The Company publishes the following trade magazines:

 

Archery Business is the leading trade publication for archery dealers and presents a mix of industry news and trends, product reviews and sales tips designed to improve financial performance of archery product dealers.

 

Boating Industry is the leading source of news and information for dealers, manufacturers, aftermarket vendors and other professionals in the marine industries through its bi-monthly magazine and daily web site.

 

11



 

Campground Management is the leading trade magazine for the campground industry.

 

Power Sports Business is an industry trade magazine introduced in January 1998 which combines previously issued Snowmobile Business and Watercraft Business with a motorcycle and ATV business section.  Distribution is to dealers servicing these industries, which in numerous cases have combined operations to service more than one of these segments.

 

Powersports Directories represent supplier directories for each of the ATV, snowmobile and watercraft markets.  These directories feature hundreds of manufacturers and suppliers of parts, services, apparel and much more- complete with detailed company information.

 

RV Business is the leading trade magazine covering industry news and trends for RV dealers, manufacturers, suppliers, associations and others.

 

 

Controlled Circulation Magazines- Consumer

 

ATV Magazine’s first issue was published in October 1995.  The publication is designed to reach large numbers of active ATV owners with comprehensive product information during the peak periods when equipment is purchased.

 

Cruising Rider was introduced in March 1998 and targets cruiser motorcycle owners and buyers.

 

Snowmobile magazine delivers broad-based editorial and snowmobile-related information to its audience of active snowmobile enthusiasts.  The publication includes reviews of new machines, clothing and accessories, and articles on responsible riding practices, snowmobiling vacation destinations and special events, and serves as the front-end medium for all snowmobile-related product promotions.

 

Watercraft World is targeted to avid personal watercraft enthusiasts and provides detailed critiques of watercraft,  in-depth gear and accessory evaluations, technical tips and racing information.  PWC Magazine was combined with Watercraft World in 2002.

 

 

Free Distribution Publications

 

Thunder Press newspapers are published monthly in three separate editions to reach the country’s motorcycling public.  Thunder press is available primarily through motorcycle dealers.  This tell-it-like-it-is magazine is designed for the ultra-active motorcycle enthusiast who feels passionate about the lifestyle.

 

Woodall’s Specials are annual publications geared around specific events, such as the beginning of the camping season and the beginning of the snowbird season.  The editorial content is aimed at season events and the ads are largely from regional RV dealers who are having sales specials.

 

Woodall’s Regional News Tabloids publications are designed to appeal to the prospective or first-time RV owner.  Stories in these publications cover area campgrounds and RV dealerships, as well as new vehicles on the market and new products within the industry.  The publications are primarily distributed at campgrounds and RV parks, as well as at RV shows and state welcome centers.

 

12



 

Annual Publications

 

Trailer Life Campground/ RV Park & Services Directory, initially published in 1972, is an annually updated directory which provides information on and ratings for approximately 12,250 public and private campgrounds, and 1,330 RV service centers, including over 900 tourist attractions in North America along with color maps of the areas covered.  In 2002, approximately 243,000 directories were distributed.  The publication features Good Sam Parks that offer discounts on overnight camping fees for the Company’s club members.  This directory is sold by direct mail to Good Sam Club members, at RV dealerships and in bookstores.  In 2000, the Company began issuing a version of the directory on cd-rom.

 

Trailer Life’s RV Buyers Guide, issued annually, features more than 400 listings with photos, floor plans and specifications on new RVs including travel trailers, fifth-wheel trailers, folding camping trailers, motorhomes and pickup campers.  The publication is sold at newsstands and by mail order from magazine advertisements.

 

World Snowmobile Association (“WSA”) Snowcross Yearbook is mailed to the subscribers of Snow Goer and Snow Week magazines and is available at WSA racing events across the country.  Snowmobile racing enthusiasts depend on this yearbook for information on upcoming events.

 

Woodall Campground Directory, initially published in 1948, is an annual consumer directory offered in both national and regional editions.  In 2002, approximately 295,000 directories were distributed.  The Woodall directory is primarily distributed through book stores.

 

Woodall Tenting Directory is an annual directory providing information on both government and privately-owned campgrounds and the outdoor activities and attractions that are available near them.  In 2002, approximately 27,000 directories were distributed, primarily through newsstands.

 

Woodall Go & Rent… Rent & Go is an annual catalog providing information on where to find on-site lodging and cabin rentals at RV Parks & Campgrounds and “Over-the-Road” RV Rentals, as well as fully equipped campsites throughout the U.S.A. and Canada.  This book features “turn-key” camping experiences for those who want to try camping, rent a cabin, or rent a fully-equipped campsite.  In 2002, approximately 85,000 catalogs were distributed.

 

Club or Trade Magazines and Books

 

Each of the Company’s membership clubs has its own publication which provides information on club activities and events, feature stories and other articles.  The Company publishes Highways for the Good Sam Club, Coast to Coast Magazine for the Coast to Coast clubs, The Golf Traveler for the Golf Card Club, and RV View for Camping World’s President’s Club.  The Company also periodically publishes books targeted for its club membership which address the RV lifestyle.

 

 

Retail

 

Camping World is a national specialty retailer of merchandise and services for RV owners.  The 30 Camping World retail locations, which are located in 18 states, accounted for approximately 69% of the merchandise revenues for the year ended December 31, 2002 while approximately 23% were derived from catalog and Internet sales and approximately 8% were derived from fees or non-merchandise revenues.

 

The Company believes that Camping World’s leading position in the RV accessory industry results from

 

13



 

a high level of name recognition, an effective triple channel distribution strategy (store, catalog, and Internet), and a commitment to offer a broad selection of specialized RV products and services at competitive prices combined with technical assistance and on-site installation.  Camping World’s supercenters offer over 8,000 SKUs, approximately 80% of which are not regularly available in general merchandise stores.  In addition, general merchandise stores do not provide installation or repair services for RV products, which are available at Camping World’s supercenters.  Products sold by Camping World include specialty-sized refrigerators, housewares and other appliances, bedding and furniture, generators and hydraulic leveling systems, awnings, folding boats, chairs, ladders, cleaning and maintenance, bicycles, hitch-towing, sanitation, automotive electronics and lifestyle products.  Further, kiosks have been installed at numerous locations to market such products and services as vehicle insurance, extended warranty and emergency road service.  Camping World supercenters are strategically located in areas where many RV owners live or in proximity to destinations frequented by RV users.  Camping World’s supercenters are designed to provide one-stop shopping by combining broad product selection, technical assistance and on-site installation services.

 

Camping World sources its products from approximately 800 vendors.  Camping World attends regional, national and international trade shows to determine the products it will offer.  The purchasing activities of Camping World are focused on RV parts and accessories, electronics, housewares, hardware, automotive, crafts, clothing, home furnishings, gifts, camping and sporting goods.  Camping World has developed an automated “plan-o-gram” system to provide merchandising plans to each supercenter and a minimum/maximum inventory system for its operations to improve fulfillment rates on key items.  Camping World believes that the volume of merchandise it purchases and its ability to buy direct from manufacturers together with the utilization of its transportation fleet and contract carriers enables Camping World to obtain merchandise at costs which compare favorably to local RV dealers and retailers.  Camping World does not enter into material long-term contracts or commitments with its vendors.

 

In the fourth quarter of 2002 Camping World completed the first phase of a system-wide re-imaging and visual merchandising initiative.  The retail supercenters have been reset to enhance the customers shopping experience as well as to maximize merchandise category offerings.  The company has expanded its product offering by introducing camping gear, salty snacks, a greater variety of pet supplies and housewares, while at the same time further stream-lined its less active product offerings in other areas.  In the first quarter of 2003 the company plans to rollout phase two of the re-imaging and visual merchandise initiative.  The second phase will include state-of-the art performance centers staffed with expert RV technical consultants and equipped with demonstrable merchandise to assist in educating customers about RV performance products.  The second phase will also include new resource centers staffed with professionals offering insurance products, extended warranties, roadside service, club memberships, and RV financing.  Finally, store dress, promotional signage and directional signage are being added to further enhance the customers shopping experience at Camping World’s supercenters.

 

 

Mail Order Operations and Internet

 

Camping World initiated its catalog operations in 1967.  Camping World currently has a proprietary mailing list of approximately 2.5 million RV owners, all of whom have made a purchase or requested a catalog from Camping World within the prior 60 months.  Camping World maintains a database of these names, which includes information such as order frequency, size of order, date of most recent order and type of merchandise purchased.  Camping World analyzes its database to determine those customers most likely to order from Camping World’s catalogs.  As a result, Camping World is able to target catalog mailings more effectively than direct marketers of catalogs offering general merchandise.  Camping World continually expands its proprietary mailing list through in-store subscriptions and requests for catalogs in response to advertisements in regional publications directed to RV owners.  In addition, Camping World rents mailing lists of RV owners from third parties.

 

14



 

During 2002, Camping World distributed 11.5 million catalogs, of which 9.4 million were mailed in 14 separate mailings, and the remaining 2.0 million catalogs were distributed in supercenters, at campgrounds, and as package inserts.  In 2002, Camping World processed approximately 484,000 catalog orders at an average net order size of $129, excluding postage and handling charges.  Camping World distributes nine high quality, full-color catalogs each year: the master, a spring, late summer, holiday, two sale editions, and three prospecting catalogs.  Camping World also distributes specialty catalogs directed to targeted customers in order to develop market niches.

 

The Company maintains thirty Internet web sites, which are accessible through “RV.net,” and are experiencing significant growth.  In 2000, the Company’s club operations commenced a low-cost marketing strategy, e-mail membership acquisition campaigns.  Members added in 2002 under these programs represented approximately 9.0% of all new club members.   E-mail acquisition campaigns and Internet online revenues total approximately $16.4 million in 2002, an increase of 61% over prior year.

 

 

Marketing

 

Marketing of club memberships and related products and services is through direct mail, e-mail, inserts, ride-alongs, space advertisements, promotional events, point of sale, member-get-a-member campaigns, and telemarketing.  Direct response marketing efforts account for approximately 62% of new enrollments with the remaining 38% derived from other sources.  The Company uses a variety of commercially available mailing lists of RV owners in its direct mail efforts.  Currently, the most widely used list databases are provided by three commercial list compilers, and direct response lists are from RV industry participants, RV consumer surveys, and proprietary in-house lists.

 

The Publications segment solicits advertisements through its internal sales force and by paying commissions to advertising agencies and independent contractors who place advertisements.  Many advertisers are repeat customers with whom the Company has long standing relationships.

 

The Merchandise segment solicits customers through mail order catalogs, direct mail retail flyers, advertisements in national and regional industry publications, vendor co-op advertising programs, promotional events, President’s Club direct mailings and personal solicitations and referrals. Camping World’s principal marketing strategy is to capitalize on its broad name recognition among RV owners.

 

The Internet is proving to be a significant, low-cost source for new club members, subscriptions and other ancillary product sales.  The Company’s thirty web pages, which are accessible through “RV.net,” are experiencing tremendous growth.  E-mail acquisition campaigns and Internet online revenues totaled approximately $16.4 million in 2002, up 61% or $10.2 million from 2001.  In addition, e-commerce user sessions increased 56% to 24.9 million in 2002 versus 16.0 million in 2001.

 

 

Operations

 

The Company’s customer service operations are located in Denver, Colorado and Bowling Green, Kentucky.  The primary focus of these groups is to manage the customers’ expectations and relationship with the organization. Approximately fifty percent of the calls into these centers originate from the marketing efforts of catalog mailings, membership acquisition, membership renewals and associated ancillary products and events.  All such efforts use toll-free numbers as a response mechanism.

 

A Catalog Management System was implemented in August 2002 that produces on-line inventory information, order acknowledgement, shipment confirmation, and more which was not previously available for on-line orders.  The 2002 implementation of this system is expected to yield improved

 

15



 

customer satisfaction and reduce cost.

 

Camping World’s catalog and Internet operations, located at its headquarters in Bowling Green, Kentucky, are supported by the customer contact center in the same location.  Orders are usually processed and shipped within 24 hours of receipt.  On average, these member service operations process approximately 7,800 telephone calls daily.

 

Fulfillment operations involve the processing of orders and checks principally received by mail.  Certain fulfillment operations are performed by third parties.  The Company’s publication operations develop the layout for publications and outsource printing to third parties.

 

Camping World’s supercenters generally range in size from approximately 12,000 to 59,000 square feet.  Approximately 40% of each supercenter is devoted to a retail sales floor, a customer service area, and a technical information counter; 40% is comprised of the installation facility which contains 4 to 16 drive-through installation bays; and 20% is allocated to office and warehouse space.  Large parking areas provide sufficient space and facilitate maneuvering of RVs.  By combining broad product selection, technical assistance and installation and repair services, Camping World’s supercenters provide one-stop shopping for RV owners.  Camping World maintains toll-free telephone numbers for customers to schedule installation and repair appointments.  All supercenters are open seven days a week.

 

Camping World intends to continue the controlled, limited expansion of its supercenter store network while at the same time develop dealer partnerships across North America by establishing Camping World stores alongside or within existing, independent dealerships.  This marketing strategy will provide an expanded number of customers with access to the vast array of products and services that the Company offers and generate traffic for our dealer partners by marketing locally, regionally and nationally its extensive parts and accessories business.

 

 

Information Support Services

 

The Company utilizes integrated computer systems to support its membership club and publishing operations.  A database containing all customer activity across the Company’s various businesses and programs has been integrated into the Company’s web sites and call centers.  Comprehensive information on each member, including a profile of the purchasing activities of members, is available to customer service representatives when responding to member requests, and when sales representatives market the Company’s products and services.  The Company employs publishing software for publication makeup and content and for advertising to support its publications operations.  A wide-area network facilitates communication within and between the Company’s offices.  The Company also utilizes information technology, including list segmentation and merge and purge programs, to select prospects for direct mail solicitations and other direct marketing efforts.

 

Camping World’s management information systems and electronic data processing systems consist of an extensive range of retail, mail order, financial and merchandising systems, including purchasing, inventory distribution and control, sales reporting, accounts payable and merchandise management.  Camping World’s management information system includes point-of-sale registers that are equipped with bar code readers in each supercenter.  These registers are polled nightly by a central computer.  With this point-of-sale information and the information from Camping World’s on-line distribution centers, Camping World compiles comprehensive data, including detailed sales volume and inventory information by product, merchandise transfers and receipts, special orders, supply orders and returns of product purchases to vendors.  In conjunction with its nightly polling, Camping World’s central computer sends price changes to registers at the point of sale.  The registers capture President’s Club member numbers and associated sales and references to specific promotional campaigns.

 

16



 

Management monitors the performance of each supercenter and mail order operation to evaluate inventory levels, determine markdowns and analyze gross profit margins by product.

 

Camping World’s catalog operations also utilize a computerized management system allowing on-line desktop access to information which previously required manual retrieval.  Screen prompts which provide product, promotional, and revenue potential information have allowed Camping World to maintain high service levels during seasonal sales peaks.

 

 

Regulation

 

The Company’s operations are subject to varying degrees of federal, state and local regulation.  Specifically, the Company’s outbound telemarketing, direct mail, and emergency road service programs, as well as certain services provided by third parties, including insurance, RV Financing, and extended warranty, are currently subject to certain regulation, and may be subjected to increased regulation in the future.  The Company does not believe that such federal, state and local regulations currently have a material impact on its operations.  However, new regulatory efforts impacting the Company’s operations may be proposed from time to time in the future at the federal, state and local level.  There can be no assurance that such regulatory efforts will not have a material adverse effect on the Company’s ability to operate its businesses or on its results of operations.

 

 

Competition

 

In general, the Company’s membership clubs, retail and catalog operations and publications compete with numerous organizations in the recreation industry for disposable income spent on leisure activities.  By offering significant membership benefits at a reasonable cost and actively marketing to club members, the Company believes that it has been able to maintain a loyal following for its membership organizations as evidenced by the high renewal rates of the Company’s membership clubs.  The products and services marketed by the Company compete with similar products and services offered by other providers.  However, management believes that the Company is able to use the large volume of purchases by its club members to secure attractive pricing for the products and services marketed by the Company.

 

 

Employees

 

As of December 31, 2002, the Company had 1,459 full-time and 168 part-time or seasonal employees, including 7 executives, 1,005 employees in retail operations, 357 employees in administrative and club operations, 202 employees in publishing and advertising sales, 10 employees in resort services and 46 employees in marketing.  No employees are covered by a collective bargaining agreement.  The Company believes that its employee relations are good.

 

 

Trademarks and Copyrights

 

The Company owns a variety of registered trademarks and service marks for the names of its clubs, magazines and other publications.  The Company also owns the copyrights to certain articles in its publications.  The Company believes that its trademark and copyrights have significant value and are important to its marketing efforts.

 

17



 

ITEM 2:  PROPERTIES

 

The table below sets forth certain information concerning the Company’s properties.  The leased properties generally provide for fixed monthly rentals with annual escalation clauses.

 

 

 

Square
Feet

 

Acres

 

Owned/
Leased

 

Lease
Expiration

 

Corporate Headquarters:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ventura, CA

 

74,100

 

 

 

Leased

 

2029

 

 

 

 

 

 

 

 

 

 

 

Other Office Facilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denver, Colorado (for its customer service, warehousing fulfillment, and information system functions).

 

60,000

 

 

 

Leased

 

2029

 

Bowling Green, Kentucky (for its retail administrative headquarters and mail order operations)

 

31,278

 

 

 

Leased

 

2029

 

Bowling Green Headquarters Annex

 

4,100

 

 

 

Leased

 

2003

 

Seattle, Washington (regional publication sales office)

 

912

 

 

 

Leased

 

2004

 

Elkhart, Indiana (regional publication sales office)

 

4,076

 

 

 

Leased

 

2004

 

Maple Grove, Minnesota (Ehlert Publications Group, Inc. Headquarters)

 

17,496

 

 

 

Leased

 

2005

 

 

 

 

 

 

 

 

 

 

 

Distribution Centers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bowling Green, Kentucky

 

104,000

 

6.780

 

Leased

 

2010

 

Bakersfield, California (includes an 1,800 square foot retail showroom)

 

85,747

 

14.827

 

Leased

 

2027

 

 

 

 

 

 

 

 

 

 

 

Camping World Supercenter Locations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tucson, AZ

 

12,145

 

2.000

 

Leased

 

2018

 

Mesa, AZ

 

27,500

 

3.140

 

Leased

 

2010

 

La Mirada, CA

 

33,479

 

5.501

 

Leased

 

2027

 

San Marcos, CA

 

25,522

 

2.212

 

Leased

 

2027

 

Fairfield, CA

 

43,434

 

3.780

 

Leased

 

2020

 

Rocklin, CA

 

29,085

 

4.647

 

Leased

 

2037

 

San Bernardino, CA

 

18,126

 

1.665

 

Leased

 

2012

 

San Martin, CA

 

29,486

 

5.000

 

Leased

 

2023

 

Valencia, CA

 

64,410

 

9.231

 

Leased

 

2027

 

Denver, CO

 

27,085

 

4.132

 

Leased

 

2037

 

Ft. Myers, FL

 

22,886

 

4.217

 

Leased

 

2012

 

Kissimmee, FL

 

58,382

 

6.043

 

Leased

 

2027

 

Tampa, FL

 

40,334

 

3.711

 

Leased

 

2026

 

Bolingbrook, IL

 

25,126

 

5.299

 

Leased

 

2035

 

Bowling Green, KY

 

37,615

 

2.750

 

Leased

 

2027

 

Belleville, MI

 

44,248

 

7.260

 

Leased

 

2027

 

Rogers, MN

 

24,700

 

6.303

 

Leased

 

2025

 

Bridgeport, NJ

 

24,581

 

6.920

 

Leased

 

2031

 

Henderson, NV

 

25,850

 

4.400

 

Leased

 

2025

 

Brunswick, OH

 

23,233

 

4.087

 

Leased

 

2038

 

 

18



 

 

 

Square
Feet

 

Acres

 

Owned/
Leased

 

Lease
Expiration

 

Wilsonville, OR

 

32,850

 

4.653

 

Leased

 

2016

 

Myrtle Beach, SC

 

38,962

 

5.410

 

Leased

 

2027

 

Nashville, TN

 

34,478

 

3.238

 

Leased

 

2027

 

Denton, TX

 

22,984

 

6.887

 

Leased

 

2037

 

New Braunfels, TX

 

43,397

 

19.100

 

Leased

 

2035

 

Mission, TX

 

23,094

 

3.430

 

Leased

 

2015

 

Draper, UT

 

27,675

 

8.031

 

Leased

 

2026

 

Manassas, VA

 

16,348

 

1.880

 

Leased

 

2018

 

Fife, WA

 

35,659

 

5.840

 

Leased

 

2032

 

 

The Company also leases a body shop of 10,500 square feet on approximately 0.7 acres in Denver, Colorado, a body shop of 12,000 square feet on approximately 1.9 acres in Bellville, Michigan and other miscellaneous office equipment.  In addition, the Company owns 12.439 acres of unimproved land adjacent to the New Braunfels, Texas Camping World Supercenter.

 

 

ITEM 3:  LEGAL PROCEEDINGS

 

From time to time, the Company is involved in litigation arising in the normal course of business operations.

 

In January 1998, certain of the Company’s subsidiaries were sued in California state court in connection with the termination of the participation by the plaintiffs in the Camp Coast to Coast reciprocal use program for RV resorts.  In October 2000, the trial court entered judgment in favor of the Company’s subsidiaries and subsequently awarded them a total of $3.88 million for their legal fees and costs.  The plaintiffs have appealed the judgment in favor of the Company’s subsidiaries as well as the award of attorney fees.  In February, 2003, the plaintiffs’ appeals were denied and the judgment in favor of the Company’s subsidiaries was affirmed.

 

The Insurance Commissioner of the state of California, by order dated April 23, 2002, directed GSS Enterprises, Inc. (“GSS”), one of the Company’s subsidiaries, to cease and desist from engaging in certain insurance and motor club services without requisite licensing, advising such subsidiary that the Commissioner may impose certain fines if GSS fails to be licensed.  The order provides GSS the right to a hearing on the matter.  The order issued by the Insurance Commissioner of the state of California applies only to operations of GSS within the state of California.  If sustained, the order could materially limit certain activities of GSS within the state of California.  GSS operates in all 50 states, a majority of which have regulations comparable to those of the state of California.  To the Company’s knowledge, there is no similar pending investigation by any other state.  The Company and the Department of Insurance of the state of California are in the process of seeking to resolve the cease and desist order through clarifications in the Company’s marketing materials and clarifications of applicable California laws.

 

 

ITEM 4:  SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS

 

None.

 

19



 

PART II

 

 

ITEM 5:  MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Not Applicable

 

20



 

ITEM 6:  SELECTED FINANCIAL DATA

 

The selected financial data of the Company for each of the five years ended December 31 are derived from the audited consolidated financial statements of the Company.  The selected financial data of the Company should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s Consolidated Financial Statements and the notes thereto included elsewhere herein.

 

 

 

Years Ended December 31,

 

 

 

(dollars in thousands)

 

Statement of Operations Data:

 

2002

 

2001

 

2000

 

1999

 

1998

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

Membership services

 

$

124,546

 

$

119,958

 

$

121,393

 

$

120,410

 

$

116,325

 

Publications

 

66,654

 

65,150

 

68,519

 

61,554

 

60,354

 

Retail

 

239,922

 

220,264

 

215,160

 

204,732

 

186,835

 

 

 

431,122

 

405,372

 

405,072

 

386,696

 

363,514

 

 

 

 

 

 

 

 

 

 

 

 

 

COSTS APPLICABLE TO REVENUES:

 

 

 

 

 

 

 

 

 

 

 

Membership services

 

74,097

 

72,944

 

77,625

 

73,283

 

71,460

 

Publications

 

45,351

 

46,175

 

46,298

 

40,915

 

42,703

 

Retail

 

158,265

 

148,244

 

143,018

 

135,510

 

125,298

 

 

 

277,713

 

267,363

 

266,941

 

249,708

 

239,461

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

153,409

 

138,009

 

138,131

 

136,988

 

124,053

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

101,608

 

86,050

 

85,513

 

80,670

 

73,227

 

Restructuring  charge

 

2,269

 

 

 

 

 

Depreciation and amortization

 

9,893

 

16,404

 

16,885

 

16,216

 

14,868

 

 

 

113,770

 

102,454

 

102,398

 

96,886

 

88,095

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

39,639

 

35,555

 

35,733

 

40,102

 

35,958

 

 

 

 

 

 

 

 

 

 

 

 

 

NON-OPERATING ITEMS:

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(16,862

)

(24,234

)

(27,735

)

(28,543

)

(31,823

)

Other non-operating (expense) income, net

 

(44

)

(6,574

)

5

 

(1,215

)

2,501

 

 

 

(16,906

)

(30,808

)

(27,730

)

(29,758

)

(29,322

)

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE

 

22,733

 

4,747

 

8,003

 

10,344

 

6,636

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX EXPENSE

 

(9,032

)

(4,137

)

(4,700

)

(5,641

)

(4,422

)

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONTINUING OPERATIONS  BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE

 

13,701

 

610

 

3,303

 

4,703

 

2,214

 

 

 

 

 

 

 

 

 

 

 

 

 

DISCONTINUED OPERATIONS:

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) from discontinued operations, net of applicable income taxes

 

 

 

 

1,018

 

(1,935

)

Gain (loss) on disposal, net of applicable income taxes

 

 

 

 

757

 

(54

)

INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE

 

13,701

 

610

 

3,303

 

6,478

 

225

 

 

 

 

 

 

 

 

 

 

 

 

 

EXTRAORDINARY ITEM:

 

 

 

 

 

 

 

 

 

 

 

Loss on early extinguishment of debt, net of applicable current income tax benefit

 

 

(44

)

 

 

(5,135

)

CUMULATIVE EFFECT OF ACCOUNTING CHANGE

 

(1,742

)

 

 

 

(124

)

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

11,959

 

$

566

 

$

3,303

 

$

6,478

 

$

(5,034

)

 

21



 

 

 

December 31,

 

 

 

(dollars in thousands)

 

 

 

2002

 

2001

 

2000

 

1999

 

1998

 

Balance Sheet Data (at period end):

 

 

 

 

 

 

 

 

 

 

 

Working capital (deficiency)

 

$

(39,820

)

$

(55,585

)

$

(51,796

)

$

(47,010

)

$

(42,111

)

Total assets

 

302,636

 

318,640

 

371,827

 

377,267

 

496,169

 

Deferred revenues and gains (1)

 

94,475

 

96,162

 

89,968

 

90,610

 

88,671

 

Total debt

 

223,001

 

228,316

 

285,486

 

293,558

 

305,467

 

Total stockholder’s deficit

 

(87,548

)

(76,349

)

(76,915

)

(74,468

)

(80,946

)

 


(1) Deferred revenues represent cash received by the Company in advance of the recognition of revenues in accordance with accounting principles generally accepted in the United States.  Deferred revenues primarily reflect club membership dues, annual ERS fees, advances on third party credit card fee revenues and publication subscriptions.  These revenues are recognized at the time the goods or services are provided or over the membership period, which averages approximately 18 months.  The deferred revenue balance for 2002 and 2001 also include deferred gains of $11.8 million and $12.1 million, respectively, from the real estate sale-leaseback transactions which occurred in December 2001.

 

22



 

ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following tables set forth the components of the statements of operations for the years ended December 31, 2002, 2001, and 2000 as a percentage of total revenues, and the comparison of those components from period to period.  The following discussion is based on the Company’s Consolidated Financial Statements included elsewhere herein.  The Company’s revenues are derived principally from membership services, including club membership dues and marketing fees paid to the Company for services provided by third parties, from publications, including subscriptions and advertising, and from retail sales.

 

23



 

AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES

 

TABLE FOR PERCENTAGE COMPARISONS OF TOTAL REVENUES

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

 

 

 

Percentage of
Total Revenues

 

Percentage Increase/
(Decrease)

 

 

 

2002

 

2001

 

2000

 

Year 2002
over 2001

 

Year 2001
over 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

Membership services

 

28.9

%

29.6

%

30.0

%

3.8

%

(1.2

)%

Publications

 

15.5

%

16.1

%

16.9

%

2.3

%

(4.9

)%

Retail

 

55.6

%

54.3

%

53.1

%

8.9

%

2.4

%

 

 

100.0

%

100.0

%

100.0

%

6.4

%

0.1

%

 

 

 

 

 

 

 

 

 

 

 

 

COSTS APPLICABLE TO REVENUES:

 

 

 

 

 

 

 

 

 

 

 

Membership services

 

17.2

%

18.0

%

19.2

%

1.6

%

(6.0

)%

Publications

 

10.5

%

11.4

%

11.4

%

(1.8

)%

(0.3

)%

Retail

 

36.7

%

36.6

%

35.3

%

6.8

%

3.7

%

 

 

64.4

%

66.0

%

65.9

%

3.9

%

0.2

%

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

35.6

%

34.0

%

34.1

%

11.2

%

(0.1

)%

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

23.6

%

21.2

%

21.1

%

18.1

%

0.6

%

Restructuring charge

 

0.5

%

 

 

 

 

Depreciation and amortization

 

2.3

%

4.0

%

4.2

%

(39.7

)%

(2.8

)%

 

 

26.4

%

25.2

%

25.3

%

11.0

%

0.1

%

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

9.2

%

8.8

%

8.8

%

11.5

%

(0.5

)%

 

 

 

 

 

 

 

 

 

 

 

 

NON-OPERATING ITEMS:

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(3.9

)%

(6.0

)%

(6.8

)%

(30.4

)%

(12.6

)%

Other non-operating (expense) income, net

 

 

(1.6

)%

 

(99.3

)%

100.0

%

 

 

(3.9

)%

(7.6

)%

(6.8

)%

(45.1

)%

11.1

%

INCOME FROM OPERATIONS BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE

 

5.3

%

1.2

%

2.0

%

378.9

%

(40.7

)%

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX EXPENSE

 

(2.1

)%

(1.0

)%

(1.2

)%

118.3

%

(12.0

)%

INCOME FROM OPERATIONS BEFORE EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE

 

3.2

%

0.2

%

0.8

%

2146.1

%

(81.5

)%

 

 

 

 

 

 

 

 

 

 

 

 

EXTRAORDINARY ITEM:

 

 

 

 

 

 

 

 

 

 

 

Loss on early extinguishment of debt, net of applicable current income tax benefit

 

 

(0.1

)%

 

(100.0

)%

 

CUMULATIVE EFFECT OF ACCOUNTING CHANGE

 

(0.4

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

2.8

%

0.1

%

0.8

%

2012.9

%

(82.9

)%

 

24



 

Year Ended December 31, 2002 Compared with Year Ended December 31, 2001

 

Revenues

 

Revenues of $431.1 million for 2002 increased by approximately $25.8 million or 6.4% from the comparable period in 2001.

 

Membership services revenues for 2002 of $124.5 million increased by approximately $4.6 million or 3.8% compared to $120.0 million for 2001.  This revenue increase is largely attributable to a marketing fee increase of $3.3 million from the extended vehicle warranty program due to increased renewal rates on existing contracts and continued sales of the one-year warranty products, $0.9 million of fee income recognized on sales of vehicle insurance products, and $0.9 million from emergency road service products, partially offset by a $0.5 million reduction in marketing fees from the sale of health and life insurance products.  In addition, membership services revenue decreased $1.3 million in the Coast to Coast Club due to reduced enrollment, which was substantially offset by increases in other club revenues.

 

Publications revenues for 2002 of $66.7 million increased by $1.5 million or 2.3% from $65.2 million for 2001.  This increase was primarily attributable to the addition of REV, a new all-terrain vehicle title, and additional advertising and subscription revenue from the motorcycle and other all-terrain vehicle titles, partially offset by one less issue of Snowmobile in 2002.

 

Retail revenue for 2002 of $239.9 million increased $19.7 million or 8.9% over 2001.  This increase consisted of an $18.7 million increase in Camping World merchandise sales revenues and a $1.0 million increase in recreational vehicle sales.  The increase in Camping World merchandise sales resulted from a same store sales increase of 9.8% increase, or an aggregate $13.5 million increase in store merchandise sales.  The remaining variance was attributable to a $2.3 million increase in mail order revenue and a $2.9 million revenue increase for installation fees, service work and supply sales.

 

Costs Applicable to Revenues

 

Costs applicable to revenues totaled $277.7 million in 2002, an increase of $10.4 million or 3.9% over 2001.

 

Membership services costs and expenses increased by approximately $1.2 million or 1.6% to $74.1 million for 2002 compared to $72.9 million in 2001.  This increase was primarily associated with $1.4 million of increased expenses from the extended vehicle warranty program as a result of increased revenue, $0.8 million of Coast to Coast club expenses primarily associated with prior period legal defense insurance reimbursements recovered in 2001, and $0.7 million of increased costs associated with fee income from vehicle insurance product sales.  Partially offsetting these increases were expense decreases of $1.0 million associated with the RVSEARCH website, and $0.7 million associated with the RVtoday television program.

 

Publication costs and expenses of $45.4 million for 2002 decreased $0.8 million or 1.8% compared to 2001.  This net decrease was attributable to reduced production and marketing expenses for various publications, partially offset by costs associated with the new REV title and increased production and circulation costs for the motorcycle group.

 

Retail costs applicable to revenues increased $10.0 million or 6.8% to $158.3 million primarily due to a $9.7 million increase in merchandise costs which was primarily attributable to the 8.9% increase in merchandise sales.  The retail gross profit margin increased by $9.6 million, to 34.0% in 2002 from

 

25



 

32.7% in 2001 primarily due to higher net labor rates charged on installation sales and a shift to higher margin products.

 

Operating Expenses

 

Selling, general and administrative expenses of $101.6 million for 2002 were $15.6 million or 18.1% over 2001.  The increased selling, general and administrative expenses resulted primarily from increased retail selling, general and administrative expenses of $6.6 million, an increase of $3.2 million in real estate rental expense associated with the sales-leaseback transactions that occurred in December 2001, a $5.4 million increase in deferred executive compensation and $0.4 million from other general and administrative expenses.  Depreciation and amortization expenses of $9.9 million were $6.5 million lower than in 2001.  This decrease was primarily attributable to a $5.1 million reduction in amortization due to the discontinuance of goodwill amortization per SFAS No. 142 “Goodwill and Other Intangible Assets” (“SFAS 142”) implemented January 1, 2002, and reduced depreciation due to the real estate sold in the 2001 sales-leaseback transactions.  The Company incurred a $2.3 million restructuring charge which was primarily attributable to a management change in the retail segment.  As of December 31, 2002, approximately $0.6 million of restructuring charges remained unpaid.

 

Income from Operations

 

Income from operations of $39.6 million for 2002 increased by $4.1 million or 11.5% compared to 2001.  Increased gross profit for the retail, membership services, and publications operations of $9.7 million, $3.4 million and $2.3 million, respectively, were partially offset by increased operating expenses of $11.3 million.

 

Non-Operating Items

 

Net non-operating items for 2002 were $16.9 million compared to $30.8 million for 2001.  This $13.9 million decrease was primarily due to a $7.4 million reduction in net interest expense as a result of lower interest rates applied to a lower average outstanding debt balance, combined with a $6.5 million net non-operating loss associated with the sales of real estate recorded in 2001.

 

Income from Operations before Income Taxes, Extraordinary Item and Cumulative Effect of Accounting Change

 

Income from operations before income taxes, extraordinary item and cumulative effect of accounting change for 2002 was $22.7 million compared to $4.7 million for 2001.  This increase was due to the increases in income from operations reflected above combined with reduced interest expense and the loss recorded in 2001 on the real estate sales-leaseback transactions.

 

Income Taxes

 

Income taxes for 2002 of $9.0 million increased $4.9 million from 2001.  The effective income tax rates are higher than statutory rates due primarily to state income taxes.

 

Income before Extraordinary Item and Cumulative Effect of Accounting Change

 

Income before extraordinary item and cumulative effect of accounting change for 2002 was $13.7 million compared to $0.6 million for 2001.  This increase was due to the increase in income from operations and decreased non-operating expenses.

 

26



 

Cumulative Effect of Accounting Change

 

In accordance with the transition provisions of SFAS No. 142, Goodwill and Other Intangible Assets, the Company recorded a one-time non-cash charge of approximately $1.7 million to reduce the carrying value of the goodwill associated solely with the Golf Card Club, which is included within the Membership Services segment.  This charge is non-operational in nature and is reflected as a cumulative effect of an accounting change in the accompanying Consolidated Statement of Operations.

 

Net Income

 

The net income for 2002 was $12.0 million compared with $0.6 million for 2001.  This $11.4 million increase resulted from a $13.1 million increase in income from operations for 2002 partially offset by the cumulative effect of an accounting change.

 

 

Year Ended December 31, 2001 Compared with Year Ended December 31, 2000

 

Revenues

 

Revenues of $405.4 million for 2001 increased by approximately $0.3 million or 0.1% from the comparable period in 2000.

 

Membership services revenues for 2001 of $120.0 million decreased by approximately $1.4 million or 1.2% compared to $121.4 million for 2000.  This revenue decrease is largely attributable to a $3.6 million reduction in Coast to Coast Club membership revenue, a $1.4 million decrease in marketing fee income recognized on sales of vehicle insurance products, and $0.8 million in reduced member events revenue.  These reductions were partially offset by a $2.0 million increase in extended vehicle warranty program revenue, a $1.7 million increase in marketing fee income from the sale of RV financing products and a $0.7 million increase in advertising revenue from the new RVtoday television program.

 

Publications revenues for 2001 of $65.1 million decreased by $3.4 million or 4.9% from $68.5 million for 2000.  This decrease is attributable to a $1.8 million reduction in advertising revenue associated with the recreational vehicle magazines, a $1.0 million reduction in annual directory and related product sales, and a $0.6 million reduction in single-copy book sales.

 

Retail revenue for 2001 of $220.3 million increased $5.1 million or 2.4% over 2000.  This increase consisted of revenues of $4.7 million related to the March 2000 asset acquisition of Camping World RV Sales, Inc. (“CWRV”) and a $0.4 million increase in Camping World merchandise sales.  The increase in Camping World merchandise sales is attributable to a $1.0 million revenue increase for installation fees, service work and supply sales, offset by a $0.3 million decrease in mail order revenue and a $0.3 million or 0.3% decrease in same store sales over 2000.

 

Costs Applicable to Revenues

 

Costs applicable to revenues totaled $267.4 million in 2001, an increase of $0.4 million or 0.2% over 2000.

 

Membership services costs and expenses decreased by approximately $4.7 million or 6.0% to $72.9 million for 2001 compared to $77.6 million in 2000.  This decrease was primarily associated with $2.1 million of legal defense costs recognized in 2000 in conjunction with the Travel America, Inc., et al lawsuit dismissed in October 2000, plus associated insurance reimbursements of $1.5 million in 2001,

 

27



 

and $1.8 million of reduced marketing and program costs in the Coast to Coast Club.  In addition, emergency road service claims costs decreased $0.7 million, President’s Club and kiosk expenses decreased $0.5 million, member events expenses decreased $0.5 million, and overhead expenses declined $0.3 million, partially offset by a $1.6 million expense increase associated with the commencement of the RVtoday television program and $1.1 million increase in administration and marketing costs associated with the extended vehicle warranty program.

 

Publication costs and expenses of $46.2 million for 2001 decreased $0.1 million or 0.3% compared to 2000.  This decrease was primarily due to $0.3 million of savings realized with the implementation of an in-house prepress production process and reduced paper costs, and $0.6 million of reduced costs associated with lower single copy book sales, partially offset by an $0.8 million increase in annual directory production, marketing and overhead expenses.

 

Retail costs applicable to revenues increased $5.2 million or 3.7% to $148.2 million due to a $4.3 million expense increase associated with CWRV, and a $0.9 million increase in merchandise costs which was primarily attributable to the 0.2% increase in merchandise sales and a slight decrease in merchandise gross profit margin.  The retail gross profit margin decreased by $0.1 million, to 32.7% in 2001 from 33.5% in 2000 primarily due to the lower margins realized on the sale of RV vehicles in addition to increased shipping costs associated with merchandise sales.

 

Operating Expenses

 

Selling, general and administrative expenses of $86.1 million for 2001 were $0.5 million or 0.6% over 2000.  This increase was the result of a $1.2 million increase in retail lease expenses as a result of the sale-leaseback transactions that occurred in December 2000, partially offset by reduced retail selling, general and administrative expenses of $0.7 million.  Depreciation and amortization expenses of $16.4 million were $0.5 million lower than in 2000.  This variance was principally associated with reduced depreciation expense attributable to reduced capital expenditures over the past two years.

 

Income from Operations

 

Income from operations of $35.5 million for 2001 decreased by $0.2 million or 0.5% compared to 2000. Reduced gross profit for the publications operations and retail operations of $3.2 million and $0.1 million, respectively, and reduced operating expenses of $0.1 million were partially offset by increased gross profit from membership services of $3.2 million.

 

Non-Operating Items

 

Net non-operating items for 2001 were $30.8 million compared to approximately $27.7 million for 2000.  This $3.1 million increase was primarily the result of a $6.0 million net loss recorded on the sale of real estate related to the sale-leaseback transactions that occurred in December 2001, partially offset by a $3.5 million reduction in net interest expense as a result of lower interest rates applied to a lower average outstanding debt balance.

 

Income from Operations before Income Taxes and Extraordinary Item

 

Income from operations before income taxes and extraordinary item for 2001 was $4.7 million compared to $8.0 million for 2000.  This decrease was due to the decreases in income from operations reflected above combined with the loss recorded on the real estate sale-leaseback transaction and reduced interest expense.

 

Income Taxes

 

Income taxes for 2001 of $4.1 million decreased $0.6 million from 2000.  The effective income tax rates are higher than statutory rates due primarily to the amortization of non-deductible goodwill.

 

28



 

Income from Operations

 

Income from operations for 2001 was $0.6 million compared to $3.3 million for 2000.  This decrease was due to the decrease in income from operations and increased non-operating expenses.

 

Extraordinary Item

 

The Company paid off the existing mortgage debt on one of the properties involved in the sale-leaseback transaction.  This resulted in a prepayment penalty of $71,000.  The income tax benefit that related to this early debt extinguishment totaled $27,000.

 

Net Income

 

The net income for 2001 was $0.6 million compared with $3.3 million for 2000.  This $2.7 million decrease resulted from a $2.7 million decrease in income from operations for 2001 over 2000.

 

Liquidity and Capital Resources

 

AGHI is a holding company whose primary asset is the capital stock of Affinity Group (“AGI”).  AGI, and its subsidiaries, provide the operating cash flow necessary to service its debt as well as that of AGHI.

 

The Company has historically operated with a working capital deficit.  The working capital deficit as of December 31, 2002 and 2001 was $39.8 million and $55.6 million, respectively.  The primary reason for the working capital deficit is the deferred revenue and gains reported under current liabilities which were $54.8 million and $54.9 million as of December 31, 2002 and 2001, respectively.  Deferred revenue is primarily comprised of cash collected for club memberships in advance which is deferred and recognized as revenue over the life of the membership.  The Company uses this deferred membership revenue to lower its long-term borrowings.  The Company generated net cash from operations of $17.3 million and $19.1 million, in 2002 and 2001, respectively.  Management believes that funds generated by operations together with available borrowings under its revolving credit line will be sufficient to meet all of its debt service requirements and capital requirements over the next twelve months.

 

The following table reflects the Company’s contractual obligations and commercial commitments at December 31, 2002, in thousands.

 

 

 

Payents Due by Period

 

(in thousands)

 

Total

 

Less than
1 year

 

Years
2-3

 

Years
4-5

 

More than
5 years

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

$

223,001

 

$

8,053

 

$

84,948

 

$

130,000

 

$

 

Operating lease obligations

 

139,592

 

11,096

 

22,079

 

18,598

 

87,819

 

Deferred compensation

 

7,600

 

1,400

 

2,800

 

3,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other commercial commitments

 

 

 

 

 

 

 

 

 

 

 

Lines of credit

 

59

 

59

 

 

 

 

Standby letters of credit

 

5,481

 

2,965

 

2,516

 

 

 

Subtotal

 

5,540

 

3,024

 

2,516

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grand total

 

$

375,733

 

$

23,573

 

$

112,343

 

$

151,998

 

$

87,819

 

 

29



 

The Company has two primary debt obligations.  On April 2, 1997, AGHI issued a total of $130.0 million of 11.0% senior notes maturing on April 1, 2007 (“AGHI Senior Notes”).  On November 13, 1998, AGI entered into a $200.0 million revolving credit and term loan facility (“AGI Credit Facility”) consisting of two term loans (“Term A” and “Term B”) aggregating $130.0 million and a revolving credit facility of $70.0 million which was increased to $74.5 million in December 2001.  The interest on borrowings under the AGI Credit Facility is at variable rates based on the ratio of total cash flow to outstanding indebtedness (as defined).  Interest rates float with prime and the London Interbank Offered Rates (“LIBOR”), plus an applicable margin ranging from 1.75% to 4.125% over the stated rates.  As of December 31, 2002, the average interest rates on the term loans and revolving credit facility were 5.17% and 4.67%, respectively, and permitted borrowings under the undrawn revolving line were $10.4 million.  AGI also pays a commitment fee of 0.5% per annum on the unused amount of the revolving credit line.  As of December 31, 2002, $11.2 million and $22.9 million were outstanding under the Term A and B loans, respectively.  Re-borrowings under the Term Loans are not permitted.  The term loans have aggregate quarterly scheduled payments of $1.9 million in 2003.  The revolving credit facility matures on December 31, 2004, and the Term A and Term B loans mature on June 30, 2004 and December 31, 2005, respectively.  The funds available under the AGI Revolving Credit line may be utilized for borrowings or letters of credit; however, a maximum of $12.5 million may be allocated to such letters of credit.  As of December 31, 2002, the Company had letters of credit in the amount of $5.5 million outstanding.  The AGI Credit Facility is secured by virtually all the assets and a pledge of the stock of AGI.

 

On December 5, 2001, the Company sold eleven real estate properties to eleven separate wholly-owned subsidiaries of AGRP Holding Corp., a wholly-owned subsidiary of the Company’s parent, AGI Holding Corp. (“AGHC”), for $52.3 million in cash and a note receivable.  The properties have been leased back to the Company or its subsidiaries on a triple net basis.  Both the sales price and lease rates were based on market rates determined by third party independent appraisers engaged by the mortgage lender and approved by the AGI Credit Facility agent bank.  The cash proceeds of $47.5 million were used to payoff $2.1 million of existing mortgage financing and the balance, $45.4 million, paid down the AGI Credit Facility Term A and B loans by $19.4 million and $26.0 million, respectively.  The balance of the purchase price, $4.8 million, is represented by a note receivable yielding 11% per annum, with monthly payments of $46,000 and a ten-year balloon.

 

Concurrent with the above real estate transaction, the Company amended the AGI Credit Facility to allow for the release of the above real estate, increase the revolving credit commitment from $70 million to $74.5 million, adjust the amortization of the Term A loans, amend the pricing schedule and re-set certain financial covenants.

 

The AGI Credit Facility allows for, among other things, the distribution of payments by AGI to AGHI to service the semi-annual interest due on the AGHI Senior Notes and the annual amounts due under the Camping World Management Incentive Agreements.  Such distributions are subject to AGI’s compliance with certain restrictive covenants, including, but not limited to, an interest coverage ratio, fixed charge coverage ratio, minimum operating cash flow, and limitations on capital expenditures and total indebtedness.  In addition, the AGI Credit Facility prohibits the distribution by its wholly-owned subsidiary, AGI, of any excess cash flow, as defined, until total leverage is less than 4.75 to 1.  The Company generated no excess cash flow, as defined, in 2002.

 

In connection with the December 2001 sale-leaseback transactions, Affinity Group Thrift Holding Corporation (“AGTHC”), a wholly-owned subsidiary of the Company and an “unrestricted” subsidiary under the terms of the indenture governing the AGHI Senior Notes, sold a $15.0 million participation in the Affinity Bank Holdings, Inc. Capital Note held by AGTHC to an affiliate of Mr. Adams, the Company’s Chairman.  AGTHC used the net proceeds of this sale to purchase a $14.5 million Capital Note of AGRP Holding Corp.  The Capital Note accrues interest at the rate of 11% per annum until

 

30



 

maturity on December 5, 2011.  Interest is payable from time to time as declared by the board of directors of AGRP Holding Corp.  Interest not paid will accumulate and will be compounded annually until paid.

 

At various dates throughout 2002, AGTHC distributed $23.2 million in non-cash dividends through the Company to AGHC, its parent company.  These dividends consisted of the net balance of the Affinity Bank Holdings, Inc.  Capital Note and a 100% participation in the AGRP Capital Note which had net book values of $7.1 million and $16.1 million, respectively.

 

The AGHI indenture pursuant to which the AGHI Senior Notes were issued contains certain restrictive covenants relating to, but not limited to, mergers, changes in the nature of the business, acquisitions, additional indebtedness, sale of assets, investments, and the payment of dividends subject to certain limitations and minimum operating covenants.  The Company was in compliance with all debt covenants at December 31, 2002.

 

During 2002, payments under the terms of the phantom stock agreements with key executives totaled $1.5 million.  Phantom stock payments of $1.4 million are scheduled to be made during 2003.

 

Capital expenditures for 2002 totaled $10.7 million compared to capital expenditures of $4.5 million in 2001.  Capital expenditures are anticipated to be approximately $14.7 million for 2003, primarily for new Camping World stores and equipment, information technology and databases enhancements computer hardware upgrades and replacements, and computer software upgrades and enhancements.

 

Factors Affecting Future Performance

 

Although increases in operating costs could adversely affect the Company’s operations, management does not believe that inflation has had a material effect on operating profit during the past several years.  However, fuel shortages and substantial increases in propane and gasoline costs could have a significant impact on the Company’s travel-related membership services and publications revenues.  Historically such events have caused declines in advertisements but have not significantly affected club membership enrollment.  The Company is unable to predict at what point fluctuating fuel prices may begin to adversely impact revenues or cash flow.  The Company believes it will be able to partially offset any cost increases with price increases to its members and certain cost reducing measures.

 

Seasonality

 

The Company’s cash flow is highest in the summer months due to the seasonal nature of the retail segment, membership renewals and advertising prepayments for the annual directories.

 

Critical Accounting Policies

 

General

 

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  On an on-going basis, the Company evaluates its estimates, including those related to membership programs and incentives, bad debts, inventories, intangible assets, employee health insurance benefits,

 

31



 

income taxes, restructuring, and contingencies and litigation.  The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

 

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

 

Revenue Recognition

 

Some of the membership revenue is generated from lifetime memberships.  The revenue and expense associated with these memberships are deferred and amortized over an 18-year period, which is the actuarially determined estimated fulfillment period.  Recognized revenues and profit are subject to revisions as the membership progresses to completion.  Revisions to membership period estimates would change the amount of income and expense amortized in future accounting periods.

 

Accounts Receivable

 

The Company estimates the collectibility of its trade receivables.  A considerable amount of judgment is required in assessing the ultimate realization of these receivables including the current credit-worthiness of each customer.  Changes in required reserves have been recorded in recent periods and may occur in the future due to the market environment.

 

Inventory

 

The Company states inventories at the lower of cost or market.  In assessing the ultimate realization of inventories, the Company is required to make judgments as to future demand requirements and compare that with the current or committed inventory levels.  The Company has recorded changes in required reserves in recent periods due to changes in strategic direction, such as discontinuances of product lines as well as changes in market conditions due to changes in demand requirements.  It is possible that changes in required inventory reserves may continue to occur in the future due to the market conditions.

 

Restructuring

 

In 2002, the Company recorded reserves in connection with the restructuring program primarily within the retail segment of the Company.  These reserves include estimates pertaining to employee separation costs and the settlements of contractual obligations resulting from our actions.  Although the Company does not anticipate significant changes, the actual costs may differ from these estimates.

 

 

ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

 

The Company is exposed to market risks relating to fluctuations in interest rates.  The Company’s objective of financial risk management is to minimize the negative impact of interest rate fluctuations on the Company’s earnings and cash flows.  Interest rate risk is managed through the use of a combination of fixed and variable interest debt as well as the periodic use of interest rate collar contracts.

 

32



 

The following analysis presents the sensitivity to the earnings of the Company if these changes occurred at December 31, 2002.  The range of changes chosen for this analysis reflects the Company’s view of changes which are reasonably possible over a one-year period.  These forward-looking disclosures are selective in nature and only address the potential impacts from financial instruments.  They do not include other potential effects which could impact the Company’s business as a result of these interest rate fluctuations.

 

Interest Rate Sensitivity Analysis

 

At December 31, 2002, the Company had debt, excluding capital leases, totaling $223.0 million, comprised of $92.7 million of variable rate debt and $130.3 million of fixed rate debt.  Holding other variables constant (such as debt levels), the earnings and cash flow impact of a one-percentage point increase/ decrease in interest rates would have an unfavorable/ favorable impact of approximately $0.9 million.

 

Credit Risk

 

The Company is exposed to credit risk on accounts receivable.  The Company provides credit to customers in the ordinary course of business and performs ongoing credit evaluations.  Concentrations of credit risk with respect to trade receivables are limited due to the number of customers comprising the Company’s customer base.  The Company currently believes its allowance for doubtful accounts is sufficient to cover customer credit risks.

 

New Accounting Standards

 

Business Combinations and Goodwill - SFAS No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, were recently issued.  The Company adopted these standards effective January 1, 2002.  The statements, among other things, require the use of purchase accounting for business combinations, discontinues amortization of Goodwill, and requires an annual assessment of goodwill for impairment.  The effect of these standards was the discontinuance of goodwill amortization, which was $5.1 million in 2001, and the recordation of a one-time non-cash charge of approximately $1.7 million to reduce the carrying value of its goodwill.

 

Accounting for Asset Retirement Obligations - SFAS No. 143 was issued in June 2001.  SFAS No. 143 establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost.  This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002.  The Company adopted this standard on January 1, 2003.  As the Company currently does not have any legal obligations associated with the retirement of long-lived assets within the scope of SFAS No. 143, the potential future impact of this statement is not known.

 

Accounting for the Impairment or Disposal of Long-Lived Assets - SFAS No. 144 was issued in August 2001.  This statement addresses financial accounting and reporting of long-lived assets and for long-lived assets to be disposed of.  The provisions of this statement are effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years.  The Company adopted in this statement on January 1, 2002.  The adoption of SFAS No. 144 had no significant impact on the Company’s financial statements.

 

Disclosure Regarding Forward Looking Statements

 

This filing contains statements that are “forward looking statements,” and includes, among other things, discussions of the Company’s business strategy and expectations concerning market position, future operations, margins, profitability, liquidity and capital resources, as well as statements concerning the integrations of acquired operations and the achievement of financial benefits and operational efficiencies in connection with acquisitions.  Forward looking statements are included in “Business— General,” “Business— Business Strategy, “Business— RV Industry,” “Business— Operations,” “Business— Competition,” “Legal Proceedings,” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Although the Company believes that the

 

33



 

expectations reflected in such forward looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.  Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies, number of acquisitions and projected or anticipated benefits from acquisitions made by or to be made by the Company, or projections involving anticipated revenues, expenses, earnings, levels of capital expenditures or other aspects of operating results.  All phases of the operations of the Company are subject to a number of uncertainties, risks and other influences, including consumer spending, fuel prices, general economic conditions, regulatory changes and competition, many of which are outside the control of the Company, any one of which, or a combination of which, could materially affect the results of the Company’s operations and whether the forward looking statements made by the Company ultimately prove to be accurate.

 

34



 

ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

 

 

Index to Financial Statements

 

 

 

Page

 

 

 

Reports of Independent Public Accountants

 

36

 

 

 

Consolidated Balance Sheets as of December 31, 2002 and 2001

 

38

 

 

 

Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and 2000

 

39

 

 

 

Consolidated Statements of Stockholder’s Deficit for the years ended December 31, 2002, 2001 and 2000

 

40

 

 

 

Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000

 

41

 

 

 

Notes to Consolidated Financial Statements

 

42

 

All other financial statement schedules not listed have been omitted since the required information is included in the consolidated financial statements, the notes thereto, is not applicable, or not required.

 

 

35



 

REPORT OF INDEPENDENT AUDITORS

 

Board of Directors

Affinity Group Holding, Inc.:

 

We have audited the accompanying consolidated balance sheet of Affinity Group Holding, Inc. and subsidiaries as of December 31, 2002 and the related consolidated statements of operations, stockholder’s deficit and cash flows for the year then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.  The financial statements of Affinity Group Holding, Inc. as of December 31, 2001, and for each of the two years in the period ended December 31, 2001, were audited by other auditors who have ceased operations.  Those auditors expressed an unqualified opinion on those financial statements in their report dated February 18, 2002.

 

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 2002 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Affinity Group Holding, Inc. and subsidiaries at December 31, 2002, 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.

 

As discussed in Note 1 to the consolidated financial statements, Affinity Group Holding, Inc. changed its method of accounting for goodwill and other intangible assets in accordance with Statement of Financial Accounting Standards No. 142 in 2002.

 

As discussed above, the consolidated financial statements of Affinity Group Holding, Inc. as of December 30, 2001 and for each of the two years in the period ended December 30, 2001 were audited by other auditors who have ceased operations.  As described in Note 3, these financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142, which was adopted by Affinity Group Holding, Inc. as of January 1, 2002.  Our audit procedures with respect to the disclosures in Note 3 with respect to 2001 and 2000 included (a) agreeing the previously reported net income to the previously issued financial statements and the adjustments to reported net income representing amortization expense recognized in those periods related to goodwill which is no longer being amortized as a result of initially applying Statement of Financial Accounting Standards No. 142 to Affinity Group Holding, Inc.’s underlying records obtained from management, and (b) testing the mathematical accuracy of the reconciliation of adjusted net income to reported net income. In our opinion, the disclosures for 2001 and 2000 in Note 3 are appropriate.  However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 financial statements of Affinity Group Holding, Inc. other than with respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 and 2000 financial statements taken as a whole.

 

 

/s/ Ernst & Young LLP

 

 

 

Woodland Hills, California

February 13, 2003

 

36



 

[THIS REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP.  THE REPORT HAS NOT BEEN RE-ISSUED BY ARTHUR ANDERSON LLP NOR HAS ARTHUR ANDERSEN PROVIDED A CONSENT TO THE INCLUSION OF ITS REPORT IN THIS FORM 10-K.]

 

 

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

 

 

Board of Directors

Affinity Group Holding, Inc. and Subsidiaries:

 

 

We have audited the accompanying consolidated balance sheets of Affinity Group Holding, Inc. (a Delaware corporation and wholly-owned subsidiary of AGI Holding Corp.) and Subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholder’s deficit, and cash flows for each of the three years in the period ended December 31, 2001.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits 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 audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Affinity Group Holding, Inc. and Subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States.

 

 

/s/ ARTHUR ANDERSEN LLP

 

 

Los Angeles, California

February 18, 2002

 

37



 

AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

 

 

 

2002

 

2001

 

ASSETS

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

 

$

1,730

 

$

3,180

 

Accounts receivable, less allowance for doubtful accounts of $1,202 in 2002 and $1,587 in 2001

 

25,082

 

20,636

 

Inventories

 

31,806

 

32,065

 

Prepaid expenses and other assets

 

9,307

 

10,281

 

Deferred tax assets

 

5,596

 

4,985

 

Total current assets

 

73,521

 

71,147

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT, net

 

22,935

 

18,277

 

NOTES FROM AFFILIATES

 

8,911

 

30,128

 

INTANGIBLE ASSETS, net

 

20,830

 

23,683

 

GOODWILL, net

 

151,210

 

152,952

 

DEFERRED TAX ASSETS

 

20,885

 

18,703

 

OTHER ASSETS

 

4,344

 

3,750

 

 

 

$

302,636

 

$

318,640

 

LIABILITIES AND STOCKHOLDER’S DEFICIT

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Accounts payable

 

$

11,048

 

$

17,554

 

Accrued interest

 

3,900

 

4,565

 

Accrued income taxes

 

3,014

 

2,212

 

Accrued liabilities

 

31,276

 

30,059

 

Deferred revenues and gains

 

54,827

 

54,872

 

Deferred tax liabilities

 

1,223

 

1,281

 

Current portion of long-term debt

 

8,053

 

16,189

 

Total current liabilities

 

113,341

 

126,732

 

 

 

 

 

 

 

DEFERRED REVENUES AND GAINS

 

39,648

 

41,290

 

LONG-TERM DEBT, net of current portion

 

214,948

 

212,127

 

DEFERRED TAX LIABILITIES

 

15,453

 

11,737

 

OTHER LONG-TERM LIABILITIES

 

6,794

 

3,103

 

 

 

390,184

 

394,989

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

STOCKHOLDER’S DEFICIT:

 

 

 

 

 

Common stock, $.01 par value, 1,000 shares authorized, 100 shares issued and outstanding

 

1

 

1

 

Additional paid-in capital

 

2,021

 

12,021

 

Accumulated deficit

 

(89,570

)

(88,371

)

Total stockholder’s deficit

 

(87,548

)

(76,349

)

 

 

$

302,636

 

$

318,640

 

 

See notes to consolidated financial statements.

 

38



 

AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (IN THOUSANDS)

 

 

 

2002

 

2001

 

2000

 

REVENUES:

 

 

 

 

 

 

 

Membership services

 

$

124,546

 

$

119,958

 

$

121,393

 

Publications

 

66,654

 

65,150

 

68,519

 

Retail

 

239,922

 

220,264

 

215,160

 

 

 

431,122

 

405,372

 

405,072

 

 

 

 

 

 

 

 

 

COSTS APPLICABLE TO REVENUES:

 

 

 

 

 

 

 

Membership services

 

74,097

 

72,944

 

77,625

 

Publications

 

45,351

 

46,175

 

46,298

 

Retail

 

158,265

 

148,244

 

143,018

 

 

 

277,713

 

267,363

 

266,941

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

153,409

 

138,009

 

138,131

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

Selling, general and administrative

 

101,608

 

86,050

 

85,513

 

Restructuring charge

 

2,269

 

 

 

Depreciation and amortization

 

9,893

 

16,404

 

16,885

 

 

 

113,770

 

102,454

 

102,398

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

39,639

 

35,555

 

35,733

 

 

 

 

 

 

 

 

 

NON-OPERATING ITEMS:

 

 

 

 

 

 

 

Interest expense, net

 

(16,862

)

(24,234

)

(27,735

)

Other non-operating income (expense), net

 

(44

)

(6,574

)

5

 

 

 

(16,906

)

(30,808

)

(27,730

)

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE

 

 

 

 

 

 

 

 

22,733

 

4,747

 

8,003

 

 

 

 

 

 

 

 

 

INCOME TAX EXPENSE

 

(9,032

)

(4,137

)

(4,700

)

 

 

 

 

 

 

 

 

INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE

 

13,701

 

610

 

3,303

 

 

 

 

 

 

 

 

 

EXTRAORDINARY ITEM:

 

 

 

 

 

 

 

Loss on early extinguishment of debt, net of applicable current income tax benefit of $27

 

 

(44

)

 

CUMULATIVE EFFECT OF ACCOUNTING CHANGE

 

(1,742

)

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

11,959

 

$

566

 

$

3,303

 

 

See notes to consolidated financial statements.

 

39



 

AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

Common Stock

 

Paid-in

 

Accumulated

 

 

 

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCES AT JANUARY 1, 2000

 

100

 

$

1

 

$

12,021

 

$

(86,490

)

$

(74,468

)

 

 

 

 

 

 

 

 

 

 

 

 

Dividend

 

 

 

 

 

 

 

(5,750

)

(5,750

)

Net income

 

 

 

 

 

 

 

3,303

 

3,303

 

BALANCES AT DECEMBER 31, 2000

 

100

 

1

 

12,021

 

(88,937

)

(76,915

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

566

 

566

 

BALANCES AT DECEMBER 31, 2001

 

100

 

1

 

12,021

 

(88,371

)

(76,349

)

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

(10,000

)

(13,158

)

(23,158

)

Net income

 

 

 

 

 

 

 

11,959

 

11,959

 

BALANCES AT DECEMBER 31, 2002

 

100

 

$

1

 

$

2,021

 

$

(89,570

)

$

(87,548

)

 

See notes to consolidated financial statements.

 

40



 

AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000 (IN THOUSANDS)

 

 

 

2002

 

2001

 

2000

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

$

11,959

 

$

566

 

$

3,303

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Cumulative effect of accounting change

 

1,742

 

 

 

Deferred tax provision (benefit)

 

865

 

(2,615

)

(3,557

)

Depreciation and amortization

 

9,893

 

16,404

 

16,885

 

Provision for losses on accounts receivable

 

1,319

 

1,904

 

1,563

 

Deferred compensation

 

5,700

 

300

 

 

Loss (gain) on sale of property and equipment

 

40

 

6,047

 

(9

)

Loss on sale of notes receivable participation

 

 

522

 

 

Extraordinary item - loss on early extinguishment of debt

 

 

71

 

 

Changes in operating assets and liabilities (net of purchased businesses):

 

 

 

 

 

 

 

Accounts receivable

 

(5,765

)

1,853

 

(4,859

)

Inventories

 

259

 

1,709

 

857

 

Prepaid expenses and other assets

 

389

 

826

 

(316

)

Accounts payable

 

(6,506

)

(155

)

(1,599

)

Accrued and other liabilities

 

(733

)

(2,487

)

7,378

 

Deferred revenues and gains

 

(1,817

)

(5,873

)

(713

)

Net cash provided by operating activities

 

17,345

 

19,072

 

18,933

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Capital expenditures

 

(10,710

)

(4,454

)

(9,397

)

Net proceeds from sale of property and equipment

 

25

 

46,300

 

7,547

 

Increase in intangible assets

 

(171

)

(2,048

)

(9

)

Loans receivable

 

(1,941

)

(1,905

)

(945

)

Acquisitions, net of cash received

 

(683

)

 

(2,262

)

Net cash provided by (used in) investing activities

 

(13,480

)

37,893

 

(5,066

)

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Dividends paid

 

 

 

(5,750

)

Borrowings on long-term debt

 

130,654

 

99,630

 

99,322

 

Principal payments of long-term debt

 

(135,969

)

(156,871

)

(108,194

)

Net cash used in financing activities

 

(5,315

)

(57,241

)

(14,622

)

 

 

 

 

 

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

(1,450

)

(276

)

(755

)

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

 

3,180

 

3,456

 

4,211

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF YEAR

 

$

1,730

 

$

3,180

 

$

3,456

 

 

See notes to consolidated financial statements.

 

41



 

AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

 

1.                             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation - The consolidated financial statements include the accounts of Affinity Group Holding, Inc. (“AGHI”), its wholly-owned subsidiary, Affinity Group, Inc. (“AGI”), and AGI’s subsidiaries (collectively the Company).  AGHI was formed in November 1996 and all of the stock of AGI was contributed to AGHI from its parent, AGI Holding Corp. (“AGHC”), formerly Affinity Group Holding, Inc., upon formation.  All significant intercompany transactions and balances have been eliminated.

 

Description of the Business - The Company is a membership based direct marketing company which sells club memberships, products, services, and publications to selected affinity groups primarily in North America.  The Company markets club memberships, merchandise and services to RV owners, and camping and golf enthusiasts.  The Company also publishes magazines, directories and books.

 

Use of Estimates -  The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the Company’s management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes.  Actual results could differ from those estimates.

 

Cash and Cash Equivalents - The Company considers all short-term, highly liquid investments purchased with a maturity date of three months or less to be cash equivalents.  The carrying amount approximates fair value because of the short maturity of these instruments.

 

Concentration of Credit Risk - The Company is potentially subject to concentrations of credit risk in accounts receivable.  Concentrations of credit risk with respect to accounts receivable is limited due to the large number of customers and their geographical dispersion.

 

Inventories - Inventories are stated at lower of cost or market.  Effective July 1, 2002, the Company changed its inventory costing method from Last-in, Last-out (“LIFO”) to First-in, First-out (“FIFO”).  This accounting change had no material impact on the financial statements.  The FIFO values approximate the current market cost.  Inventories consist of retail travel and leisure specialty merchandise.

 

Property and Equipment - Property and equipment are recorded at cost.  Depreciation of property and equipment is provided using the straight-line method over the following estimated useful lives of the assets:

 

 

 

Years

 

Leasehold improvements

 

3-39

 

Furniture and equipment

 

3-12

 

Software

 

3-5

 

 

42



 

 

Leasehold improvements are amortized over their useful lives or the remaining term of the respective lease, whichever is shorter.

 

Goodwill and Other Intangible Assets - Goodwill arising from acquisitions was amortized on a straight-line basis over a period of 40 years through December 31, 2001.  Effective January 1, 2002, goodwill is no longer amortized but is instead reviewed at least annually for impairment, and more often when impairment indicators are present.  Finite lived intangible assets are amortized over the following lives:

 

 

 

Years

 

Membership and customer lists

 

3-10

 

Resort and golf course agreements

 

4

 

Noncompete and deferred consulting agreements

 

3-15

 

 

Deferred financing costs are amortized over the lives of the related debt agreements.

 

Long-term Debt - The fair value of the Company’s long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered for debt of the same or similar remaining maturities.  The fair value of the Company’s long-term debt was $224.3 million as of December 31, 2002.

 

Revenue Recognition -  Merchandise revenue is recognized when products are sold in the retail stores, shipped for mail and Internet orders or when services are provided to customers.  Membership and Emergency Road Service (“ERS”) revenues are deferred and recognized over the life of the membership.  Advances on third party credit card fee revenues are deferred and recognized based primarily on increases in credit card receivables held by third parties.  Good Sam Club lifetime membership revenues and expenses are deferred and recognized over 18 years which is the actuarially determined fulfillment period.  Promotional expenses, consisting primarily of direct mail advertising, are deferred and expensed over the period of expected future benefit.  Renewal expenses are expensed at the time related materials are mailed.  ERS claim expenses are recognized when incurred.

 

Publications Revenue and Expense -  Newsstand sales of publications and related expenses are recorded at the time of delivery, net of estimated provision for returns.  Subscription sales of publications are reflected in income over the lives of the subscriptions.  The related selling expenses are expensed as incurred.  Advertising revenues and related expenses are recorded at the time of delivery.  Subscription and newsstand revenues and expenses related to annual publications are deferred until the publications are distributed.

 

Shipping and Handling Fees and Costs - The company reports shipping and handling costs billed to customers as a component of revenues and related costs are reported as a component of cost applicable to revenues.

 

Restructuring Charge - The Company incurred a $2.3 million restructuring charge which was primarily attributable to a management restructuring in the retail segment.  As of December 31, 2002, approximately $0.6 million of restructuring charges remained unpaid.

 

Accounting for Derivative Instruments and Hedging Activities - Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 133, which establishes accounting and reporting standards for derivative instruments, including certain

 

43



 

derivative instruments embedded in other contracts and for hedging activities.  All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value.  If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings.  If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income (“OCI”) and are recognized in the income statement when the hedged item affects earnings.  Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings.

 

The adoption of SFAS 133 on January 1, 2001 had no significant impact on the Company’s financial statements.  The Company periodically uses derivative instruments to manage exposures to interest rate risks.  As of December 31, 2002, the Company had no derivative instruments in place.  The Company’s objectives for holding derivatives are to minimize the risks using the most effective methods to eliminate or reduce the impacts of these exposures.

 

Accounting for Asset Retirement Obligations - SFAS No. 143 was issued in June 2001.  SFAS No. 143 establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost.  This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002.  The Company adopted this standard on January 1, 2003.  The adoption of SFAS No. 143 had no significant impact on the Company’s financial statements.

 

Accounting for the Impairment or Disposal of Long-Lived Assets - SFAS No. 144 was issued in August 2001.  This statement addresses financial accounting and reporting of long-lived assets and for long-lived assets to be disposed of.  The provisions of this statement are effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years.  The Company adopted this statement on January 1, 2002.  The adoption of SFAS No. 144 had no significant impact on the Company’s financial statements.

 

 

2.                             PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following at December 31 (in thousands):

 

 

 

2002

 

2001

 

 

 

 

 

 

 

Land

 

$

477

 

$

477

 

Building and improvements

 

5,569

 

5,208

 

Furniture and equipment

 

31,145

 

28,428

 

Software

 

13,711

 

11,204

 

Systems development and construction in progress

 

5,421

 

2,275

 

 

 

56,323

 

47,592

 

Less: accumulated depreciation

 

(33,388

)

(29,315

)

 

 

$

22,935

 

$

18,277

 

 

44



 

3.          GOODWILL AND OTHER INTANGIBLE ASSETS

 

A summary of changes in the carrying amount of the Company’s goodwill for the twelve months ended December 31, 2002, by business segment, is as follows (in thousands):

 

 

 

Membership
Services

 

Publications

 

Retail

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2002

 

$

56,030

 

$

48,181

 

$

48,741

 

$

152,952

 

Impairments

 

(1,742

)

 

 

(1,742

)

Balance as of December 31, 2002

 

$

54,288

 

$

48,181

 

$

48,741

 

$

151,210

 

 

Finite lived intangible assets and related accumulated amortization consisted of the following at December 31 (in thousands):

 

 

 

2002

 

 

 

 

 

Accumulated

 

 

 

 

 

Gross

 

Amortization

 

Net

 

 

 

 

 

 

 

 

 

Membership and customer lists

 

$

4,263

 

$

(1,847

)

$

2,416

 

Resort and golf course participation agreements

 

13,565

 

(8,882

)

4,683

 

Non-compete and deferred consulting agreements

 

17,880

 

(8,413

)

9,467

 

Deferred financing and organization costs costs

 

10,262

 

(5,998

)

4,264

 

 

 

$

45,970

 

$

(25,140

)

$

20,830

 

 

 

 

2001

 

 

 

Gross

 

Accumulated
Amortization

 

Net

 

 

 

 

 

 

 

 

 

Membership and customer lists

 

$

3,500

 

$

(1,476

)

$

2,024

 

Resort and golf course participation agreements

 

13,540

 

(8,315

)

5,225

 

Non-compete and deferred consulting agreements

 

17,805

 

(7,071

)

10,734

 

Deferred financing and organization costs

 

10,171

 

(4,471

)

5,700

 

 

 

$

45,016

 

$

(21,333

)

$

23,683

 

 

The aggregate future five-year amortization of finite lived intangibles at December 31, 2002 is as follows (in thousands):

 

2003

 

$

4,079

 

2004

 

3,990

 

2005

 

3,081

 

2006

 

2,982

 

2007

 

2,432

 

Thereafter

 

4,266

 

Total

 

$

20,830

 

 

45



 

As discussed in Note 1, in January 2002, Affinity Group Holding, Inc. adopted SFAS No. 142, which requires companies to discontinue amortizing goodwill and certain intangible assets with an indefinite useful life.  Instead, SFAS No. 142 requires that goodwill and intangible assets deemed to have an indefinite useful life be reviewed for impairment upon adoption of SFAS No. 142 (January 1, 2002) and annually thereafter.  The Company performed its annual impairment review during the fourth quarter of 2002.  Based on this review, the Company determined that no additional impairment charges were required as of December 31, 2002.

 

Under SFAS No. 142, goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value.  The Company’s reporting units are generally consistent with the operating segments underlying the reporting segments identified in Note 12- Segment Information.  This methodology differs from Affinity Group Holding, Inc.’s previous policy, as permitted under accounting standards existing at that time, of using undiscounted cash flows on an enterprise-wide basis to determine if goodwill is recoverable.

 

In accordance with the transition provisions of SFAS No. 142, Goodwill and Other Intangible Assets, Affinity Group Holding, Inc. recorded a non-cash charge of approximately $1.7 million to reduce the carrying value of its goodwill.  The SFAS No. 142 goodwill impairment is associated solely with goodwill of the Golf Card Club, which is included in the Membership Services segment.  Such charge is reflected as a cumulative effect of an accounting change in the accompanying consolidated statement of operations.  In calculating the impairment charge, the fair value of the impaired reporting units underlying the segments were estimated using either a discounted cash flow methodology or recent comparable transactions.

 

The 2001 results on a historical basis do not reflect the provisions of SFAS No. 142.  Had Affinity Group Holding, Inc. adopted SFAS No. 142 on January 1, 2001, the historical net income for 2001 and 2000 would have been changed to the adjusted amounts indicated below:

 

 

 

2001

 

2000

 

 

 

 

 

 

 

Net income - as reported

 

$

566

 

$

3,303

 

Add back: Goodwill amortization

 

5,078

 

5,068

 

Adjusted net income

 

$

5,644

 

$

8,371

 

 

4.          ACCRUED LIABILITIES

 

Accrued liabilities consisted of the following at December 31 (in thousands):

 

 

 

2002

 

2001

 

 

 

 

 

 

 

Compensation and benefits

 

$

7,964

 

$

8,300

 

Other accruals

 

23,312

 

21,759

 

 

 

$

31,276

 

$

30,059

 

 

46



5.                 LONG-TERM DEBT

 

The following reflects outstanding long-term debt as of December 31 (in thousands):

 

 

 

2002

 

2001

 

AGHI Senior Notes

 

$

130,000

 

$

130,000

 

 

 

 

 

 

 

Camping World management incentive obligation

 

 

10,000

 

AGI Revolving Credit and Term Loan Facility:

 

 

 

 

 

Term A

 

11,224

 

16,463

 

Term B

 

22,850

 

23,450

 

Revolving credit facility

 

58,600

 

47,725

 

Other long-term obligations

 

327

 

678

 

 

 

223,001

 

228,316

 

Less: current portion

 

(8,053

)

(16,189

)

 

 

$

214,948

 

$

212,127

 

 

On April 2, 1997, AGHI issued a total of $130.0 million of senior notes (“AGHI Senior Notes”).  The notes bear interest at the rate of 11% per annum with interest payable semi-annually each April 1 and October 1, and mature on April 1, 2007.  The AGHI Senior Notes are redeemable, in whole or in part, at the option of the Company any time on or after April 1, 2002, starting at a redemption price of 105.5% of the principal amount plus accrued interest to the redemption date.  These notes are general unsecured obligations of AGHI and rank pari passu with all existing indebtedness of AGHI and senior in right of payment to all existing and future subordinated indebtedness of the Company.

 

On April 2, 1997, AGHI entered into management incentive agreements (“Camping World Management Incentive Agreements”) with certain Camping World executives pursuant to which up to an additional $15.0 million was paid subject to Camping World achieving certain operating goals.  Such contingent amounts were payable in $1.0 million annual installments on the first four anniversaries of the closing and $11.0 million on the fifth anniversary of the closing.  This obligation was recorded at the present value of $10.0 million and accrued interest at the rate of 10% per annum on the unpaid balance.  This obligation was paid in full on April 2, 2002.

 

On November 13, 1998, AGI entered into a $200.0 million revolving credit and term loan facility (“AGI Revolving Credit and Term Loan Facility”) consisting of two term loans (“Term A” and “Term B”) aggregating $130.0 million and a revolving credit facility of $70.0 million which was amended to $74.5 million in December  2001.  The interest on borrowings under the AGI Revolving Credit and Term Loan Facility is at variable rates based on the ratio of total cash flow to outstanding indebtedness (as defined).  Interest rates float with prime and the London Interbank Offered Rates (“LIBOR”), plus an applicable margin ranging from 1.75% to 4.125% over the stated rates.

 

As of December 31, 2002, the average interest rates on the term loans and revolving credit facility were 5.17% and 4.67%, respectively, and permitted borrowings under the undrawn revolving line were $10.4 million.  AGI also pays a commitment fee of 0.5% per annum on the unused amount of the revolving credit line.  As of December 31, 2002, $11.2 million and $22.9 million were outstanding under the Term A and B loans, respectively.  Re-borrowings under the Term Loans are not permitted.  The term loans have aggregate quarterly scheduled payments of $1.9 million in 2003.  The revolving credit facility matures on December 31, 2004, and the Term A and Term B

 

47



 

loans mature on December 31, 2004 and June 30, 2005, respectively.  The funds available under the AGI Revolving Credit line may be utilized for borrowings or letters of credit; however, a maximum of $12.5 million may be allocated to such letters of credit.  As of December 31, 2002, the Company had letters of credit in the amount of $5.5 million outstanding.  The AGI Revolving Credit and Term Loan Facility are secured by a security interest in virtually all the assets of AGI and its subsidiaries and a pledge of the stock of AGI and its subsidiaries.

 

The AGI Revolving Credit and Term Loan Facility allows for, among other things, the distribution of payments by AGI to AGHI to service the semi-annual interest due on the AGHI Senior Notes and the annual amounts due under the Camping World Management Incentive Agreements, which were paid in full on April 2, 2002.  Such distributions are subject to AGI’s compliance with certain restrictive covenants, including, but not limited to, an interest coverage ratio, fixed charge coverage ratio, minimum operating cash flow, and limitations on capital expenditures and total indebtedness.  Effective December 2000 and December 5, 2001, the Company amended the AGI Revolving Credit and Term Loan Facility to ensure compliance with certain of its restrictive covenants, principally minimum operating cash flow, as defined, and the total leverage covenant.  In addition, among other things, the Amendments provided for an interest rate increase on the revolving credit facility and term loans and prohibited the distribution by its wholly-owned subsidiary, AGI, of any excess cash flow, as defined, until total leverage ratio is less than 4.75 to 1.  The Company generated no excess cash flow, as defined, in 2002.

 

The AGHI indenture pursuant to which the AGHI Senior Notes were issued contains certain restrictive covenants relating to, but not limited to, mergers, changes in the nature of the business, acquisitions, additional indebtedness, sale of assets, investments, and the payment of dividends subject to certain limitations and minimum operating covenants.

 

The Company was in compliance with all debt covenants at December 31, 2002.

 

The aggregate future maturities of long-term debt at December 31, 2002 are as follows (in thousands):

 

2003

 

$

8,053

 

2004

 

63,298

 

2005

 

21,650

 

2006

 

 

2007

 

130,000

 

Total

 

$

223,001

 

 

6.      INCOME TAXES

 

The components of the Company’s income tax expense from operations for the year ended December 31, consisted of (in thousands):

 

 

 

2002

 

2001

 

2000

 

Current:

 

 

 

 

 

 

 

Federal

 

$

7,174

 

$

5,931

 

$

7,259

 

State

 

993

 

821

 

1,016

 

Deferred

 

865

 

(2,615

)

(3,575

)

Income tax expense

 

$

9,032

 

$

4,137

 

$

4,700

 

 

48



 

A reconciliation of income tax expense from operations to the federal statutory rate for the year ended December 31 is as follows (in thousands):

 

 

 

2002

 

2001

 

2000

 

Income taxes computed at federal statutory rate

 

$

7,957

 

$

1,662

 

$

2,800

 

State income taxes - net of federal benefit

 

682

 

142

 

240

 

Permanent difference -

 

 

 

 

 

 

 

Amortization of goodwill

 

 

1,643

 

1,660

 

Other

 

393

 

690

 

 

Income tax expense

 

$

9,032

 

$

4,137

 

$

4,700

 

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and operating loss and tax credit carryforwards.  Significant items comprising the net deferred tax asset at December 31 are (in thousands):

 

 

 

2002

 

2001

 

Deferred tax liabilities:

 

 

 

 

 

Management Incentive

 

$

(3,254

)

$

 

Prepaid expenses

 

(2,817

)

(2,967

)

Intangible assets

 

(1,800

)

(1,582

)

Basis difference on building and land acquired

 

(8,582

)

(8,243

)

Other

 

(223

)

(226

)

 

 

(16,676

)

(13,018

)

 

 

 

 

 

 

Deferred tax assets:

 

 

 

 

 

Accelerated depreciation

 

1,010

 

1,351

 

Intangible assets

 

768

 

1,349

 

Deferred revenues

 

10,307

 

11,558

 

Accrual for employee benefits and severance

 

2,460

 

1,803

 

Accrual for deferred phantom stock compensation

 

2,877

 

1,264

 

Charitable contribution carryforward

 

2,190

 

2,836

 

Tax credits

 

 

170

 

Claims reserves

 

2,215

 

2,290

 

Reserve for resort cards

 

1,811

 

1,871

 

Deferred compensation

 

6,255

 

2,814

 

Bad debt

 

509

 

 

Other reserves

 

1,242

 

1,545

 

 

 

31,644

 

28,851

 

 

 

 

 

 

 

Valuation allowance

 

(5,163

)

(5,163

)

 

 

 

 

 

 

Net deferred tax asset

 

$

9,805

 

$

10,670

 

 

The Company and its subsidiaries are parties to a tax-sharing agreement with the Company’s parent; however, taxes are determined on a separate company basis.  As part of this tax-sharing agreement, AGHC is compensated for its usable share of separate company federal tax losses.  As such, accrued income taxes on the balance sheet are due to AGHC.  At December 31, 2002, the Company had general charitable contribution carryforwards of approximately $5.8 million.

 

49



 

7.      COMMITMENTS, CONTINGENCIES AND SALE-LEASEBACK TRANSACTIONS

 

Leases - - The Company holds certain property and equipment under rental agreements and operating leases which have varying expiration dates.  Future minimum annual fixed rentals under operating leases having an original term of more than one year as of December 31, 2002 are as follows (in thousands):

 

2003

 

$

11,096

 

2004

 

11,162

 

2005

 

10,917

 

2006

 

9,704

 

2007

 

8,894

 

Thereafter

 

87,819

 

Total

 

$

139,592

 

 

During 2002, 2001 and 2000, respectively, approximately $11,546,000, $8,428,000, and $6,840,000 of rent expense was charged to costs and expenses.

 

On December 5, 2001, the Company sold eleven real estate properties to eleven separate wholly-owned subsidiaries of AGRP Holding Corp., a wholly-owned subsidiary of the Company’s parent, AGI Holding Corp., for $52.3 million in cash and a note receivable.  The properties have been leased back to the Company on a triple net basis.  Both the sales price and lease rates were based on market rates determined by third party independent appraisers engaged by the mortgage lender and approved by the AGI Senior Credit Facility agent bank.  These leases have an initial term of 25 to 27 years with two five-year options at the then current market rent.  The leases are classified as operating leases in accordance with SFAS No. 13 “Accounting for Leases”.  Land and buildings with a net book value totaling $45.8 million have been removed from the balance sheet.  The transaction resulted in a net gain of $6.1 million consisting of a $12.1 million gain on certain properties and a $6.0 million loss on other properties.  In accordance with accounting principles generally accepted in the United States, the $6.0 million loss has been recognized upon the date of sale in the statement of operations and the $12.1 million gain has been deferred and will be credited to income as rent expense adjustments over the lease terms.  The average net annual lease payments over the lives of the leases are $3.4 million.

 

Litigation - From time to time, the Company is involved in litigation arising in the normal course of business operations.

 

In January 1998, certain of the Company’s subsidiaries were sued in California state court in connection with the termination of the participation by the plaintiffs in the Camp Coast to Coast reciprocal use program for RV resorts.  In October 2000, the trial court entered judgment in favor of the Company’s subsidiaries and subsequently awarded them a total of $3.88 million for their legal fees and costs.  The plaintiffs have appealed the judgment in favor of the Company’s subsidiaries as well as the award of attorney fees.  In February, 2003, the plaintiffs’ appeals were denied and the judgment in favor of the Company’s subsidiaries was affirmed.

 

The Insurance Commissioner of the state of California, by order dated April 23, 2002, directed GSS Enterprises, Inc. (“GSS”), one of the Company’s subsidiaries, to cease and desist from engaging in certain insurance and motor club services without requisite licensing, advising such subsidiary that the Commissioner may impose certain fines if GSS fails to be licensed.  The order provides GSS the right to a hearing on the matter.  The order issued by the Insurance Commissioner of the state of California applies only to operations of GSS within the state of California.  If sustained, the order could materially limit certain activities of GSS within the state of California.  GSS operates in all 50 states, a majority of which have regulations comparable to those of the state of California.  To the

 

50



 

Company’s knowledge, there is no similar pending investigation by any other state.  The Company and the Department of Insurance of the state of California are in the process of seeking to resolve the cease and desist order through clarifications in the Company’s marketing materials and clarifications of applicable California laws.

 

8.      RELATED-PARTY TRANSACTIONS

 

Certain directors of the Company, including the Chairman of the Board, are partners in partnerships and shareholders of corporations that lease facilities to the Company under long-term leases.  For the years ended December 31, 2002, 2001 and 2000, payments under these leases were approximately $7.0 million, $3.7 million and $2.6 million, respectively.  Future commitments under these leases total approximately $117.1 million.  The leases expire at various dates from December 2005 through July 2029, subject to the right of the Company to exercise renewal options.

 

During the fourth quarter of 1998, the Company’s Board of Directors adopted a plan to sell the stock of Affinity Bank (“AB”), subject to regulatory approval, to an affiliate of the Company at its net book value, which in the opinion of management approximates market value.  As a result, the operations of AB were classified as a discontinued operation in the accompanying financial statements.  The Company received regulatory approval to sell AB and subsequently closed the transaction on September 30, 1999.  In consideration for the stock of AB, Affinity Group Thrift Holding Corporation (“AGTHC”) received 17,100 shares of Series A Preferred stock of the purchaser, ABH, valued at $18,631,000.  In the fourth quarter of 1999, AGTHC agreed to convert and exchange the preferred stock for a Capital Note.  The Capital Note principal balance was equal to the preference amount of the preferred stock as of the conversion date and accrues interest at the rate of 11% per annum until maturity on October 1, 2014.  On October 31, 2000, AGTHC sold, at face value, a $1.5 million participation in the Capital Note to an affiliate of Stephen Adams, the Company’s Chairman.  In addition, AGTHC, although required to be consolidated with the Company, is recognized as an “unrestricted” or non-guarantying subsidiary under the terms of the AGHI Senior Notes.

 

Further, on December 5, 2001, AGTHC sold a $15.0 million participation in the Capital Note to an affiliate of Stephen Adams for $14,477,000.  AGTHC used the net proceeds of this sale to purchase a $14.5 million Capital Note of AGRP Holding Corp., a wholly owned subsidiary of the Company’s parent, AGHC.  The Capital Note accrues interest at the rate of 11% per annum until maturity on December 5, 2011.  Interest is payable from time to time as declared by the Board of Directors of AGRP Holding Corp.  Interest not paid will accumulate and will be compounded annually until paid.

 

At various dates throughout 2002, AGTHC paid $23.2 million in non-cash dividends through the Company to AGHC.  These dividends consisted of the net balance of the Affinity Bank Holdings, Inc.  Capital Note and a 100% participation in the AGRP Capital Note which had net book values of $7.1 million and $16.1 million, respectively.

 

In March 2002, the Company received a royalty payment of $1.5 million from Holiday RV Superstores, Inc., doing business as Recreation USA, (“Recreation USA”).  This non-refundable payment grants Recreation USA a limited non-exclusive license to use the Company’s Good Sam trademarks and will be recognized by the Company as revenue ratably over the license period.  When the Company entered into the agreement with Recreation USA, the Company’s Chairman beneficially owned through entities controlled by him approximately 57%

 

51



 

of the then outstanding common stock of Recreation USA after taking into account conversion and exercise of his beneficially owned securities in Recreation USA.

 

On May 15, 2002, Stephen Adams sold his 96.1% shareholder interest in the parent company of National Alliance Insurance Company (“NAIC”) to an unrelated third-party insurance company.  NAIC is a regulated property and casualty insurance company domiciled in the state of Missouri with active licenses in 39 other states.  Its principal book of business is derived by marketing insurance to the Camping World President’s Club members.  Under the terms of an exclusive marketing agreement entered into December 31, 1998, the Company earns a marketing fee based upon annual premiums received by NAIC from the sale of its insurance products to Camping World’s President’s Club members.  As part of the sale, the expiration date of the agreement was modified to conclude on May 15, 2012.  The Company earned $1.3 million in marketing fees from January 1, 2002 through the May 15, 2002 sale date.  In 2002, 2001 and 2000 fees earned by the Company under this marketing agreement totaled $3.1 million, $2.5 million, and $2.5 million, respectively.

 

The Company is recording the royalty payment into income in a level amount ratably over the three-year term of the license.

 

The Company has the following notes receivable from affiliates:

 

                  On December 31, 1998, the Company sold Affinity Insurance Group, Inc. (“AINS”) to Adams Insurance Holding LLC, a Minnesota limited liability company wholly-owned by Stephen Adams, the Company’s Chairman, in exchange for a promissory note in the amount of $3.1 million, which approximated the fair market value.  This note accrues interest at a rate of 7.0% per annum.

 

                  In conjunction with the sale of real estate properties sold to an affiliate on December 5, 2001, AGI financed $4.8 million of the purchase price with a ten-year balloon note receivable 11% per annum, with monthly payments of approximately $46,000.

 

9.      STATEMENTS OF CASH FLOWS

 

Supplemental disclosures of cash flow information for December 31 (in thousands):

 

 

 

2002

 

2001

 

2000

 

Cash paid during the year for:

 

 

 

 

 

 

 

Interest

 

$

20,080

 

$

27,197

 

$

30,295

 

Income taxes

 

8,273

 

9,958

 

3,679

 

 

The Company entered into the following non-cash investing and financing transactions:

 

2002:

The Company assumed $0.2 million of liabilities in the acquisition of publication titles.

 

The Company declared and distributed $23.2 million of dividends consisting of the balance of the Affinity Bank Holdings, Inc. Capital Note and the 100% participation in the AGRP Capital Note.

 

52



 

2001:

The Company recorded a $12.1 million deferred gain and provided a $4.8 million seller financing note receivable in conjunction with the sale-leaseback transactions.

 

2000:

The Company assumed $0.3 million of liabilities and issued $0.8 million of purchase debt in the acquisition of Thunder Press.

 

10.    BENEFIT PLAN

 

The Company sponsors a deferred savings and profit sharing plan (the “401(k) Plan”) qualified under Section 401(a) and 401(k) of the Internal Revenue Codes of 1986, as amended (the “Code”).  All employees over age 21 who have completed one year of service (minimum of 1,000 hours) are eligible to participate in the 401(k) Plan.  Eligible employees may contribute up to 15% of their salary subject to an annual maximum established under the Code.  For the plan year January 1, 2002 through December 31, 2002, the Company elected a Safe Harbor Matching Contribution for the employer match and set the employer match, which vests upon contribution, at an amount equal to 100% of the first 4% of the employee’s contribution.  Also commencing January 1, 2002, eligible participants were permitted to make catch-up pre-tax contributions in accordance with the maximum amount set by the Internal Revenue Code.  Catch-up contributions are not eligible for the employer match program.  The Company’s contributions to the plan totaled approximately $1,372,000, $1,431,000, and $1,380,000 for 2002, 2001, and 2000, respectively.

 

11.    DEFERRED PHANTOM STOCK COMPENSATION

 

The Company has deferred compensation agreements with certain officers.  The agreements provide for payment to the officers upon their termination, death, disability, or sale of the Company.  Deferred compensation is included in other long-term liabilities as if fully vested.  Deferred compensation to be paid in 2003 has been classified in current liabilities.  This deferred compensation is subject to vesting under the terms of the individual agreements.  Vesting periods range from 20% per year over a five-year period to immediate vesting upon entering an agreement.

 

12.    SEGMENT INFORMATION

 

The Company’s three principal lines of business are Membership Services, Publications, and Retail.  The Membership Services segment operates the Good Sam Club, Coast to Coast Club, and Camping World’s President’s Club for RV owners, campers and outdoor vacationers, and the Golf Card Club for golf enthusiasts.  The Publications segment publishes a variety of publications for selected markets in the recreation and leisure industry, including general circulation periodicals, club magazines, directories and RV industry trade magazines.  The Retail segment sells specialty retail merchandise and services for RV owners primarily through retail supercenters and mail order catalogs.  The Company evaluates performance based on profit or loss from operations before income taxes.

 

The reportable segments are strategic business units that offer different products and services.  They are managed separately because each business requires different technology, management expertise and marketing strategies.  Most of the businesses were acquired as a unit, and the management at the time of acquisition was retained.

 

53



 

The Company does not allocate income taxes or unusual items to segments.  Financial information by reportable business segment is summarized as follows (in thousands):

 

 

 

Membership
Services

 

Publications

 

Retail

 

Consolidated

 

YEAR ENDED DECEMBER 31, 2002

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

124,546

 

$

66,654

 

$

239,922

 

$

431,122

 

Loss on sale of property and equipment

 

 

 

(40

)

(40

)

Interest income

 

2,631

 

 

3

 

2,634

 

Interest expense

 

 

1,641

 

8,438

 

10,079

 

Depreciation and amortization

 

2,635

 

261

 

4,590

 

7,486

 

Segment profit (loss)

 

39,647

 

17,079

 

(571

)

56,155

 

Segment assets

 

132,897

 

71,434

 

110,459

 

314,790

 

Expenditures for segment assets

 

2,184

 

1,235

 

6,251

 

9,670

 

 

 

 

 

 

 

 

 

 

 

YEAR ENDED DECEMBER 31, 2001

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

119,958

 

$

65,150

 

$

220,264

 

$

405,372

 

Gain/(loss) on sale of property and equipment

 

6

 

 

(1,979

)

(1,973

)

Interest income

 

3,278

 

 

13

 

3,291

 

Interest expense

 

 

2,170

 

12,300

 

14,470

 

Depreciation and amortization

 

4,747

 

1,241

 

6,223

 

12,211

 

Segment profit (loss)

 

34,451

 

13,505

 

(6,201

)

41,755

 

Segment assets

 

123,418

 

72,526

 

109,128

 

305,072

 

Expenditures for segment assets

 

1,534

 

78

 

2,498

 

4,110

 

 

 

 

 

 

 

 

 

 

 

YEAR ENDED DECEMBER 31, 2000

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

121,393

 

$

68,519

 

$

215,160

 

$

405,072

 

Gain/(loss) on sale of property and equipment

 

58

 

(54

)

5

 

9

 

Interest income

 

3,612

 

2

 

17

 

3,631

 

Interest expense

 

 

2,532

 

13,448

 

15,980

 

Depreciation and amortization

 

5,007

 

1,284

 

6,779

 

13,070

 

Segment profit (loss)

 

31,443

 

15,699

 

(4,972

)

42,170

 

Segment assets

 

122,483

 

72,770

 

146,853

 

342,106

 

Expenditures for segment assets

 

2,669

 

117

 

5,331

 

8,117

 

 

54



 

The following is a summary of the reconciliations of reportable segments to the Company’s consolidated financial statements for the years ended December 31, 2002, 2001 and 2000 (in thousands):

 

 

 

2002

 

2001

 

2000

 

Gain/ (Loss) on Sale of Property and Equipment

 

 

 

 

 

 

 

Total gain/(loss) on sale for reportable segments

 

$

(40

)

$

(1,973

)

$

9

 

Other non-allocated loss

 

 

(4,596

)

 

Total gain/(loss) on sale of property and equipment

 

$

(40

)

$

(6,569

)

$

9

 

 

 

 

 

 

 

 

 

Interest Income

 

 

 

 

 

 

 

Total interest income for reportable segments

 

$

2,634

 

$

3,291

 

$

3,631

 

Elimination of intersegment interest income

 

(2,627

)

(3,266

)

(3,596

)

Other non-allocated interest income

 

2,546

 

2,538

 

2,555

 

Total interest income

 

$

2,553

 

$

2,563

 

$

2,590

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

 

 

Total interest expense for reportable segments

 

$

10,079

 

$

14,470

 

$

15,980

 

Elimination of intersegment interest expense

 

(10,079

)

(14,469

)

(15,964

)

Other non-allocated interest expense

 

19,415

 

26,796

 

30,309

 

Total interest expense

 

$

19,415

 

$

26,797

 

$

30,325

 

 

 

 

 

 

 

 

 

Depreciation and Amortization

 

 

 

 

 

 

 

Total depreciation and amortization for reportable segments

 

$

7,486

 

$

12,211

 

$

13,070

 

Unallocated depreciation and amortization expense

 

2,407

 

4,193

 

3,815

 

Total consolidated depreciation and amortization

 

$

9,893

 

$

16,404

 

$

16,885

 

 

 

 

 

 

 

 

 

Income From Continuing Operations Before Income Taxes, Extraordinary Item and Cumulative Effect of Accounting Change

 

 

 

 

 

 

 

Total profit for reportable segments

 

$

56,155

 

$

41,755

 

$

42,170

 

Unallocated depreciation and amortization expense

 

(2,407

)

(4,193

)

(3,815

)

Unallocated G & A expense

 

(24,225

)

(18,430

)

(18,562

)

Unallocated interest expense, net

 

(16,869

)

(24,258

)

(27,754

)

Unallocated loss on sale of property and equipment

 

 

(4,596

)

 

Elimination of intersegment interest expense, net

 

10,079

 

14,469

 

15,964

 

Income From Continuing Operations Before Income Taxes and Extraordinary Item

 

$

22,733

 

$

4,747

 

$

8,003

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Total assets for reportable segments

 

$

314,790

 

$

305,072

 

$

342,106

 

Capitalized finance costs not allocated to segments

 

5,595

 

7,015

 

6,889

 

Corporate unallocated assets

 

38,886

 

56,868

 

64,902

 

Elimination of intersegment receivable

 

(57,073

)

(50,315

)

(42,070

)

Consolidated total

 

$

302,198

 

$

318,640

 

$

371,827

 

 

 

 

 

 

 

 

 

Capital Expenditures

 

 

 

 

 

 

 

Total expenditures for assets for reportable segments

 

$

9,670

 

$

4,110

 

$

8,117

 

Other asset expenditures

 

1,040

 

286

 

1,280

 

Total capital expenditures

 

$

10,710

 

$

4,396

 

$

9,397

 

 

55



 

Major customers- Included in revenues in 2002, 2001 and 2000 are $17.8 million, and $15.5 million, $16.7 million, respectively, received under contracts from one customer of the Company.  These revenues have been reported in the Membership Services segment.

 

13.              SELECTED QUARTERLY INFORMATION (UNAUDITED)

 

The following is a summary of selected quarterly information for the years ended December 31, 2002, 2001 and 2000 (in thousands):

 

 

 

March 31,
2002

 

June 30,
2002

 

September 30,
2002

 

December 31,
2002

 

Total revenue

 

$

96,860

 

$

121,752

 

$

112,302

 

$

100,208

 

Gross profit

 

34,329

 

41,788

 

38,984

 

38,308

 

Income from continuing operations

 

2,818

 

5,053

 

2,374

 

3,456

 

Net income

 

1,076

 

5,053

 

2,374

 

3,456

 

 

 

 

March 31,
2001

 

June 30,
2001

 

September 30,
2001

 

December 31,
2001

 

Total revenue

 

$

92,999

 

$

111,176

 

$

103,602

 

$

97,595

 

Gross profit

 

32,864

 

36,963

 

33,864

 

34,318

 

Income (loss) from continuing operations

 

264

 

1,771

 

1,345

 

(2,770

)

Net income (loss)

 

264

 

1,771

 

1,345

 

(2,814

)

 

 

 

March 31,
2000

 

June 30,
2000

 

September 30,
2000

 

December 31,
2000

 

Total revenue

 

$

91,960

 

$

109,771

 

$

106,013

 

$

97,328

 

Gross profit

 

31,213

 

37,111

 

35,223

 

34,584

 

Income (loss) from continuing operations

 

(300

)

1,925

 

541

 

1,137

 

Net income (loss)

 

(300

)

1,925

 

541

 

1,137

 

 

56



 

14.    VALUATION AND QUALIFYING ACCOUNTS

 

(in thousands)

 

Balance at
Beginning
of Period

 

Additions
Charged to
Costs and
Expenses

 

Deductions

 

Balance at
End
of Period

 

Description:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2002:

 

 

 

 

 

 

 

 

 

Allowance for doubtful accounts receivable

 

$

1,587

 

$

1,319

 

$

1,704

(a)

$

1,202

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2001:

 

 

 

 

 

 

 

 

 

Allowance for doubtful accounts receivable

 

$

1,642

 

$

1,904

 

$

1,959

(a)

$

1,587

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2000:

 

 

 

 

 

 

 

 

 

Allowance for doubtful accounts receivable

 

$

947

 

$

1,563

 

$

868

(a)

$

1,642

 

 


(a)               Accounts determined to be uncollectable and charged against allowance account, net of collection on accounts previously charged against allowance account.

 

57



 

Exhibit B

 

ITEM 9:              CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

On June 26, 2002, the Board of Directors of Affinity Group Holding, Inc. (the “Company”) appointed Ernst & Young LLP as the Company’s independent public accountants, replacing Arthur Andersen LLP.  The Company dismissed Arthur Andersen LLP on the same date.  Ernst & Young LLP has notified the Company that it has accepted the engagement.

 

The audit reports of Arthur Andersen LLP on the consolidated financial statements of the Company as of and for the years ended December 31, 2001 and 2000 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

 

During the two most recent fiscal years of the Company, ended December 31, 2001 and 2000 respectively, and the subsequent interim period to the date hereof, there were no disagreements between the Company and Arthur Andersen LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Arthur Andersen LLP’s satisfaction, would have caused Arthur Andersen LLP to make reference to the subject matter of the disagreement in connection with its reports.

 

None of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred within the two most recent fiscal years of the Company and the subsequent interim period to the date hereof.

 

The Company provided Arthur Andersen with a copy of the foregoing disclosures.  We filed a copy of AA’s letter, dated April 8, 2002, stating its agreement with such statements as an exhibit to our Current Report on Form 8-K, filed on June 27, 2002, and incorporate it herein by reference.

 

During the years ended December 31, 2001 and 2000 and through June 26, 2002, the Company did not consult with Ernst & Young LLP regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.

 

58



 

PART III

 

ITEM 10:       DIRECTORS AND EXECUTIVE OFFICERS FOR THE REGISTRANT

 

The executive officers and directors of the Company at December 31, 2002 are as follows:

 

Name

 

Age

 

Position

 

Stephen Adams

 

65

 

Chairman of the Board of the Company and AGI

 

Joe McAdams

 

59

 

President, Chief Executive Officer of the Company and AGI, and Director

 

Wayne Boysen

 

72

 

Director

 

David Frith-Smith

 

57

 

Director

 

Michael Schneider

 

48

 

Chief Operating Officer of AGI

 

Mark J. Boggess

 

47

 

Vice President and Chief Financial Officer of the Company and Senior Vice President and Chief Financial Officer of AGI

 

Michael Blumer

 

57

 

Senior Vice President of AGI

 

Murray S. Coker

 

62

 

Senior Vice President of AGI

 

Mark T. Gilman

 

38

 

President, Chief Executive Officer of Camping World, Inc. and Director

 

John Ehlert

 

57

 

Director

 

David B. Garvin

 

59

 

Director

 

George Parker

 

63

 

Director

 

 

Stephen Adams has been Chairman of the Company since December 1988.  Since the 1970’s, Mr. Adams has served as Chairman of privately owned banking, bottling, publishing, outdoor advertising, television and radio companies in which he holds a controlling ownership interest.  Mr. Adams is also Chairman and the controlling shareholder of Adams Outdoor Advertising, Inc., the managing general partner of Adams Outdoor Advertising Limited Partnership.  Further, Mr. Adams also holds a 95% interest in Affinity Bank Holdings, Inc. and holds in excess of 90% of the outstanding common stock of Recreation USA after taking into account conversion and exercise of his beneficially owned securities in Recreation USA.

 

Joe McAdams has been President and Chief Executive Officer of the Company since July 1991.  Prior thereto and since December of 1988, Mr. McAdams was President of Adams Publishing Corporation, a newspaper and magazine publishing company controlled by Mr. Adams.  From October 1987 through November 1988, Mr. McAdams was President and Publisher of Southern California Publishing Co.  Prior to October 1987 and since 1961, Mr. McAdams has held various management positions with publishing and direct marketing companies, including Senior Vice President and Chief Operating Officer of ADVO Systems, Inc. from August 1981 to April 1983.  Mr. McAdams currently serves on the Board of Directors of UCAP Incorporated.

 

Wayne Boysen was Senior Vice President of the Company since June 1991 until his retirement on January 1, 1996 and has supervised the staff of the risk management divisions of businesses owned by Stephen Adams, including the Company, since July 1988.  In addition, since their acquisition by the Company in 1995, Mr. Boysen has served as Chairman of Affinity Bank (“AB”) and Chairman of Affinity Insurance Group, Inc. (“AINS”) until December 1998.  From 1966 through July 1988, Mr. Boysen owned or

 

59



 

managed insurance agencies and provided consulting services to property and casualty insurance agencies.  Mr. Boysen has been a director of the Company since 1993.

 

David Frith-Smith has served as managing partner of Biller, Frith-Smith & Archibald, Certified Public Accountants since 1988.  Mr. Frith-Smith was a principal with Maidy Biller Frith-Smith & Brenner, Certified Public Accountants from 1984 to 1988, and with Maidy and Lederman, Certified Public Accountants from 1980 to 1984.  Mr. Frith-Smith has been a director of the Company since November 1996.  Mr. Frith-Smith is also a director of Adams Outdoor Advertising Inc., the managing general partner of Adams Outdoor Advertising Limited Partnership which is controlled by Stephen Adams, and various private and non-profit corporations.

 

Michael Schneider has been Chief Operating Officer of AGI since 1996.  Prior thereto, Mr. Schneider served as Senior Vice President and General Counsel of the Company since January 1993 and was responsible for administrative areas, development of new corporate ventures and portions of the RV publication business and the advertising and sales departments.  Prior to January 1993 and since 1977, Mr. Schneider has held a variety of senior management positions in the AGI’s publication business.

 

Mark J. Boggess has been Vice President and Chief Financial Officer of the Company since June 1993.  From June 1992 through May 1993, Mr. Boggess was Vice President and Chief Financial Officer of Hypro Corporation, a privately owned manufacturer of fluid transfer pumps.  From June 1989 through June 1992, Mr. Boggess was Treasurer of Adams Communications Corporation, a holding company controlled by Stephen Adams which owned television and radio station operations throughout the United States.

 

Michael Blumer has been Senior Vice President of AGI since January 1998.   Prior to 1998 and since 1996, Mr. Blumer served as CIO at Primedia, Inc. and prior to that post he served as Senior Vice President of Information Technology at The Hamilton Group from 1992 to 1996.  Prior to 1992, he also served in information technology management positions at The Franklin Mint, American Express and the Federal Reserve Bank of New York.

 

Murray S. Coker is currently Senior Vice President-Marketing of AGI and oversees the marketing of all products, services and clubs for AGI.  He joined Camping World in 1978 and has served in various management positions including Vice President-Mail Order, Vice President-Direct Marketing and Senior Vice President-Marketing.  Prior to joining Camping World, Mr. Coker was a consultant specializing in retail systems for Management Design Associates and Deloitte & Touche.  He was the Data Systems Product Line Manager for Pitney Bowes’ Monarch Marketing Systems Division and a Systems Engineer for IBM Corporation.

 

Mark T. Gilman assumed the positions of President, Chief Executive Officer of Camping World, Inc. and Director effective May 2002.  Prior to joining AGI, and since 1996, Mr. Gilman held various senior management positions at New Media, a division of Blockbuster, Inc., including President, Executive Vice President, and Chief Development Officer.  At New Media, Mr. Gilman was responsible for launching and managing Blockbuster, Inc.’s online and new technologies business.  Prior to 1996, Mr. Gilman held various management positions with Wal-Mart Stores, Inc. and McDonald’s Corporation.

 

John Ehlert is the founder of Ehlert Publishing Group, Inc. which the Company acquired in 1997 and has served as its President and Chief Executive Officer since 1976 until its acquisition.  Mr. Ehlert serves on the board of directors of various trade, private and charitable organizations.

 

David B. Garvin founded Camping World in 1966 and served as President of Camping World from 1966 to 1986 and as its Chairman of the Board of Directors since 1986.  The Company acquired Camping World in 1997.  Mr. Garvin and Thomas A. Donnelly, who served as President of Camping World until May 2002, are first cousins.

 

George Parker is the Senior Associate Dean for Academic Affairs and Director of the MBA Program at the Graduate School of Business at Stanford University.  Prior to 1973, Mr. Parker was an Assistant/

 

60



 

Associate Professor of Finance at the Graduate School of Business at Columbia University.  He currently serves on the Board of Directors for various companies including Continental Airlines, Inc., Tejon Ranch Co., iShares, Inc. and Converium Holding AG.  He also provides consulting services to various corporations and banks on financial management and corporate strategy, and has had numerous financial management works published.

 

Directors are elected for terms of one year or until their successors have been duly elected.

 

ITEM 11:       EXECUTIVE COMPENSATION

 

Executive Compensation

 

The following table provides certain summary information concerning the compensation paid by the Company to the Company’s Chief Executive Officer and each of the four other highest compensated executive officers who were officers at December 31, 2002, and one executive officer who was not serving as an executive officer at December 31, 2002, for the fiscal years ending December 31, 2002, 2001, and 2000.

 

SUMMARY COMPENSATION TABLE

 

Name and Principal
Position

 

Year

 

Annual Compensation

 

Other Annual
Compensation(1)(2)

 

All Other
Compensation(3)

 

Salary

 

Bonus(1)

 

 

 

 

 

 

 

 

 

 

 

 

Stephen Adams

 

2002

 

$

699,992

 

$

1,725,030

 

 

 

$

12,687

 

Chairman of the Board

 

2001

 

699,992

 

1,567,770

 

 

 

20,658

 

 

 

2000

 

699,996

 

1,578,540

 

 

 

36,503

 

 

 

 

 

 

 

 

 

 

 

 

 

Joe McAdams, President

 

2002

 

100,000

 

575,010

 

 

 

5,860

 

Chief Executive Officer

 

2001

 

100,000

 

522,590

 

 

 

6,332

 

 

 

2000

 

100,000

 

526,180

 

447,856

(4)

7,696

 

 

 

 

 

 

 

 

 

 

 

 

 

Mark T. Gilman
President of Camping World
(since 2002)

 

2002

 

205,962

 

171,688

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael Schneider

 

2002

 

210,000

 

287,505

 

811,333

(4)

8,445

 

Chief Operating Officer

 

2001

 

210,000

 

261,295

 

 

 

8,345

 

 

 

2000

 

210,000

 

263,090

 

405,667

(4)

8,716

 

 

 

 

 

 

 

 

 

 

 

 

 

Murray S. Coker

 

2002

 

196,000

 

189,753

 

 

 

7,382

 

Senior Vice President of AGI

 

2001

 

196,000

 

172,455

 

 

 

8,838

 

 

 

2000

 

195,885

 

173,639

 

 

 

9,126

 

 

 

 

 

 

 

 

 

 

 

 

 

Thomas A. Donnelly

 

2002

 

116,827

 

103,653

 

717,270

(5)

7,559

 

Former President of

 

2001

 

225,000

 

261,295

 

 

 

7,920

 

Camping World

 

2000

 

225,000

 

263,090

 

 

 

8,055

 

 


(1)               Compensation defined as “Bonus” and “Other Annual Compensation” is eligible, at the election of the employee, to be contributed to the AGHC Key Employee Security Option Plan (“KEYSOP”).  See “Management Agreements with Executive Officers.”

 

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(2)               Personal benefits are the lesser of (i) 10% of total annual salary and bonus (ii) $50,000, except as described in Note  (3) below.

 

(3)               Represents company contributions to 401(k), split dollar life insurance economic benefit and personal use of Company assets.

 

(4)               Under the terms of the phantom stock agreements, Mr. Schneider received $811,333 in 2002 and $405,667 in 2000; and Mr. McAdams received $447,856 in 2000.  All payments were contributed to the KEYSOP.

 

(5)               Upon separation from the Company in May 2002, Mr. Donnelly received $492,270 under the terms of his phantom stock agreement and separation/severance pay totaling $225,000.  These payments were contributed to the KEYSOP.

 

The Company does not have any outstanding stock options or restricted stock grants.  The Company has phantom stock agreements and a non-qualified deferred compensation plan for certain of its officers.  See “Agreements with Executive Officers”.

 

Agreements with Executive Officers

 

Mr. Adams and the Company are parties to an amended employment agreement providing for his employment as the Chairman of the Company through September 1, 2003.  The base salary for Mr. Adams is $700,000 and his incentive compensation is 3% of operating profits (as defined in the agreement).

 

In January 1999, AGHC introduced a Key Employee Security Option Plan (“KEYSOP”) for key employees of AGHI and its subsidiaries.  This non-qualified deferred compensation plan allows key employees the option to contribute specific compensation, including bonuses, incentive compensation, and phantom stock payments to the KEYSOP.  Contributions to the KEYSOP from AGHI employees totaled $8.9 million, $0.8 million and $3.4 million in 2002, 2001 and 2000, respectively.

 

In January 1992, the Company introduced a phantom stock incentive program for key employees.  Since that time, certain employees have been granted awards at various interest levels and over varying vesting periods.  The value of the phantom stock interest is based on the increase in the value of the Company over the base value at the award date.  In accordance with the formula set forth in the agreements, which formula approximates a multiple of operating profits and is intended to approximate the fair market value of the Company, earned incentives are paid in three annual installments following the earlier of (a) termination of employment, (b) sale of the Company, or (c) five years after the initial grant of the phantom stock interest.  The phantom stock agreements also set forth the terms of employment for the executive.

 

The following table sets forth the current awards outstanding under the Company’s phantom stock incentive program as of December 31, 2002.  As of December 31, 2002, the aggregate accrued liability under this program was approximately $7.6 million, of which $1.4 million has been reflected as current in the financial statements.

 

Officer/Director

 

Full
Interest

 

Vested
Amount

 

Joe McAdams

 

2.50

%

2.50

%

Mike Schneider

 

1.80

%

1.80

%

Mark Boggess

 

1.30

%

1.30

%

Murray S. Coker

 

1.00

%

0.96

%

All Other Employees

 

0.30

%

0.24

%

 

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In addition, Mark T. Gilman was granted a phantom stock interest with Camping World, Inc., a subsidiary of AGI.  Under the terms of the agreement Mr. Gilman was granted a phantom stock interest ranging from twelve (12%) percent of Company Value (as defined in the Phantom Stock Agreement) to twenty (20%) percent of Company Value.  This interest may be allocated to other members of the management team, at Mr. Gilman’s discretion, for the purpose of maximizing the incentives that the phantom stock interests are intended to provide.  Mr. Gilman’s stock interests vest immediately, but phantom stock interests allocated to members of the management team will vest at the rate of 20% per year of service.  The value of such phantom interests are based on the increase in the value of such subsidiary and are based on formulas that are intended to approximate the fair market value of the subsidiary.

 

The executive’s base salary and annual bonus are determined from time to time by the Board of Directors.  In the event the executive’s employment is terminated without cause, the phantom stock agreements provide for severance benefits of up to one year’s base salary plus the accrued bonus for the year in which such termination occurs.

 

Compensation Committee Interlock and Insider Participation

 

The Company’s Board of Directors determines the compensation of the executive officers.  The executive officers of the Company that serve on the Board of Directors are Stephen Adams, Joe McAdams and Mark T. Gilman.

 

Stephen Adams, the Chairman and a director of the Company, has an amended employment agreement with AGI through September 1, 2003 under which Mr. Adams receives a base salary of $700,000 plus incentive compensation of 3% of operating profits (as defined).

 

Joe McAdams, the President and Chief Executive Officer and a director of the Company, has phantom stock agreements with AGI pursuant to which Mr. McAdams holds a 2.5% phantom stock interest which is fully vested.

 

Pursuant to the management incentive agreement which the Company entered into with Mr. Donnelly and Mr. Coker at the time of the acquisition of Camping World in 1997, the Company agreed, subject to Camping World achieving certain operating goals, to pay up to $6.6 million and $1.2 million to Mr. Donnelly and Mr. Coker, respectively, over the subsequent five years.  On April 2, 2002, Mr. Donnelly and Mr. Coker received the remaining balance due under the management incentive agreement of $4.84 million and $0.9 million, respectively.

 

Messrs. Garvin, McAdams, Donnelly, Boggess, Coker and Blumer are partners in various partnerships that lease nine facilities under long-term leases to Camping World.  For the years ended December 31, 2002, 2001 and 2000, payments under these leases were approximately $3.54 million, $3.50 million and $2.59 million, respectively.  The leases expire during the period December 2005 and December 2015, subject to the right of Camping World to exercise renewal options.  The Company believes that such leases contain lease terms as favorable as lease terms that would be obtained from independent third parties.

 

On December 5, 2001, the Company sold eleven real estate properties to eleven separate wholly-owned subsidiaries of AGRP Holding Corp., a wholly-owned subsidiary of the Company’s parent, AGI Holding Corp., for $52.3 million in cash and a note receivable.  The properties have been leased back to the Company on a triple net basis.  Both the sales price and lease rates were based on market rates determined by third party independent appraisers engaged by the mortgage lender and approved by the

 

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AGI Senior Credit Facility agent bank.  These leases have an initial term of 25 to 27 years with two five-year options at the then current market rentPayments under these leases were $0.2 million in 2001.

 

John Ehlert, a director of the Company, is a partner in a partnership that leased a research facility to the Company’s publishing business under a long-term lease.  For the year ended December 31, 2001 and 2000, the rental payments for such facility were $38,329 and $46,610, respectively.  The lease expired in October 2001 and was not renewed.

 

Bonus Plan

 

The Company annually adopts bonus programs for employees, including executive officers other than Mr. Adams.  Bonus payments are made based on achievement of specified operating results and/or objectives.

 

401 (k) Savings and Profit Plan

 

The Company sponsors a deferred savings and profit sharing plan (the “401(k) Plan”) qualified under Section 401(a) and 401(k) of the Internal Revenue Codes of 1986, as amended (the “Code”).  All employees over age 21 who have completed one year of service (minimum of 1,000 hours) are eligible to participate in the 401(k) Plan.  Eligible employees may contribute up to 15% of their salary subject to an annual maximum established under the Code.  For the plan year January 1, 2002 through December 31, 2002, the Company elected a Safe Harbor Matching Contribution for the employer match and set the employer match, which vests upon contribution, at an amount equal to 100% of the first 4% of the employee’s contribution.  Also, commencing January 1, 2002, eligible participants were permitted to make catch-up pre-tax contributions in accordance with the maximum amount set by the Internal Revenue Code.  Catch-up contributions are not eligible for the employer match program.

 

Other Benefit Plan

 

Company employees receive certain medical and dental benefits during their employment.  A predecessor to the Company also provided eligible employees with medical, dental and life insurance coverage after retirement.  The estimated future costs associated with such coverage to retirees are reserved as a liability in the Company’s consolidated financial statements.  Current employees are not provided medical and dental benefits upon retirement.

 

Director Compensation

 

The Company pays directors who are not employees (Messrs. Boysen, Ehlert, Frith-Smith, Garvin and Parker) director fees of $1,800 per month.

 

Report on Executive Compensation

 

The Company’s Board of Directors determines the compensation of the executive officers.  The base salary and bonus for Stephen Adams is established pursuant to the employment agreement described under the caption entitled “Agreements with Executive Officers.”  The agreement was approved when Mr. Adams was the sole director of the Company because it was determined to be in the best interests of the Company to assure continuity of management.  For the other executive officers, base salaries are set at levels which are believed to be reasonably competitive with the salary level of executives in comparable companies, including membership services companies and other highly leveraged companies with comparable operating income, except that the base salary for Joe McAdams, the President and Chief Executive Officer, is lower than the comparable companies because the primary source of his

 

64



 

compensation is through the bonus program.  The executive officers, including Mr. McAdams, receive bonuses based on their respective assigned percentage of operating income of the Company or the operations in which the executive is employed.  The percentage assigned to each executive officer depends upon the level of his responsibilities or, in the case of Mr. Adams, as prescribed in their respective employment agreement.

 

In addition, the executive officers, other than Mr. Adams who owns over 95% of the stock of the parent corporation, have received phantom stock grants under the agreements described above under the caption “Agreements with Executive Officers.”  The purpose of the phantom stock agreements is to provide the executive officers with an incentive to enhance the long-term value of the Company with payments of the amounts earned by the executive officers provided as deferred compensation over several years.

 

BOARD OF DIRECTORS

 

Stephen Adams

 

Joe McAdams

 

Wayne Boysen

 

David Frith-Smith

 

 

 

 

 

 

 

Mark T. Gilman

 

John Ehlert

 

David B. Garvin

 

George Parker

 

ITEM 12:         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The Company is a wholly-owned subsidiary of AGI Holding Corp. (“AGHC”), a privately-owned corporation.  The following table sets forth, as of December 31, 2002, certain information with respect to the beneficial ownership of the Common Stock of AGHC by each shareholder who is known to the Company to beneficially own more than 5% of the outstanding shares, each executive officer and the current sole director of AGHC, and all executive officers and directors of the Company.

 

Name and Address of Beneficial Owner

 

Number of Shares
of Stock Owned (1)

 

Percent of
Common Stock

 

Stephen Adams
2575 Vista Del Mar Drive
Ventura, CA93001

 

1,404.7 

(2)

95.75

%

Joe McAdams

 

3.0

 

0.20

%

Mark Boggess

 

0.2

 

0.01

%

All executive officers and directors as a group  (13 persons)

 

1,407.9

 

95.96

%

 


(1)  Except as otherwise indicated, the beneficial owners have sole voting and investment power with respect to the shares in the table.

 

(2)  Does not include 50 shares owned by members of the Adams’ family who do not reside with him and as to which Mr. Adams disclaims beneficial ownership.

 

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ITEM 13:         CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

During the fourth quarter of 1998, the Company’s Board of Directors adopted a plan to sell the stock of Affinity Bank (“AB”), subject to regulatory approval, to Affinity Bank Holdings LLC (“ABH”), an affiliate of the Company, at its net book value of $17,100,000, which in the opinion of management then approximated market value.  The Company received regulatory approval and subsequently closed the transaction effective September 30, 1999.  In consideration for the stock of AB, the Company’s wholly-owned subsidiary, AGHTC received 17,100 shares of Series A Preferred stock of the purchaser, ABH, having a value of $18,631,000.  In the fourth quarter of 1999, AGHTC agreed to convert and exchange the preferred stock for a Capital Note.  The Capital Note principal balance was equal to the preference amount of the preferred stock as of the conversion date and accrues interest at the rate of 11% per annum until maturity on October 14, 2014.  On October 31, 2000, AGTHC sold, at face value, a $1.5 million participation in the Capital Note to an affiliate of Mr. Adams.

 

On May 15, 2002, Mr. Adams sold his 96.1% shareholder interest in the parent company of National Alliance Insurance Company (“NAIC”) to an unrelated third-party insurance company.  NAIC is a regulated property and casualty insurance company domiciled in the state of Missouri with active licenses in 39 other states.  Its principal book of business is derived by marketing insurance to the Camping World President’s Club members.  Under the terms of an exclusive marketing agreement entered into December 31, 1998, the Company earns a marketing fee based upon annual premiums received by NAIC from the sale of its insurance products to Camping World’s President’s Club members.  As part of the sale, the expiration date of the agreement was modified to conclude on May 15, 2012.  The Company earned $1.3 million in marketing fees from January 1, 2002 through the May 15, 2002 sale date.  In 2002, 2001 and 2000 fees earned by the Company under this marketing agreement totaled $3.1 million, $2.5 million, and $2.5 million, respectively.

 

On December 5, 2001, the Company sold eleven real estate properties to eleven separate wholly-owned subsidiaries of AGRP Holding Corp., a wholly-owned subsidiary of the Company’s parent, AGI Holding Corp., for $52.3 million in cash and a note receivable.  The properties have been leased back to the Company on a triple net basis.  These leases are classified as operating leases and the average net annual lease payments over the lives of the leases are $3.4 million.  Both the sales price and lease rates were based on market rates determined by third party independent appraisers engaged by the mortgage lender and approved by the AGI Senior Credit Facility agent bank.  The net cash proceeds of $47.5 million were used to payoff $2.1 million of existing mortgage financing and the balance, $45.4 million, paid down the AGI Senior Credit Facility Term A and B loans by $19.4 million and $26.0 million, respectively.  The balance of the purchase price, $4.8 million, is represented by a note receivable yielding 11% per annum, with monthly payments of $46,000 and a ten-year balloon.

 

In connection with the sale-leaseback transactions, Affinity Group Thrift Holding Corporation (“AGTHC”), a wholly-owned subsidiary of the Company and an “unrestricted” subsidiary under the terms of the indenture governing the AGHI Senior Notes, sold a $15.0 million participation in the Affinity Bank Holdings, Inc. Capital Notes held by AGTHC to an affiliate of Mr. Adams.  AGTHC used the net proceeds of this sale to purchase a $14.5 million Capital Note of AGRP Holding Corp.  The Capital Note accrues interest at the rate of 11% per annum until maturity on December 5, 2011.  Interest is payable from time to time as declared by the board of directors of AGRP Holding Corp.  Interest not paid will accumulate and will be compounded annually until paid.

 

At various dates throughout 2002, AGTHC paid $23.2 million in non-cash dividends through the Company to AGHC.  These dividends consisted of the net balance of the Affinity Bank Holdings, Inc.  Capital Note

 

66



 

and a 100% participation in the AGRP Capital Note which had net book values of $7.1 million and $16.1 million, respectively.

 

In March 2002, the Company received a royalty payment of $1.5 million from Holiday RV Superstores, Inc., doing business as Recreation USA, (“Recreation USA”).  This non-refundable payment grants Recreation USA a limited non-exclusive license to use the Company’s Good Sam trademarks.  When the Company entered into the agreement with Recreation USA, the Company’s Chairman beneficially owned through entities controlled by him approximately 57% of the then outstanding common stock of Recreation USA after taking into account conversion and exercise of his beneficially-owned securities in Recreation USA.  The Company is recording the royalty payment into income in a level amount ratably over the three-year term of the license.

 

For a description of the employment, consulting, non-competition, management incentive and phantom stock agreements with the Company and persons serving as an executive officer or director of the Company see “Management - Agreements with Executive Officers” and “Management - Compensation Committee Interlock and Insider Participation.”

 

For a description of leases which subsidiaries of the Company have with partnerships in which a director of the Company has a partnership interest, see “Management - Compensation Committee Interlock and Insider Participation.”

 

ITEM 14:         CONTROL AND PROCEDURES

 

Within 90 days prior to the filing of this Annual Report on Form 10-K, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer and the Company’s Vice President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Regulation 13a014 under the Securities Exchange Act of 1934.  Based upon that evaluation, the Company’s President and Chief Executive Officer along with the Company’s Vice President and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.  There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date the Company carried out its evaluation.

 

67



 

PART IV

 

ITEM 15:         EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

 

(a) (1)

 

Consolidated financial statements are included in Item 8 hereto.

 

 

 

 

 

(a) (2)

 

Consolidated financial statement schedules are included in Item 8 hereto

 

 

 

 

 

(a) (3)

 

Listing of Exhibits:

 

 

 

 

 

 

 

The exhibits required to be a part of this report are listed in the Index to Exhibits which follows the signature page.

 

 

 

 

 

(b)

 

Reports on Form 8-K:

 

 

 

 

 

 

 

None

 

 

 

 

 

(c)

 

Exhibits:

 

 

 

 

 

 

 

Included in Item 15 (a) (3) above.

 

 

 

 

 

(d)

 

Financial Statement Schedules

 

 

 

 

 

 

 

Included in Item 15 (a) (2) above.

 

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Denver, State of Colorado on March 21, 2003.

 

AFFINITY GROUP HOLDING, INC.

 

 

 

 

 

 

 

By

/s/  Joe B. McAdams

 

 

Joe B. McAdams

 

Chief Executive Officer

 

 

Pursuant to the requirements of the Securities Act of 1934, this Report has been signed below by the following persons on behalf of the Company in the capacities and on the dates indicated.

 

/s/  Joe B. McAdams

 

Chief Executive Officer and Director

March 21, 2003

Joe B. McAdams

 

(Principal Executive Officer)

 

 

 

 

 

/s/  Mark J. Boggess

 

Senior Vice President and Chief

March 21, 2003

Mark J. Boggess

 

Financial Officer

 

 

 

(Principal Financial and Accounting Officer)

 

 

 

 

 

*

 

Director

March 21, 2003

Stephen Adams

 

 

 

 

 

 

 

*

 

Director

March 21, 2003

David Frith-Smith

 

 

 

 

 

 

 

*

 

Director

March 21, 2003

Wayne Boysen

 

 

 

 

69



 

*

 

Director

March 21, 2003

Mark T. Gilman

 

 

 

 

 

 

 

*

 

Director

March 21, 2003

David B. Garvin

 

 

 

 

 

 

 

*

 

Director

March 21, 2003

John Elhert

 

 

 

 

 

 

 

*

 

Director

March 21, 2003

George Parker

 

 

 

 

 

 

 

*By

/s/  Mark J. Boggess

 

 

March 21, 2003

 

(Mark J. Boggess

 

 

 

 

Attorney-in-Fact)

 

 

 

 

Mark J. Boggess, pursuant to Powers of Attorney executed by each of the officers and directors listed above whose name is marked by an “*” and filed as an exhibit hereto, by signing his name hereto does hereby sign and execute this Report of Affinity Group Holding, Inc. on behalf of each of such officers and directors in the capacities in which the names of each appear above.

 

70



 

CERTIFICATION

 

I, Joe McAdams, President and Chief Executive Officer of Affinity Group Holding, Inc., certify that:

 

1.       I have reviewed this annual report on Form 10-K of Affinity Group Holding, Inc.;

 

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

 

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

 

4.       The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

 

(a)        designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

 

(b)       evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

 

(c)        presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

 

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

 

(a)        all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

 

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

 

6.       The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:  March 21, 2003

 

 

 

 

/s/  Joe McAdams

 

 

 

 

 

 

Joe McAdams

 

 

 

 

 

President and Chief

 

 

 

 

 

Executive Officer

 

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CERTIFICATION

 

I, Mark J. Boggess, Vice President and Chief Financial Officer of Affinity Group Holding, Inc., certify that:

 

1.       I have reviewed this annual report on Form 10-K of Affinity Group Holding, Inc.;

 

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

 

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

 

4.       The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

 

(a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

 

(b)  evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

 

(c)  presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

 

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

 

(a)        all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

 

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

 

6.       The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:  March 21, 2003

 

 

 

/s/  Mark J. Boggess

 

 

 

 

 

Mark J. Boggess

 

 

 

 

Vice President and Chief

 

 

 

 

Financial Officer

 

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AFFINITY GROUP HOLDING, INC.

 

EXHIBIT INDEX TO ANNUAL REPORT

ON FORM 10-K

 

For Fiscal Year Ended December 31, 2002

 

Item

 

Regulation
S-K Exhibit
Table
Reference

 

Sequential
Page No.

Certificate of Incorporation of Affinity Group, Inc.(1)

 

3.1

 

 

 

 

 

 

 

Bylaws of Affinity Group, Inc.(1)

 

3.2

 

 

 

 

 

 

 

Indenture dated as of October 29, 1993 by and between the Company and United States Trust Company of New York.(2)

 

4.1

 

 

 

 

 

 

 

First Supplemental Indenture dated as of May 17, 1994, by and between Company and United States Trust Company of New York.(5)

 

4.2

 

 

 

 

 

 

 

Second Supplemental Indenture dated as of October 11, 1994, by and between Company and United States Trust Company of New York.(5)

 

4.3

 

 

 

 

 

 

 

Third Supplemental Indenture dated as of December 21, 1995 by and between Company and United States Trust Company of New York.(7)

 

4.3a

 

 

 

 

 

 

 

Fourth Supplemental Indenture dated as of February 1, 1996 by and between Company and United States Trust Company of New York.(7)

 

4.3b

 

 

 

 

 

 

 

Credit Agreement dated as of November 13, 1998 among Affinity Group, Inc., Fleet National Bank, as agent, and the banks named therein.(10)

 

4.9

 

 

 

 

 

 

 

Second Amendment to Credit Agreement dated as of March 1, 2001 among Affinity Group, Inc., Fleet National Bank, as agent, and the banks named therein.(12)

 

4.10

 

 

 

 

 

 

 

Third Amendment to Credit Agreement dated as of December 5, 2001 among Affinity Group, Inc., Fleet National Bank, as agent, and the banks named therein.(14)

 

4.11

 

 

 

 

 

 

 

Change in Registrant’s Accountants(16)

 

4.12

 

 

 

 

 

 

 

Fourth Amendment to Credit Agreement dated as of November 20, 2001 among Affinity Group, Inc., Fleet National Bank, as agent, and the banks named therein.

 

4.13

 

77

 

 

 

 

 

Tax Sharing Agreement among Affinity Group Holding, Inc., Affinity Group, Inc. and its subsidiaries.(2)

 

10.1

 

 

 

 

 

 

 

Lease for office facilities in Denver, Colorado.(2)

 

10.3

 

 

 

 

 

 

 

Lease Agreement for office facilities in Ventura, California(6)

 

10.3a

 

 

 

73



 

Item

 

Regulation
S-K Exhibit
Table
Reference

 

Sequential
Page No.

Investment in unrestricted subsidiary, assignment and assumption agreement and fourth amendment to office facility lease in Denver, Colorado.(3)

 

10.4

 

 

 

 

 

 

 

Employment Agreement dated August 1, 1993 between Stephen Adams and the Company, as amended.(2)

 

10.5

 

 

 

 

 

 

 

Phantom Stock Agreement dated January 2, 1992 between Joe McAdams and the Company.(2)

 

10.6

 

 

 

 

 

 

 

Phantom Stock Agreement dated January 2, 1992 between Michael Schneider and the Company.(2)

 

10.8

 

 

 

 

 

 

 

Phantom Stock Agreement dated January 2, 1992 between Mark J. Boggess and the Company.(2)

 

10.10

 

 

 

 

 

 

 

Employment Agreement dated as of January 1, 1991 between Keith Urry and Golf Card International Corp. as amended.(2)

 

10.12

 

 

 

 

 

 

 

Executive split-dollar life insurance agreements(3)

 

10.15

 

 

 

 

 

 

 

Indemnity Agreement dated October 29, 1994, by and between Affinity Group, Inc. and AGI Services, Inc.(5)

 

10.16

 

 

 

 

 

 

 

Agreement with Cross Country Motor Club, Inc. as amended.(2)

 

10.17

 

 

 

 

 

 

 

Amendment to National General Insurance Contract Dated January 13, 1994.(1)

 

10.19

 

 

 

 

 

 

 

Amendment to Service Agreement dated March 22, 1994 by and between Affinity Group, Inc. and National General Insurance Company.(4)

 

10.20

 

 

 

 

 

 

 

401 (k) Savings and Investment Plan.(2)

 

10.21

 

 

 

 

 

 

 

Form of Indemnification Agreement for persons consenting to serve as directors upon completion of the offering and amendment thereto.(1)

 

10.22

 

 

 

 

 

 

 

Phantom Stock Amendment dated October 10, 1995 between Joe McAdams and the Company.(7)

 

10.24

 

 

 

 

 

 

 

Phantom Stock Agreement dated December 19, 1995 between David Block and Affinity Road and Travel Club, Inc., a wholly-owned subsidiary of the Company.(7)

 

10.25

 

 

 

 

 

 

 

Agreement between Ganis Credit Corporation and the Company dated September, 1995.(7)

 

10.26

 

 

 

 

 

 

 

Addendum to National General Insurance Contract Dated January 13, 1994.(9)

 

10.29

 

 

 

 

 

 

 

Agreement with Cross Country Motor Club, Inc. dated October 10, 1997, as amended.(9)

 

10.30

 

 

 

74



 

Item

 

Regulation
S-K Exhibit
Table
Reference

 

Sequential
Page No.

Stock Purchase Agreement dated as of February 25, 1997, by and among the Shareholders of Camping World, Inc. and Affinity Group, Inc. (8)

 

10.31

 

 

 

 

 

 

 

Form of Phantom Stock Agreements, between certain executives and the Company (9)

 

10.35

 

 

 

 

 

 

 

Stock Purchase Agreement between Affinity Group Thrift Holding Corp. and Affinity Bank Holdings LLC (11)

 

10.39

 

 

 

 

 

 

 

Member Control Agreement of Affinity Bank Holdings LLC (11)

 

10.40

 

 

 

 

 

 

 

Closing Agreement between Affinity Group Thrift Holding Corp. and Affinity Bank Holdings LLC (11)

 

10.41

 

 

 

 

 

 

 

Agreement and Escrow Instructions for Purchase of Real Estate by AGRP Holding Corp., dated November 1, 2001 (13)

 

10.44

 

 

 

 

 

 

 

Participation Agreement by and between Affinity Group Thrift Holding Corp. and the Stephen Adams Living Trust, dated December 5, 2001. (14)

 

10.45

 

 

 

 

 

 

 

Capital Note of AGRP Holding Corp., dated December 5, 2001. (14)

 

10.46

 

 

 

 

 

 

 

Phantom Stock Amendment dated December 5, 2001 between Joe McAdams and the Company (15)

 

10.48

 

 

 

 

 

 

 

Amended and Restated Marketing Agreement, dated March 15, 2002 by and between Camping World, Inc. and National General Insurance Company

 

10.49

 

88

 

 

 

 

 

Addendums to National General Insurance Working Agreements dated March 15, 2002

 

10.50

 

106

 

 

 

 

 

Addendums to National General Insurance Service Agreements dated March 15, 2002

 

10.51

 

110

 

 

 

 

 

Phantom Stock Agreement dated May 15, 2002 between Mark T. Gilman and Camping World, Inc.

 

10.52

 

114

 

 

 

 

 

Amendment to Employment Agreement dated August 1, 1993 between Stephen Adams and the Company

 

10.53

 

126

 

 

 

 

 

Subsidiaries of the Registrant

 

21

 

127

 

 

 

 

 

Power of Attorney

 

24

 

128

 

 

 

 

 

Certification Pursuant to 18 U.S.C Section 1350- Joe McAdams, President and CEO of Affinity Group Holding, Inc.

 

99.1

 

130

 

 

 

 

 

Certification Pursuant to 18 U.S.C Section 1350- Mark J. Boggess, Vice President and CFO of Affinity Group Holding, Inc.

 

99.2

 

131

 

75



 


(1)               Filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated by reference herein.

 

(2)               Filed with the Company’s Registration Statement No. 33-67272 and incorporated by reference herein.

 

(3)               Filed with the Company’s Report on Form 10-Q for the quarter ended June 30, 1994 and incorporated by reference herein.

 

(4)               Filed with the Company’s Report on Form 10-Q for the quarter ended March 31, 1994 and incorporated by reference herein.

 

(5)               Filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated by reference herein.

 

(6)               Filed with the Company’s Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated by reference herein.

 

(7)               Filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 1995 and incorporated by reference herein.

 

(8)               Filed with the Company’s Report on Form 8-K dated April 2, 1997 and incorporated by reference herein.

 

(9)               Filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated by reference herein.

 

(10)         Filed with the Company’s Report on Form 8-K dated November 13, 1998 and incorporated by reference herein.

 

(11)         Filed with the Company’s Report on Form 10-Q for the quarter ended September 30, 1999 and incorporated by reference herein.

 

(12)         Filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated by reference herein.

 

(13)         Filed with the Company’s Report on Form 10-Q for the quarter ended September 30, 2001 and incorporated by reference herein.

 

(14)         Filed with the Company’s Report on Form 8-K dated December 5, 2001 and incorporated by reference herein.

 

(15)         Filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated by reference herein.

 

(16)         Filed with the Company’s Report on Form 8-K dated June 27, 2002 and incorporated by reference herein.

 

A copy of any of these exhibits will be furnished at a reasonable cost to any person upon receipt from such person of a written request for such exhibit.  Such request should be sent to Affinity Group, Inc., 64 Inverness Drive East, Englewood, Colorado  80112, Attention:  Chief Financial Officer

 

76


EX-4.13 3 j8667_ex4d13.htm EX-4.13

Exhibit 4.13

 

 

FOURTH AMENDMENT TO CREDIT AGREEMENT

 

 

This FOURTH AMENDMENT TO CREDIT AGREEMENT dated as of November 20, 2002 (this “Amendment”), among AFFINITY GROUP, INC. (the “Borrower”), THE GUARANTORS PARTY HERETO (the “Guarantors”), THE LENDERS PARTY HERETO (the “Lenders”), FLEET NATIONAL BANK, as Administrative Agent (the “Administrative Agent”), THE PROVIDENT BANK, as Syndication Agent (the “Syndication Agent”) and BANK ONE KENTUCKY, NA, as Documentation Agent (the “Documentation Agent” and together with the Administrative Agent and the Syndication Agent, the “Agents”).

 

WHEREAS, the Credit Agreement (as defined below) provides that the Lenders may make Revolving Credit and Term Loans to the Borrower, and that the Issuing Lender may issue Letters of Credit; and

 

WHEREAS, the Credit Parties wish to amend the Credit Agreement to increase the maximum Letter of Credit amount as stated under Section 2.4(b) of the Credit Agreement from $5,000,000 to $12,500,000.

 

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

 

1.             Reference to Credit Agreement.  Reference is made to the Amended and Restated Credit Agreement dated as of November 13, 1998, as amended by the First Amendment to Credit Agreement dated as of October 29, 1999, the Second Amendment to Credit Agreement dated as of March 1, 2001, and the Third Amendment to Credit Agreement dated as of December 5, 2001 among the Borrower, the Guarantors, the Lenders, the Administrative Agent, the Syndication Agent and the Documentation Agent (as the same may be further amended or amended and restated from time to time, the “Credit Agreement”).  Capitalized terms used herein which are defined in the Credit Agreement have the same meanings herein as therein, except to the extent that such meanings are amended hereby.

 

2.             Amendments.  The Credit Parties, the Lenders, and the Administrative Agent agree that the Credit Agreement is hereby amended, effective as of the date hereof, as follows:

 

(a)           Section 2.4(b) is hereby amended by inserting “$12,500,000” in place of “$5,000,000” in the last sentence of such section.

 

3.             No Default; Representations and Warranties, etc.  The Credit Parties hereby confirm that: (a) the representations and warranties of the Credit Parties contained in Article 4 of the Credit Agreement are true on and as of the date hereof as if made on such date; (b) the Credit Parties are in compliance in all material respects with all of the terms and provisions set forth in the Credit Agreement on their part to be observed or performed thereunder; and (c) after giving effect to this Amendment, no Event of Default,

 

77



 

nor any event which with the giving of notice or expiration of any applicable grace period or both would constitute such an Event of Default, shall have occurred and be continuing.

 

4.             Conditions to this Amendment. This Amendment shall not become effective until the date on which each of the following conditions is satisfied or waived in writing by the Required Lenders:

 

(a)           Counterparts of Amendment.  The Administrative Agent shall have received from each party hereto either (i) a counterpart of this Amendment signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Amendment) that such party has signed a counterpart of this Amendment.

 

(b)           Fees and Expenses.  The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the date hereof, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder.

 

5.             Miscellaneous.

 

(a)           Except to the extent specifically amended or waived hereby, the Credit Agreement, the Loan Documents and all related documents shall remain in full force and effect.  Whenever the terms or sections amended hereby shall be referred to in the Credit Agreement, Loan Documents or such other documents (whether directly or by incorporation into other defined terms), such defined terms shall be deemed to refer to those terms or sections as amended by this Amendment.  The foregoing waivers shall apply solely to the provisions of the Credit Agreement specified herein for the periods and purposes specified herein.  Nothing herein shall be deemed to constitute a modification, amendment or waiver of any other term or condition of the Credit Agreement.

 

(b)           This Amendment may be executed in any number of counterparts, each of which, when executed and delivered, shall be an original, but all counterparts shall together constitute one instrument.

 

(c)           This Amendment shall be governed by the laws of the Commonwealth of Massachusetts and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

 

(d)           The Credit Parties agree to pay all reasonable expenses, including legal fees and disbursements incurred by the Administrative Agent in connection with this Amendment and the transactions contemplated hereby.

 

78



 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment which shall be deemed to be a sealed instrument as of the date first above written.

 

 

BORROWER

 

 

 

 

AFFINITY GROUP, INC.

 

 

 

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

SUBSIDIARIES/GUARANTORS

 

 

 

 

A - B DEVELOPMENT CO.

 

 

 

 

By:

AGI PROPERTIES OF COLORADO, INC., a General Partner

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

AFFINITY BROKERAGE, INC.

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

AFFINITY ROAD AND TRAVEL CLUB, INC.

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

 

AGI PROPERTIES OF COLORADO, INC.

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

79



 

 

AGI REAL ESTATE HOLDINGS, INC.

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

CAMP COAST TO COAST, INC.

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

 

CAMPING REALTY, INC.

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

CAMPING WORLD, INC.

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

CWI, INC.

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

CW MICHIGAN, INC.

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

80



 

 

CW TEXAS, LP

 

 

 

 

By:

AFFINITY GROUP, INC., its General Partner

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

EHLERT PUBLISHING GROUP, INC.

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

EXPOSITIONS GROUP, INC.

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

GOLF CARD HOLDING CORPORATION

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

GOLF CARD INTERNATIONAL CORP.

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

 

 

 

GOLF CARD RESORT SERVICES, INC.

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

81



 

 

GSS ENTERPRISES, INC.

 

 

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

 

TL ENTERPRISES, INC.

 

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

 

VBI, INC.

 

 

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

 

WOODALL PUBLICATIONS CORPORATION

 

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

 

CAMPING WORLD RV SALES, INC.

 

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

 

THUNDER PRESS, INC.

 

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

82



 

 

COAST MARKETING GROUP, INC.

 

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

 

POWER SPORTS MEDIA, INC.

 

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

 

 

 

 

CAMPING WORLD INSURANCE SERVICES OF NEVADA, INC.

 

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

83



 

RATIFICATION OF NONRECOURSE GUARANTY

 

The undersigned guarantor hereby acknowledges and consents to the foregoing Amendment as of the date hereof, and agrees that the Nonrecourse Guaranty and Pledge Agreement dated as of November 13, 1998 remains in full force and effect, and the undersigned confirms and ratifies all of its obligations thereunder.

 

 

AFFINITY GROUP HOLDING, INC.

 

 

 

 

 

By:

/s/  Mark J. Boggess

 

 

 

Name:

Mark J. Boggess

 

 

Title:

Senior Vice President

 

84



 

SIGNATURE PAGES OF LENDERS

 

 

 

 

 

 

 

 

FLEET NATIONAL BANK

 

 

 

 

 

 

 

 

 

 

By:

/s/  Peter van der Horst

 

 

 

Name:

Peter van der Horst

 

 

Title:

Director

 

 

 

 

SIGNATURE PAGES OF LENDERS

 

 

 

 

THE PROVIDENT BANK

 

 

 

 

 

 

 

 

 

 

By:

/s/  Nick Jevic

 

 

 

Name:

Nick Jevic

 

 

Title:

Senior Vice President

 

 

 

 

SIGNATURE PAGES OF LENDERS

 

 

 

 

 

 

 

 

CIBC INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/  Keith Labbate

 

 

 

Name:

Keith Labbate

 

 

Title:

Executive Director

 

 

 

 

SIGNATURE PAGES OF LENDERS

 

 

 

 

 

 

 

 

USBANK (as successor in interest to Firstar Bank N.A.

 

 

 

 

 

 

 

 

 

By:

/s/  Eric A. Walker

 

 

 

Name:

Eric A. Walker

 

 

Title:

Vice President

 

85



 

SIGNATURE PAGES OF LENDERS

 

 

 

 

 

 

 

 

GOLDENTREE LOAN OPPORTUNITIES I, LTD.

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

 

By:

/s/  Fred Haddad

 

 

 

Name:

Fred Haddad

 

 

Title:

Partner, Portfolio Manager

 

 

 

 

SIGNATURE PAGES OF LENDERS

 

 

 

 

 

 

 

 

CITIZENS BANK OF MASSACHUSETTS

 

 

 

 

 

 

 

 

 

By:

/s/  Peter Kirkiris

 

 

 

Name:

Peter Kirkiris

 

 

Title:

Assistant Vice President

 

 

 

 

SIGNATURE PAGES OF LENDERS

 

 

 

 

 

 

 

 

ARCHIMEDES FUNDING II LTD.

 

 

 

 

 

 

 

 

 

By:

ING Capital Advisors LLC as Collateral Manager

 

 

 

 

 

By:

/s/  John J. D’Angelo

 

 

 

Name:

John J. D’Angelo

 

 

Title:

Vice President

 

 

 

 

SIGNATURE PAGES OF LENDERS

 

 

 

 

 

 

 

 

ENDURANCE CLO I, LTD.

 

 

 

 

 

 

 

 

 

By:

/s/  John J. D’Angelo

 

 

 

Name:

John J. D’Angelo

 

 

Title:

Vice President

 

86



 

SIGNATURE PAGES OF LENDERS

 

 

 

 

 

 

 

 

FIRST SOURCE LOAN OBLIGATIONS TRUST

 

 

 

 

 

By:

First Source Financial, Inc., its Servicer and Administrator

 

 

 

 

 

 

 

 

 

By:

/s/  Maureen S. Ault

 

 

 

Name:

Maureen S. Ault

 

 

Title:

Vice President

 

 

 

 

SIGNATURE PAGES OF LENDERS

 

 

 

 

 

 

 

 

ELF FUNDING TRUST III

 

 

 

 

 

 

 

 

 

By:

New York Life Investment Management LLC

 

 

As Attorney in Fact

 

 

 

 

 

 

By:

/s/  Robert H. Dial

 

 

 

Name:

Robert H. Dial

 

 

Title:

Vice President

 

 

 

 

SIGNATURE PAGES OF LENDERS

 

 

 

 

 

 

 

 

LANDMARK II CDO LIMITED

 

 

 

 

 

 

 

 

 

By:

Aladdin Asset Management LLC, as Manager

 

 

 

 

 

 

 

 

 

By:

/s/  Gilles Marchand

 

 

 

Name:

Gilles Marchand

 

 

Title:

 

 

87


EX-10.49 4 j8667_ex10d49.htm EX-10.49

Exhibit 10.49

 

AMENDED AND RESTATED MARKETING AGREEMENT

 

AMENDED AND RESTATED MARKETING AGREEMENT, dated as of the 15th day of May, 2002 by and between (i) CAMPING WORLD, INC., a Kentucky corporation (“Camping World”), CWI, Inc., a Kentucky corporation and a wholly-owned subsidiary of Camping World, doing business as CAMPING WORLD INSURANCE SERVICES, INC. (“CWI, Inc.”), CAMPING WORLD INSURANCE SERVICES OF NEVADA, INC., a Nevada corporation (“CWIS Nevada”), and CAMPING WORLD INSURANCE SERVICES OF TEXAS, INC., a Texas corporation (“CWIS Texas,” and collectively with CWI, Inc. and CWIS Nevada, “CWI”), and (ii) AFFINITY GROUP PLANS, INC., a Delaware corporation (“AGP”), NATIONAL ALLIANCE INSURANCE COMPANY, a Missouri domiciled insurance company (“NAIC”), NATIONAL GENERAL INSURANCE COMPANY, a Missouri domiciled insurance company (“NGIC”), and NATIONAL GENERAL ASSURANCE COMPANY, a Missouri domiciled company (“NGAC”).  NAIC, NGIC and NGAC are herein individually and collectively referred to as the “Insurer”.

 

WITNESSETH:

 

WHEREAS, Camping World, AGP and certain other parties were parties to (i) a Founders Agreement dated as of July 21, 1992, as amended, relating to, among other things, the granting of insurance marketing rights to AGP with respect to Camping World and its customers including through solicitation of Camping World customers at kiosks located at its stores and through its mailing list, including the “Camping World’s President’s Club” program (the “President’s Club”); (ii) various Kiosk Agreements, dated as of June 1, 1995, as amended, relating to the provision of certain services by AGP to Camping World and its customers at kiosks located on the premises of Camping World Stores, (iii) a Letter Agreement dated October 1997 relating to the matters described in clauses (i) and (ii) and certain other matters, (iv) a Trademark License Agreement, dated August 13, 1992, as amended, (v) a CWI Transfer Agreement, dated August 13, 1992, as amended, and (vi) the Stockholders Agreement dated as of September 30, 1994 and related documents and instruments pertaining to the common stock of AGP held by Camping World (the agreements referred to in clauses (i) through (vi) and all other documents, instruments and agreement between Camping World or CWI, on the one hand, and AGP or NAIC, on the other hand, relating to the subject matter hereof being collectively referred to herein as the “Former Marketing Arrangements”); and

 

WHEREAS, Camping World and CWI, on the one hand, and AGP and NAIC, on the other hand, amended and restated in all respects the Former Marketing Arrangements to provide for, among other things, new and ongoing cooperative marketing and other business relationships between Camping World and CWI, on the one hand, and AGP and NAIC on the other hand and memorialized such new agreement in the marketing agreement dated December 31, 1998 (the “Revised Marketing Agreement”), and in connection therewith also executed a letter agreement dated February 11, 1999 (the “Letter Agreement”) and a Right of First Offer Agreement dated December 31, 1998, (the Revised Marketing Agreement, the Letter Agreement and the Right of First Offer Agreement are hereinafter collective referred to as the “Existing Marketing Agreement”), which Revised Marketing Agreement was approved by the Missouri and California Insurance Departments; and

 

WHEREAS, in connection with a sale of AGP, and its wholly-owned subsidiary NAIC to Motors Insurance Corporation, Camping World and CWI, on the one hand, and AGP and the Insurer on the other hand desire to amend and restate in all respects the Existing Marketing Agreement to provide for, among other things, new and ongoing cooperative marketing and other business relationships between Camping World and CWI, on the one hand, and AGP and the Insurer on the other hand.

 

NOW THEREFORE, in consideration of the premises and of the respective representations, warranties, covenants, agreements and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

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I
THE EFFECTIVE TIME

 

1)                                      This Agreement shall become effective on May 15, 2002 (the “Effective Time”).  This Agreement shall supersede the Existing Marketing Agreement in all respects and the term of the Existing Marketing Agreement shall be deemed to have expired at the Effective Time, and the parties agree to take such action, including delivery of documents or certificates, as is reasonably necessary to evidence the termination of the Existing Marketing Agreement and the parties agree to waive any and all terms and conditions that may have otherwise survived a termination of the Existing Marketing Agreement  Notwithstanding the foregoing, this Agreement shall apply to all NAIC policies in effect under the Existing Marketing Agreement at the Effective Time (the “Existing Policies”).

 

II
MARKETING ARRANGEMENTS

 

1)                                      CWI and Camping World hereby, jointly and severally, grant to Insurer and its Affiliates, the sole and exclusive right and authority (as provided in Section II 4 below) to offer, sponsor, market and sell Insurance and Insurance Products, as defined in Article VIII, to any and all of Camping World’s Customers, as defined in Article VIII, during the Term, as defined in Article VIII.  To the zextent any Affiliate of Insurer offers and sells Insurance and Insurance Products hereunder, such Affiliate will agree to be bound by the terms and conditions hereof prior to offering any such products for sale.

 

2)                                      Without limiting the foregoing, and in furtherance of the right granted to Insurer in subsection II (1) above, CWI and Camping World hereby grant to Insurer and its Affiliates the following rights:

 

(a)                                  The right to use all logos, service marks, trade names, trademarks and other intellectual property of Camping World and CWI (including, but not limited to the “Camping World” tradename and, subject to the prior approval of Camping World and CWI, the ability to utilize the Camping World and CWI websites, if any), but only in connection with the marketing of Insurance and Insurance Products to Customers and the performance of Insurer’s duties hereunder.  Use of the CWI website shall be subject to all restrictions, rules or other requirements established from time to time by CWI for use of its website.

 

(b)                                 The exclusive right to market Insurance and Insurance Products to Customers of Camping World through Camping World facilities or with Camping World’s sponsorship or cooperation.

 

(c)                                  The right to use the Customer mailing list (the “Customer List”), and such other information relating to Customers in the possession of Camping World and CWI as Insurer may reasonably request, but only in connection with the marketing of Insurance Products to Customers and Insurer’s performance hereunder.

 

(d)                                 The right to receive quarterly reports (each a “Customer Report”) which shall include (i) an updated Customer List containing the most current names, addresses and other data available to Camping World with respect to its Customers, (ii) a list of the most current names, addresses, dates of birth, email addresses and other data available to Camping World with respect to the President’s Club members, (iii) a list of new Camping World Customers and new President’s Club members since the last Customer Report, (iv) any changes or corrections, of which Camping World is aware, to the last Customer List delivered to Insurer or to any Customer or President’s Club member information previously delivered to Insurer, and (v) such other information in the possession of Camping World relating to Customers, President’s Club members and Insurance or Insurance Products issued to Customers as Insurer may reasonably request.

 

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(e)                                  Reasonable rights of access to:

 

(i)

 

all Camping World stores for display or distribution of marketing materials and participation in on-site promotional events, provided that the location and prominence of such materials shall be reasonably determined by Camping World;

 

 

 

(ii)

 

space, the location of which shall be reasonably determined by Camping World, in Camping World catalogs on a regular basis for Insurer’s insurance advertisements and editorials, bind-in cards and other inserts; and

 

 

 

(iii)

 

space for insurance materials in all President’s Club membership and renewal kits, and stand alone outserts in all President’s Club newsletters.

 

 

3)                                      Camping World and CWI will provide space for a promotional kiosk unit in such of the Camping World retail stores as are designated by either party hereto (collectively, the “Kiosks”), subject to the consent of the other party, which consent shall not be unreasonably withheld or delayed.  The Kiosks to be placed in stores so selected shall be approximately 45 square feet of floor space in size and shall be used to inform Customers about the Insurance and Insurance Products available through Insurer, to generate leads for Insurance and Insurance Products and to take all other actions necessary or desirable to effect, or incident to, the above described uses of such space.  Any individual selling insurance at any such Kiosk shall be a CWI or Camping World employee and shall be a licensed insurance agent of Insurer.  Location of the Kiosk will be in a high visibility, high traffic area approved by CWI and Insurer, which approval shall not be unreasonably withheld or delayed.  Camping World further agrees that the licensed insurance agents shall have the non-exclusive right to use for their generally intended purpose of marketing the Insurance and Insurance Products all interior and exterior areas of the Camping World store and grounds surrounding the Camping World store that are generally available to the public, including entrances, lobbies, corridors, stairways, elevators, hallways, restrooms, vending areas, parking areas and sidewalks.

 

4)                                      Camping World and CWI shall not offer, sponsor, support, market, sell or advertise any Insurance or Insurance Products, other than pursuant to this Agreement, provided, that in the event that Insurer does not offer a particular type of Insurance or Insurance Product, Camping World or CWI may submit a written request (a “Coverage Proposal”), including a reasonably detailed proposal to Insurer for Insurer to make that type of Insurance or Insurance Product available to Customers.  Within 60 days after receiving such Coverage Proposal, Insurer may inform Camping World or CWI, as the case may be, in writing (a “Notice of Coverage”) that it intends to make the requested type of Insurance or Insurance Product available to Camping World Customers on the same terms and conditions as set forth in the Coverage Proposal.  Insurer may not give a Notice of Coverage unless Insurer is capable of providing the Insurance or Insurance Product described in the Coverage Proposal on the same basis, including time frames (and specifically including the same time frames required to make necessary state rate or other filings), and of the same scope of coverage as detailed in the Coverage Proposal.  The Notice of Coverage shall describe, in reasonable detail, the terms of coverage as Camping World, or CWI, as the case may be, may reasonably have requested in its Coverage Proposal.  If Insurer has given a Notice of Coverage, Insurer shall make such coverage available directly to Camping World Customers in accordance with the terms of the Coverage Proposal.  Any type of Insurance or Insurance Product so made available by Insurer to Customers is herein referred to as “Covered Insurance.”  If a Notice of Coverage is not delivered by Insurer as aforesaid, Camping World and CWI may solicit any other entity to make that type of Insurance available and may, within 90 days after expiration of the 60 day period referred to above, enter into an agreement with any other entity to sponsor, underwrite, issue, support or advertise that type of Insurance in accordance with the Coverage Proposal (i.e. not on terms either more favorable to the applicable insurer or less favorable to Camping World or

 

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CWI).  The fees with respect to Covered Insurance shall be as set forth in Article III.  If, at the end of the 90-day period referred to above, Camping World or CWI has not entered into and consummated agreements with any other entity relating to such Insurance or Insurance Products as described in this Section 4, the provisions of this Section 4 shall once again apply with respect to such Insurance or Insurance Products.  Notwithstanding the foregoing, neither Camping World nor CWI shall be precluded from providing (i) advertising space in Camping World or CWI publications or (ii) access to vendors at Camping World or CWI promotions or events (other than at retail stores or other similar outlets) on the same terms as made available to similarly situated vendors and in the ordinary course of Camping World’s and CWI’s business.

 

5)                                      The parties hereto acknowledge that Camping World and CWI provide names and addresses of Customers to other entities and agree that Camping World and CWI may continue to provide names and addresses of Customers to other entities with respect to products and services other than Insurance and Insurance Products.

 

6)                                      Camping World, CWI and Insurer shall make, and cause their respective subsidiaries to make their books and records available to the employees and agents of the other during the Term of this Agreement for purposes of verifying that the obligations undertaken by such first party under this Agreement have been met.  Any such examination shall occur at the business office of the party being examined during normal business hours, and shall be conducted in a manner designed not to be disruptive of the normal business activities of such first party.  The provisions of such materials shall be subject to the confidentiality provisions of Article V.

 

7)                                      Camping World and Insurer shall deliver to the other, for the other’s prior written approval, the form of documents contemplated for distribution which refer to the other party or any subsidiary of the other party and shall not distribute any such form of document prior to its receipt of written approval therefor from the other party.  Insurer recognizes that the trade names “Camping World” and “President’s Club” and all other trade names, trademarks, service marks, logos and slogans used by Camping World or CWI shall remain the sole and exclusive property of Camping World or CWI, as the case may be, and Insurer agrees that such trade names, trademarks, service marks, logos and slogans, and any other materials that would cause Customers to recognize an association with Camping World shall be used by Insurer only after receiving prior written approval from Camping World or CWI, as the case may be, and then only in connection with the services to be provided by Insurer pursuant to the terms of this Agreement.  No prior written approval required under this Section II(7) shall be unreasonably withheld or delayed and such prior written approval shall be deemed to have been given if the other party does not respond in writing within thirty (30) days after the form of document or other material to be approved has been delivered to the other party pursuant hereto.

 

8)                                      Insurer will expend a reasonable amount of research and development resources to refine and develop Insurance and Insurance Products, marketing strategies and operational procedures specifically designed for the sale of Insurance and Insurance Products to Customers.

 

9)                                      The marketing activities of Insurer shall include, but not be limited to, arranging promotional events and display advertisements at Camping World stores, providing marketing materials for distribution at Camping World stores, at functions such as automobile and recreational vehicle shows at which Camping World is represented, and in Camping World catalogs, direct mailings, Camping World President’s Club materials and other advertisements.  Periodically, Insurer will also provide editorials, columns and other articles for publication in Camping World newsletters.  Subject to Article III, Insurer shall be responsible for creative design, production and distribution of promotional materials associated with such program.  All costs and expenses of marketing and selling Insurance and Insurance Products to Customers shall be the responsibility of the parties as set forth in Article III, Fees and Expenses.

 

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10)                                Insurer shall be responsible for all insurance services related to Covered Insurance including, without limitation, premium billing, claims adjustment, claims processing and handling of policy inquiries, changes and renewals.  To the extent Insurer solicits Customers directly, in addition to the foregoing, Insurer shall be responsible for quoting rates, taking applications for insurance and binding coverage.

 

11)                                Insurer shall perform its duties and activities as provided in this Agreement in accordance in all material respects with applicable law and Insurer shall use its good faith and reasonable efforts to provide a level of customer service substantially equivalent to the level of customer service being provided by NAIC prior to the Effective Time.

 

12)                                Any one of the parties constituting the Insurer shall provide, as applicable, to Camping World, and Camping World shall provide and cause each of its respective subsidiaries to provide to Insurer, such information as is mutually agreed to by the parties hereto regarding all insurance marketing activities, and the amount of Direct Written Premiums received on Covered Insurance.  During such period after the term of this Agreement for which payments are due under Article III of this Agreement, the Insurer, as applicable, shall provide to Camping World reports as to the amount of Direct Written Premiums received on Covered Insurance which is (a) issued through any Insurer to Customers pursuant to applications made during the Term of this Agreement and (b) renewed by Customers at any time until five years after expiration of the Term of this Agreement.  Reports containing such information shall be substantially in the form, and shall be supplied with such frequency (at least monthly) as may be mutually agreed upon by the parties.

 

13)                                Right of First Offer

 

(a)                                  Insurer hereby grants to CWI a right of first offer (the “Right of First Offer”) to establish programs (the “Covered Programs”) involving the offering, marketing, underwriting, issuance or sale of any Vehicle Coverages or other Covered Insurance through any one or more of the distribution channels identified on Exhibit A attached hereto (each, a “Sponsored Distribution Channel”).  With respect to the Sponsored Distribution Channels identified on Exhibit A that are parties to existing agreements with Insurer, the Right of First Offer does not apply to Covered Programs established pursuant to the terms of such existing agreements during the current term thereof.

 

(b)                                 In the event that either Insurer or CWI proposes a Covered Program through a Sponsored Distribution Channel, the parties shall attempt to establish the Covered Program by mutual agreement.  If the parties are unable to establish a mutually acceptable Covered Program, the party proposing the Covered Program shall submit its proposal (a “Program Proposal”) in writing to the other party hereto, including a reasonably detailed description of the terms on which the Covered Program would be made available through the Sponsored Distribution Channel.  Insurer and its Affiliates agree not to offer, market, underwrite, issue or sell any Vehicle Coverages or other Covered Insurance through one or more Sponsored Distribution Channel on terms that are less favorable to Insurer than the terms contained in the Program Proposal.

 

(c)                                  Notwithstanding anything to the contrary in this Section 13, the total fees payable by Insurer in connection with any Covered Program through a Sponsored Distribution Channel shall not exceed the fees set forth in Section III(2).

 

14)                                Neither Camping World, CWI or any of its Affiliates will take any affirmative action with the intent of, or in furtherance of, depriving Insurer of the intended benefits of this Agreement; provided, however, that the conduct of business in the ordinary course by Good Sam shall not be deemed to be a breach of this Section 14.

 

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15)                                Neither Insurer nor any of its Affiliates will take any affirmative action with the intent of, or in furtherance of, depriving Camping World or CWI of the intended benefits of this Agreement.

 

III
FEES AND EXPENSES

 

1)                                      In consideration of the exclusive rights granted hereunder to Insurer, NAIC, NGIC or NGAC, as the case may be, hereby agrees to pay to the entity designated by CWI that is a licensed insurance agency, for each full or partial calendar month during the period from the Effective Time until the fifth anniversary of the Effective Time, amounts in cash equal to seven percent (7%) of Direct Written Premiums for (a) all Existing Policies and (b) all new and renewal policies written pursuant to the terms hereof.

 

2)                                      Beginning on the fifth anniversary date of the Effective Time and continuing until the termination of this Agreement, the percentage set forth in Section III 1 above shall be changed to eight and one-quarter percent (8.25%) of Direct Written Premiums.

 

3)                                      If Insurer terminates this Agreement, or if upon expiration of the Term Insurer does not elect or agree to renew the Agreement on the terms of the Agreement then in effect, the payments contemplated by Sections III(1) and (2) shall continue to be paid by Insurer to CWI for a period of five (5) years following termination (the “Run-Off Period”), and calculated as provided in Sections III(1) and (2) except that for each year during the Run-Off Period, the percentage referenced in Sections III(1) and (2), shall be multiplied times a fraction, the numerator of which is the Direct Written Premium for the Covered Insurance for the year and the denominator of which is the Direct Written Premium for the year immediately preceding such year.  This provision shall not be applicable to any termination or election not to renew by Camping World or CWI.

 

4)                                      During the Run-Off Period, as long as CWI is continuing to receive the payment described in Section III(3) above, CWI and Camping World will not engage in, use, sponsor, endorse, recommend or otherwise participate in any telephone solicitation or direct mail solicitation that is (a) directed at the Customers that are still provided an Insurance Product by Insurer and (b) intended for the purpose of soliciting such Customers to cancel, terminate or allow to lapse insurance policies written pursuant to the terms of this Agreement and to replace such policies with new policies offered by an insurance company other than Insurer.  Prior to making any solicitation not otherwise prohibited by this Section, Camping World shall delete from the membership list(s) of it and its Affiliates the names of all Customers described in this paragraph prior to such solicitation.  This provision shall apply to all Customers that continue to pay premiums that are included in the Direct Written Premium.

 

5)                                      At the expiration of each month, NGIC, NGAC, or NAIC, as the case may be, shall, within twenty-one (21) days after such expiration, make the necessary calculations and remit to the entity designated by CWI that is a licensed insurance agency, by wire transfer any payment as may be due for such month pursuant to this Article IIINotwithstanding the foregoing, NGIC, NGAC or NAIC, as the case may be, shall provide monthly reports of Direct Written Premium to CWI not later than fifteen (15) days after then end of each month.

 

6)                                      Camping World and Insurer agree that there are certain costs associated with the construction and operation of the Kiosks.  The categories of costs associated with construction and operation of the Kiosks are identified on Exhibit B hereto.  Camping World and Insurer further agree that not all of the costs of constructing and operating the Kiosks relate to the marketing and promotion of the Insurance and Insurance Products.  Insurer agrees to reimburse Camping World for fifty percent (50%) of the costs of the construction of new Kiosks and operation of all Kiosks associated with the sale of Insurance and Insurance Products only.  Insurer’s share of expenses

 

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associated with the construction of new Kiosks and operation of all Kiosks in the Camping World stores shall be calculated by adding the total of all expenses associated with the construction of new Kiosks and operation of all Kiosks, less the expenses allocable to the sale of products other than Insurance Products, and multiplying the result of such calculation by 50%.  Camping World shall provide a report to Insurer (the form of which shall be mutually agreed upon) within twenty-five (25) days after the end of each month of all of Camping World’s expenses associated with the construction of new Kiosks and operation of all Kiosks for such month.  Payment to Camping World for Insurer’s share of such expenses shall be made within twenty-one (21) days after Insurer’s receipt of such report.  The categories of costs and the percentage related to Insurance and Insurance Products for the calendar year 2002 are set forth on Exhibit B hereto.  Camping World and Insurer agree to review such percentages on a monthly basis.  This provision is not applicable during the Run-Off Period.

 

7)                                      Camping World and Insurer recognize that substantial advertising, mailing and promotional expenses will be needed in creating interest in the Insurance Products.  Camping World agrees to reimburse Insurer for fifty percent (50%) of the Marketing Expenses (as defined on Exhibit C hereto) associated with marketing the Insurance Products.  The rate charged for such advertising in Camping World’s catalog and other publications shall be at the “house rate” as previously defined by the parties.  Insurer shall provide a report to Camping World (the form of which shall be mutually agreed upon) within twenty-five (25) days after the end of each month outlining all of Insurer’s Marketing Expenses for such month.  Payment to Insurer for Camping World’s share of such expenses shall be made within twenty-one (21) days after Camping World’s receipt of such report.  This provision is not applicable during the Run-Off Period.

 

8)                                      All Insurance and Insurance Products issued pursuant to the terms of this Agreement shall be coded by Insurer for tracking purposes.  Insurer agrees to provide CWI with the applicable coding needed to track inquiries or applications for Insurance and Insurance Products.  Insurer agrees that Customers will be prompted by Insurer’s representatives to reveal the applicable code.  CWI shall be entitled to fees under Article III of this Agreement only for applications reflecting the appropriate coding.

 

9)                                      All fees and expenses payable by Insurer to CWI hereunder with respect to the provisions hereof are set forth herein.

 

10)                                Anything in this Agreement to the contrary notwithstanding, the parties hereto agree that Motors Insurance Corporation shall not be entitled, regardless of any other rights it may otherwise have, to offset the amount of indemnity or other amounts owed to it under the Stock Purchase Agreement from any amounts due to Camping World or CWI under this Agreement.

 

IV
OTHER MARKETING AGREEMENTS

 

1)                                      Camping World, CWI and Insurer agree to share with each other, to the extent they are legally entitled to do so, customer lists, reports and other database information relating to Camping World Customers which might be of use to such other party in its business.  The confidentiality provisions of Article V will apply with respect to the information shared.

 

V
CONFIDENTIALITY

 

1)                                      The parties hereby agree that each has received, and may be receiving, from the other parties hereto information that is confidential and highly proprietary, which information may include customer lists, customer reports, reserve information, renewal information and other information

 

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relating to the business and operations of such other party (“Confidential Information”) and such party hereby agrees that it has kept, and will continue to keep, such information confidential and it has not used, and it will not use, such information for any purpose other than in furtherance of the purposes of this Agreement or in any way detrimental to the providing person or its Affiliates (it being understood that such Confidential Information may be disclosed to the extent necessary or required in order to comply with applicable law, rule or regulation or for legal, administrative or regulatory reasons or in order to enforce any right hereunder).  Confidential Information shall not include information which (i) was or becomes generally available to the public other than as a result of disclosure by such first party or its directors, officers, employees or agents, (ii) was or becomes available to such first party on a non-confidential basis prior to its disclosure to them by the other party, or (iii) was or becomes available to such first party on a non-confidential basis from a source other than such other party’s directors, officers, employees or agents, provided that such source is not bound by a confidentiality agreement with respect to such information.

 

2)                                      Each party hereto that is a financial institution (as such is defined by federal, state and local laws) agrees not to disclose any non-public personal information (as such is defined by federal, state and local laws) concerning customers and consumers (as defined by federal, state and local laws), to comply with all state and federal laws and regulations with regard to the use and protection of such information, including but not limited to the Gramm-Leach-Bliley Act and not distribute, disseminate or reveal any such non-public personal information to any other party, other than the parties set forth herein, except as allowed or required by any law, regulation or other lawful order.

 

3)                                      Upon any expiration or termination of this Agreement, the parties hereto agree to promptly deliver to the other party, at such party’s written request, all written materials containing Confidential Information.

 

4)                                      The parties hereto agree not to directly or indirectly solicit for employment or hire or retain any employee or advisor or agent of the other party or of the other party’s Affiliates; provided that the foregoing provision will not prevent any solicitation of employment not specifically directed toward the other party’s or such other party’s Affiliates, employees, advisors or agents.

 

VI
REPRESENTATIONS AND WARRANTIES

 

1)                                      Each of Camping World and CWI, with respect to itself, and Insurer, with respect to itself, represent and warrant to the other parties hereto as follows:

 

(a)                                  the execution and delivery of this Agreement by such party has been duly authorized and adopted by resolution of such party;

 

(b)                                 such party’s obligations under this Agreement are legal, valid and binding obligations enforceable against such party in accordance with its terms; and

 

(c)                                  such party is not a party to, or bound by, any contractual agreement or instrument which would prevent or impede or restrict such party’s performance under this Agreement.

 

VII
TERM AND TERMINATION

 

1)                                      The Term of this Agreement shall commence upon the Effective Time and shall extend, without interruption except to the extent otherwise expressly provided in this Agreement, to and including a date that is ten (10) years from the Effective Time.  Thereafter the Agreement shall automatically

 

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renew for consecutive ten (10) year periods, unless terminated by written notice by either party to the other not less than sixty (60) days prior to the termination of the original term hereof or any extension hereof.

 

2)                                      Notwithstanding anything herein to the contrary, if Camping World or CWI, on the one hand, or Insurer, on the other hand, fails to perform any of its obligations under this Agreement and such breach is material, the other party may deliver a written notice (a “Notice of Breach”) describing such violation or nonperformance in reasonable detail.  The breaching party shall have thirty (30) days in which to cure the violation or non-performance described in the Notice of Breach; and if such party does not cure such violation or non-performance as aforesaid, the party delivering the Notice of Breach may terminate this Agreement upon a further thirty (30) days’ written notice to the other party which termination shall take effect on the 30th day after delivery of such second notice.  For the avoidance of doubt, (and in addition to or in place of delivery of notice of such termination), the non-breaching party may pursue at law or at equity any other rights or remedies (including specific performance) for any failure by the other party to perform any of its obligations hereunder.

 

3)                                      Notwithstanding anything herein to the contrary, if Camping World or CWI reasonably determines that Insurer is performing its duties hereunder in a manner that has a material adverse effect on the business or goodwill of Camping World or CWI or any of their subsidiaries, or if Insurer reasonably determines that Camping World or CWI is performing its duties in a manner that has a material adverse effect on the business or goodwill of Insurer, Camping World or Insurer, as the case may be, may deliver a written notice (a “Notice of Injury”) describing the acts and adverse effects in reasonable detail.  The party receiving the Notice of Injury shall have thirty (30) days in which to change the manner in which it performs such duties so as to eliminate the material adverse effect.  If the party receiving any such Notice of Injury fails to make changes to eliminate such defect, the party delivering the Notice of Injury may terminate this Agreement upon thirty (30) days written notice to the other party.

 

VIII
DEFINITIONS

 

As used herein the following terms shall have the following meanings:

 

Affiliate.  When used with respect to any Person means any other Person, which directly or indirectly controls, or is controlled by or is under common control with such Person.  For purposes of this definition, “control” (including the correlative terms “controlling,” “controlled by” and “under common control with”), with respect to any Person, shall mean possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise.  With respect to investment partnerships, to the extent the organization documents thereof require or permit a distribution of assets to partners and others upon the liquidation or winding up of the investment partnership or otherwise, the term Affiliate shall include such partners and others.

 

Branded.  As applied to Insurance or Insurance Products, means Insurance or Insurance Products that bear, or are marketed or solicited, using a trade name, trademark, service mark, logo, or slogan of a Person other than the person that is issuing such Insurance or Insurance Products or is otherwise sponsored by such first Person.

 

Coverage Proposal.  See Section II(4).

 

Covered Insurance.  See Section II(4).

 

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Customers.  Means customers of Camping World, including without limitation, its catalogs, retail stores, other selling outlets and members of any of its present or future affinity or other clubs, memberships organizations, including the President’s Club.

 

Customer List.  See Section II(2)(c).

 

Direct Written Premium.  Direct Written Premium, for any period, means gross premiums, less credits for premium cancellations and returns recorded and received by Insurer during such period.

 

Effective Time.  See Section I(1).

 

Existing Policies.  See Section I(1).

 

Insurance and Insurance Products.  Any automobile or recreational vehicle property and casualty insurance product, including Vehicle Coverage, but specifically excluding Warranty Coverage and roadside assistance service.

 

Notice of Breach.  See Section VII(2).

 

Notice of Coverage.  See Section II(4).

 

Notice of Injury.  See Section VII(3).

 

Person.  An individual, corporation, partnership, limited liability company, joint venture, a trust, an unincorporated organization or any other entity or organization, including a government, a political subdivision or any agency or instrumentality thereof and shall include the plural thereof.

 

Stock Purchase Agreement.  The Stock Purchase Agreement dated as of March 15, 2002 by, among others, Motors Insurance Corporation, AGP and the shareholders of AGP.

 

Term.  See Section VII.

 

Vehicle Coverage.  Private passenger automobile liability and physical damage insurance coverages (which, for avoidance of doubt, includes all insurance coverages reasonably related thereto including, without limitation, comprehensive, collision, third party property damage and bodily injury liability coverages and personal injury protection).  Automobile includes private passenger automobiles and recreational vehicles, motor homes, travel trailers, minivans, sport utility vehicles, and other similar vehicles or items.

 

Warranty Coverage.  Means insurance that covers the warranty (or extensions thereof) provided by a manufacturer of such manufacturer’s products.

 

IX
MISCELLANEOUS

 

1)                                      This Agreement does not make any party hereto the agent of the other, nor does it create a partnership, a consortium, an association, a joint venture, or any form of juristic person or entity.  No party hereto shall have any authority or right to assume or create obligations of any kind or nature, express or implied, on behalf of, or in the name of any other party, nor to accept service of any legal process of any kind addressed to or intended for any other party, nor to bind any other party in any respect, without the specific prior written authorization of such other party.

 

2)                                      Each of Camping World and CWI on the one hand, and Insurer on the other hand agrees to indemnify and hold harmless the other and their respective Affiliates, and its and their respective employees, officers, directors, shareholders and agents, from and against any and all claims, demands, losses, damages, liabilities, lawsuits, and other proceedings, judgments and awards and costs and expenses (including, but not limited to reasonable attorneys’ fees) arising directly or indirectly in whole or in part out of the performance by the other party or its Affiliates (or any of its or their respective employees, officers, directors, shareholders, agents and affiliates) of their respective obligations under this Agreement.  This provision shall survive any expiration or other

 

97



 

termination of this Agreement for a period of three (3) years from the termination of this Agreement.

 

3)                                      Neither Camping World or any of its subsidiaries, on the one hand, nor Insurer, on the other hand, shall directly or indirectly, sell, assign or transfer (other than a pledge, transfer or collateral assignment to a lender)(collectively “transfer”) any of its rights or obligations contemplated under this Agreement without first obtaining the written consent of the other party.  This Agreement shall inure to the benefit of and be binding upon the parties (including, without limitation, each subsidiary of Camping World), their successors, trustees, permitted assigns, receivers and legal representatives but shall not inure to the benefit of any other person or entity, except as specifically contemplated by Section IX(3).  So long as there is no material adverse change to the benefits or obligations of the parties under this Agreement, reinsurance or other similar risk spreading or transfer methods by Insurer or its use of a managing general agent, shall not be deemed (i) a violation of, or inconsistent with, the terms hereof or (ii) a transfer for the purposes of the foregoing.  Neither Camping World, CWI nor any Insurer shall transfer all of its assets or any business unit unless the transferee or acquiring entity confirms in writing that it continues to be subject to all of the terms of this Agreement.

 

4)                                      This Agreement contains the entire agreement between the parties with respect to the subject matter hereof, and no oral statements or representations or prior written matter not contained herein or therein shall have any force or effect.  This Agreement shall not be modified in any way except by a writing subscribed by the parties by their duly authorized representatives.  No amendment of this Agreement or its exhibits or schedules shall be of any force or effect unless reduced to writing and executed in writing by the parties hereto in the same manner as the present Agreement.

 

5)                                      Camping World and CWI agree that, as between Camping World, CWI and Insurer, Insurer shall have exclusive ownership and control of all expirations on policies issued pursuant to this Program and that upon the expiration or termination of this Agreement, each of NAIC, NGIC or NGAC, as the case may be, have the right to send renewal notices to Customers maintaining Covered Insurance as required by law, and at their option, may continue to renew policies of Customers insured while the Agreement was in effect, but will in no way use the Camping World name or logo in such renewal notice.  This provision shall survive expiration or other termination of this Agreement.

 

6)                                      The parties agree that the Insurer may use a fronting company in the state of Texas for the purpose of marketing Insurance Products to customers in that state.  Currently, Insurer’s business in Texas is underwritten by Home State County Mutual Insurance Company.

 

7)                                      Notwithstanding anything herein to the contrary, if Insurer has in force policies written for Customers under the Good Sam insurance program pursuant to the terms of those certain agreements between Affinity Group Inc. and NGIC known as the Working Agreement and Service Agreement (the “Good Sam Agreements”), Insurer shall continue to pay the fee payable on such policies under the Good Sam Agreements for so long as such policies remain in force.  Insurer agrees to edit the mailing lists provided to it by CWI hereunder and by Affinity Group Inc. under the Good Sam Agreements to make its best efforts to avoid, to the extent reasonably possible, mailing insurance solicitations on behalf of CWI to any potential person who is a current policyholder of the Good Sam insurance program.  Insurer also agrees, to the extent legally permissible, to not convert any current policyholder under either the CWI or Good Sam insurance program to a policyholder of the other insurance program.  Otherwise, Insurer is free to market Insurance and Insurance Products in any way and to whomever Insurer chooses.

 

98



 

8)                                      All notices under this Agreement must be in writing and shall be delivered by (i) certified or registered mail, postage prepaid, return receipt requested, or (ii) overnight commercial courier or delivery service, or (iii) by facsimile transmission confirmed by certified or registered mail or commercial courier or delivery service as follows:

 

To AGP or Insurer:

 

 

 

 

 

If by Courier:

 

If by mail:

One GMAC Insurance Plaza

 

P.O. Box 66937

Earth City, Missouri  63045

 

St. Louis Missouri, 63166-6937

Attention:  President

 

Attention:  President

 

 

 

If by facsimile:  (314) 493-8113

 

 

 

99



 

To Camping World or CWI:

 

Camping World, Inc.

2575 Vista Del Mar Drive

Ventura, California 93001

Attention:  President

Facsimile (805) 667-4419

 

with a copy to:

 

Kaplan, Strangis and Kaplan, P.A.

90 South 7th Street

Suite 5500

Minneapolis, Minnesota 55402

Attention:  Robert T. York, Esq.

Facsimile:  (612) 375-1143

 

All notices, consents, waivers, and other communications under this Agreement shall be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth above (or to such other addresses and telecopier numbers as a party may designate by notice to the other party.

 

9)                                      This Agreement shall be governed by and construed and enforced in all respects according to the laws of the state of Missouri, determined without reference to conflict of law principles.

 

10)                                The parties hereto recognize that a breach of the Agreement would cause irreparable injury and that damages at law would be difficult to ascertain. The parties hereto therefore consent to the granting of equitable relief by way of a restraining order or temporary or permanent injunction by any court of competent jurisdiction to prohibit the breach or enforce the performance of the covenants contained in this Agreement.

 

11)                                In the event that any of the provisions of this Agreement are held to be invalid or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision thereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein and the parties hereto shall to the fullest extent possible modify any such provision to the extent required to carry out the general intention of this Agreement and to impart validity thereto.

 

12)                                No forbearance, indulgence, or relaxation or inaction by any party at any time to require performance of any provisions of this Agreement shall in any way affect, diminish or prejudice the right of a party hereto to require performance of that provision and any waiver or acquiescence by any party hereto in any breach of any provision of this Agreement shall not be construed as a waiver or acquiescence in any continuing or succeeding breach of such provision, a waiver or an amendment of the provision itself or a waiver of any right under or arising out of this Agreement or acquiescence in or recognition of rights and/or positions other than as expressly stipulated in this Agreement.

 

13)                                This Agreement may be executed in any number of counterparts each of which shall be deemed an original and all of which shall constitute one and the same Agreement.

 

100



 

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

 

 

CAMPING WORLD, INC.

 

 

 

 

 

By:

/s/ Paul E. Schedler

 

Name:

 Paul E. Schedler

Title:

 Vice President

 

 

CWI, INC.

 

 

 

By:

/s/ Paul E. Schedler

 

Name:

 Paul E. Schedler

Title:

 Vice President

 

 

CAMPING WORLD INSURANCE SERVICES OF NEVADA, INC.

 

 

By:

/s/ Paul E. Schedler

 

Name:

 Paul E. Schedler

Title:

 Vice President

 

 

CAMPING WORLD INSURANCE SERVICES OF TEXAS, INC.

 

 

By:

/s/ Paul E. Schedler

 

Name:

Paul E. Schedler

Title:

Vice President

 

 

AFFINITY GROUP PLANS, INC.

 

 

By:

/s/ Paul E. Schedler

 

Name:

 Paul E. Schedler

Title:

 Vice President

 

 

AFFINITY GROUP PLANS, INC.

 

 

By:

/s/ Bernard J. Buselmeier

 

Name:

 Bernard J. Buselmeier

Title:

 Executive Vice President and

 

 Chief Financial Officer

 

101



 

NATIONAL ALLIANCE INSURANCE COMPANY

 

 

By:

/s/ Bernard J. Buselmeier

 

Name:

 Bernard J. Buselmeier

Title:

 Executive Vice President and

 

 Chief Financial Officer

 

 

NATIONAL GENERAL INSURANCE COMPANY

 

 

By:

/s/ Bernard J. Buselmeier

 

Name:

 Bernard J. Buselmeier

Title:

 Executive Vice President and

 

 Chief Financial Officer

 

 

NATIONAL GENERAL ASSURANCE COMPANY

 

 

By:

/s/ Bernard J. Buselmeier

 

Name:

 Bernard J. Buselmeier

Title:

 Chief Financial Officer

 

102



 

EXHIBIT A

 

Family Motor Coach Association

Fleetwood Enterprises, Inc.

Flying J Inc.

Monaco Coach Corporation

Thousand Trails/NACO

Winnebago Industries, Inc.

 

103



 

EXHIBIT B

 

Categories of Costs

 

1.                                       Kiosk Labor

 

2.                                       Insurance Labor

                  Agent Base Salary

                  Agent Commission Fees

                  Agent Quote Fees

                  Agent Sales Contests

                  Staff Salaries

                  MLC Expenses

                  Fringe (22%)

 

3.                                       Non-Insurance Labor

                  Agent Commission Fees

                  Fringe (22%)

 

4.                                       General and Administrative

                  Management/Training & Development Labor

                  Agent Recruiting

                  Agent Education & Licensing

                  Agent Annual Meeting

                  Business Travel

                  Insurance Quote Premiums

                  CWIS Licensing/Legal Fees

                  Errors & Omissions Coverage

                  Express Mail

                  Office Supplies

                  Kiosk & Equipment Maintenance, Repair, Replacement

                  Communication Network - WAN, Fax, Phone ($600 monthly per store)

                  Kiosk Store Space Charges/Rent ($750 monthly per store)

 

CWI and the Insurer shall mutually agree to the hiring of any employees by CWI to perform services pursuant to the terms of the Agreement, other than licensed insurance agents.

 

Percentage

 

For calendar year 2002, the standard operating percentage for costs not related to the sale of Insurance or Insurance Products is 11.5%.  For each subsequent year, the parties will set a mutually agreed upon standard percentage based on the prior year’s costs.  At the end of each calendar year, to the extent that actual costs vary from true cost, the parties will reconcile expenses pursuant to the terms of the Agreement.

 

104



 

EXHIBIT C

 

1.             Direct Mail Printing

 

2.             Direct Mail Postage

 

3.             Promotional Items including, but not limited to:

 

                a.             Call Transfer Expenses

                b.             Give Aways

                c.             Event Costs (both space, etc.)

                d.             Ad Cost

                e.             Shipping Expenses

                f.              Sponsorship Fees

                g.             Premium Items

                h.             Creative Costs

 

105


EX-10.50 5 j8667_ex10d50.htm EX-10.50

Exhibit 10.50

 

ADDENDUM TO WORKING AGREEMENT

 

Affinity Group, Inc. (formerly Trailer Life Publishing Company, Incorporated) (“AGI”) and National General Insurance Company (“NGIC”), wish to amend the Working Agreement between them for the Rider Motorcycle Club insurance plan operated in conjunction with AGI’s wholly-owned subsidiary GSS Enterprises, Inc., dated October 5, 1979, and amended by Addenda dated October 17, 1989, March 22, 1994 and January 9, 1998 (collectively, the “Working Agreement”), as follows:

 

1.            The first paragraph after clause numbered 6 on page 1 of the Working Agreement, as most recently amended by the Addendum to Working Agreements dated January 9, 1998, is deleted in its entirety and the following is substituted therefor:

 

Both parties to this agreement recognize that substantial development costs, advertising, mailing and promotional services will be needed in creating interest in a new Motorcycle Insurance Program.  To assist in implementing TL’s expressed intention of developing interest in a new Motorcycle Insurance Program, TL agrees that, beginning with the fourth quarter of 1979, the Good Sam Vehicle Insurance Plan promotional allowance shall be reduced from a basis equivalent to five (5) percent of the written premium being generated by the Good Sam Vehicle Insurance Plan to three (3) percent of written premium, and that reduction shall continue through the third quarter of 1980.  TL and NGI mutually agree that the maximum total amount so deducted from the Good Sam promotional allowance shall not exceed the sum of $50,000.  In consideration of the foregoing expressed agreements, NGI will return to TL the amount so deducted from the Good Sam Vehicle Insurance Plan promotional allowance on the basis of the number of Rider Motorcycle Club members participating in the Motorcycle Insurance Program, in accordance with the following schedule:

 

2.            The last paragraph on page 1 of the Working Agreement is deleted in its entirety and the following is substituted therefor:

 

This Working Agreement shall remain in full force and effect for the period beginning on the date of this Addendum and ending May 15, 2012.  Thereafter, the Working Agreement shall automatically renew for consecutive ten (10) year periods, unless terminated by written notice by either party to the other not less than sixty (60) days prior to the termination of the original term hereof or any extension hereof.  NGI also agrees to offer other selected insurance products to Rider Club members, which will consist of:

 

3.            Except as amended by this Addendum, all provisions of the Working Agreement shall remain unchanged and in full force and effect.

 

 

AFFINITY GROUP, INC.

NATIONAL GENERAL INSURANCE COMPANY

 

 

 

 

 

 

 

 

By:

/s/ Paul E. Schedler

 

By:

/s/ Bernard J. Buselmeier

 

Name:

Paul E. Schedler

Name:

Bernard J. Buselmeier

Title:

Vice President

Title:

Executive Vice President and

 

 

 

Chief Financial Officer

Date:

May 15, 2002

Date:

May 15, 2002

 

106



 

ADDENDUM TO WORKING AGREEMENT

 

Affinity Group, Inc., the parent company of Golf Card International Corp. (erroneously identified as Golf Card International, Inc.) (“AGI”) and National General Insurance Company (“NGIC”), wish to amend the Working Agreement between them for the Golf Card insurance plan operated in conjunction with AGI’s wholly-owned subsidiary Golf Card International Corp. dated April 17, 1992, and amended by Addenda dated March 22, 1994 and January 9, 1998 (collectively, the “Working Agreement”), as follows:

 

1.  The first paragraph after clause numbered 5 on page 1 of the Working Agreement is deleted in its entirety and the following is substituted therefor:

 

This Working Agreement shall remain in full force and effect for the period beginning on the date of this Addendum and ending May 15, 2012.  Thereafter, the Working Agreement shall automatically renew for consecutive ten (10) year periods, unless terminated by written notice by either party to the other not less than sixty (60) days prior to the termination of the original term thereof or any extension hereof.  NGIC also agrees to develop new insurance products to be offered to GCI members which will consist of:

 

2.               The amendment made to the first paragraph after clause numbered 6 on page 1 of the Working Agreement in the Addendum to Working Agreements dated January 9, 1998 is hereby deleted in its entirety.

 

3.               Except as amended by this Addendum, all provisions of the Working Agreement shall remain unchanged and in full force and effect.

 

 

AFFINITY GROUP, INC.

NATIONAL GENERAL INSURANCE COMPANY

 

 

 

 

 

 

By:

/s/ Paul E. Schedler

 

By:

/s/ Bernard J. Buselmeier

 

Name:

Paul E. Schedler

Name:

Bernard J. Buselmeier

Title:

Vice President

Title:

Executive Vice President and

 

 

 

Chief Financial Officer

Date:

May 15, 2002

Date:

May 15, 2002

 

107



 

ADDENDUM TO WORKING AGREEMENT

 

Affinity Group, Inc., the parent company of Camp Coast to Coast, Inc. (erroneously identified as Coast to Coast Incorporated) (“AGI”) and National General Insurance Company (“NGIC”), wish to amend the Working Agreement between them for the Coast to Coast insurance plan operated in conjunction with AGI’s wholly-owned subsidiary Camp Coast to Coast, Inc. dated October 23, 1987, and amended by Addenda dated November 30, 1987, October 17, 1989, March 22, 1994 and January 9, 1998 (collectively, the “Working Agreement”), as follows:

 

1.       The first paragraph after clause numbered 6 on page 1 of the Working Agreement, as most recently amended by the Addendum to Working Agreements dated January 9, 1998, is deleted in its entirety and the following is substituted therefor:

 

This Working Agreement shall remain in full force and effect for the period beginning on the date of this Addendum and ending May 15, 2012.  Thereafter, the Working Agreement shall automatically renew for consecutive ten (10) year periods, unless terminated by written notice by either party to the other not less than sixty (60) days prior to the termination of the original term hereof or any extension hereof.  NGI also agrees to develop new insurance products to be offered to CTC members which will consist of:

 

2.       Except as amended by this Addendum, all provisions of the Working Agreement shall remain unchanged and in full force and effect.

 

AFFINITY GROUP, INC.

NATIONAL GENERAL INSURANCE COMPANY

 

 

 

 

 

 

 

 

By:

/s/ Paul E. Schedler

 

By:

/s/ Bernard J. Buselmeier

 

Name:

Paul E. Schedler

Name:

Bernard J. Buselmeier

Title:

Vice President

Title:

Executive Vice President and

 

 

 

Chief Financial Officer

Date:

May 15, 2002

Date:

May 15, 2002

 

108



 

ADDENDUM TO WORKING AGREEMENT

 

Affinity Group, Inc., (formerly Trailer Life Publishing Company, Incorporated) (“AGI”) and National General Insurance Company (“NGIC”), wish to amend the Working Agreement between them for the Good Sam insurance plan operated in conjunction with AGI’s wholly-owned subsidiary GSS Enterprises, Inc., dated June 2, 1978, and amended by Addenda dated November 25, 1987, October 17, 1989, March 22, 1994, January 9, 1998 and January 16, 2001 (collectively, the “Working Agreement”), as follows:

 

1.   The first paragraph after clause numbered 6 on page 1 of the Working Agreement, as most recently amended by the Addendum to Working Agreements dated January 9, 1998, is deleted in its entirety and the following is substituted therefor:

 

This Working Agreement shall remain in full force and effect for the period beginning on the date of this Addendum and ending May 15, 2012.  Thereafter, the Working Agreement shall automatically renew for consecutive ten (10) year periods, unless terminated by written notice by either party to the other not less than sixty (60) days prior to the termination of the original term hereof or any extension hereof.  NGI also agrees to develop new insurance products to be offered to Good Sam members which will consist of:

 

2.   Except as amended by this Addendum, all provisions of the Working Agreement shall remain unchanged and in full force and effect.

 

 

AFFINITY GROUP, INC.

NATIONAL GENERAL INSURANCE COMPANY

 

 

 

 

 

 

 

 

By:

/s/ Paul E. Schedler

 

By:

/s/ Bernard J. Buselmeier

 

Name:

Paul E. Schedler

Name:

Bernard J. Buselmeier

Title:

Vice President

Title:

Executive Vice President and

 

 

 

Chief Financial Officer

Date:

May 15, 2002

Date:

May 15, 2002

 

109


EX-10.51 6 j8667_ex10d51.htm EX-10.51

Exhibit 10.51

ADDENDUM TO SERVICE AGREEMENT

 

Affinity Group, Inc. (formerly Trailer Life Publishing Company, Incorporated) (“AGI”) and National General Insurance Company (“NGIC”), wish to amend the Service Agreement between them for the Rider Motorcycle Club insurance plan operated in conjunction with AGI’s wholly­-owned subsidiary GSS Enterprises, Inc., dated October 5, 1979, and amended by Addenda dated October 17,1989, February 18, 1992, March 22, 1994 and November 11,1997, and by various side letters dated August 26, 1994, June 3, 1997, November 19, 1997, November 12, 1999, December 15, 1999 and February 1, 2001 (collectively, the “Service Agreement”), as follows:

 

1.     The last paragraph on page 1 of the Service Agreement, as most recently amended by the Addendum to Service Agreements dated November 11, 1997, is deleted in its entirety and the following is substituted therefor:

 

NGI agrees to expend in developing, advertising and promoting said program a sum which will be no less than the sum deducted from the Good Sam promotional allowance.

 

2.     The second paragraph on page 2 of the Service Agreement is deleted in its entirety and the following is substituted therefor:

 

This Service Agreement shall remain in full force and effect for the period beginning on the date of this Addendum and ending May 15, 2012.  Thereafter this Service Agreement shall automatically renew for consecutive ten (10) year periods, unless terminated by written notice by either party to the other not less than sixty (60) days prior to the termination of the original term hereof or any extension hereof.

 

3.     Except as amended by this Addendum, all provisions of the Service Agreement shall remain unchanged and in full force and effect.

 

 

AFFINITY GROUP, INC.

NATIONAL GENERAL INSURANCE COMPANY

 

 

 

 

By:

/s/ Paul E. Schedler

 

By:

/s/ Bernard J. Buselmeier

 

Name:

Paul E. Schedler

Name:

Bernard J. Buselmeier

Title:

Vice President

Title:

Executive Vice President and

 

 

 

Chief Financial Officer

Date:

May 15, 2002

Date:

May 15, 2003

 

110



 

ADDENDUM TO SERVICE AGREEMENT

 

Affinity Group, Inc., the parent company of Golf Card International Corp. (erroneously identified as Golf Card International, Inc.) (“AGI”) and National General Insurance Company (“NGIC”), wish to amend the Service Agreement between them for the Golf Card insurance plan operated in conjunction with AGI’s wholly-owned subsidiary Golf Card International Corp. dated April 19, 1992, and amended by Addenda dated March 22, 1994, and November 11, 1997, and by various side letters dated August 26, 1994, June 3, 1997, November 19, 1997, November 12, 1999, December 15, 1999 and February 1, 2001 (collectively, the “Service Agreement”), as follows:

 

1. The penultimate paragraph on page 1 of the Service Agreement is deleted in its entirety and the following is substituted therefor:

 

This Service Agreement shall remain in full force and effect for the period beginning on the date of this Addendum and ending May 15, 2012.  Thereafter this Service Agreement shall automatically renew for consecutive ten (10) year periods, unless terminated by written notice by either party to the other not less than sixty (60) days prior to the termination of the original term hereof or any extension hereof.

 

2. The last paragraph on page 1 of the Service Agreement, as most recently amended by the Addendum to Service Agreements dated November 11, 1997, is deleted in its entirety and the following is substituted therefor:

 

In the event suit is filed by either party to this Agreement, it is mutually agreed that:

 

1)     Missouri law shall govern and,

 

2)     The prevailing party shall be entitled to reasonable attorney fees.

 

3. Except as amended by this Addendum, all provisions of the Service Agreement shall remain unchanged and in full force and effect.

 

 

AFFINITY GROUP, INC.

NATIONAL GENERAL INSURANCE COMPANY

 

 

 

 

By:

/s/ Paul E. Schedler

 

By:

/s/ Bernard J. Buselmeier

 

Name:

Paul E. Schedler

Name:

Bernard J. Buselmeier

Title:

Vice President

Title:

Executive Vice President and

 

 

 

Chief Financial Officer

Date:

May 15, 2002

Date:

May 15, 2002

 

111



 

ADDENDUM TO SERVICE AGREEMENT

 

Affinity Group, Inc., the parent company of Camp Coast to Coast, Inc. (erroneously identified as Coast to Coast Incorporated) (“AGI”) and National General Insurance Company (“NGIC”), wish to amend the Service Agreement between them for the Coast to Coast insurance plan operated in conjunction with AGI’s wholly-owned subsidiary Camp Coast to Coast, Inc. dated October 23, 1987, and amended by Addenda dated November 30, 1987, October 17, 1989, March 22, 1994 and November 11, 1997, and by various side letters dated August 26, 1994, June 3, 1997, November 19, 1997, November 12, 1999, December 15, 1999 and February 1, 2001 (collectively, the “Service Agreement”), as follows:

 

1. The last paragraph on page 1 of the Service Agreement, as most recently amended by the Addendum to Service Agreements dated November 11, 1997, is deleted in its entirety and the following is substituted therefor:

 

This Service Agreement shall remain in full force and effect for the period beginning on the date of this Addendum and ending May 15, 2012.  Thereafter this Service Agreement shall automatically renew for consecutive ten (10) year periods, unless terminated by written notice by either party to the other not less than sixty (60) days prior to the termination of the original term hereof or any extension hereof.

 

2. Except as amended by this Addendum, all provisions of the Service Agreement shall remain unchanged and in full force and effect.

 

 

AFFINITY GROUP, INC.

NATIONAL GENERAL INSURANCE COMPANY

 

 

 

 

By:

/s/ Paul E. Schedler

 

By:

/s/ Bernard J. Buselmeier

 

Name:

Paul E. Schedler

Name:

Bernard J. Buselmeier

Title:

Vice President

Title:

Executive Vice President and

 

 

 

Chief Financial Officer

Date:

May 15, 2002

Date:

May 15, 2002

 

112



 

ADDENDUM TO SERVICE AGREEMENT

 

Affinity Group, Inc., (formerly Trailer Life Publishing Company, Incorporated) (“AGI”) and National General Insurance Company (“NGIC”), wish to amend the Service Agreement between them for the Good Sam Club insurance plan operated in conjunction with AGI’s wholly-owned subsidiary GSS Enterprises, Inc. dated June 2, 1978, and amended by Addenda dated October 11, 1982, November 25, 1987, October 17, 1989, February 14, 1992, March 22, 1994 and November 11, 1997, and by various side letters dated August 26, 1994, June 3, 1997, November 19, 1997, November 12, 1999, December 15, 1999 and February 1, 2001 (collectively, the “Service Agreement”), as follows:

 

1. The last paragraph on page 1 of the Service Agreement, as most recently amended by the Addendum to Service Agreements dated November 11, 1997, is deleted in its entirety and the following is substituted therefor:

 

This Service Agreement shall remain in full force and effect for the period beginning on the date of this Addendum and ending May 15, 2012.  Thereafter this Service Agreement shall automatically renew for consecutive ten (10) year periods, unless terminated by written notice by either party to the other not less than sixty (60) days prior to the termination of the original term hereof or any extension hereof.

 

2. Except as amended by this Addendum, all provisions of the Service Agreement shall remain unchanged and in full force and effect.

 

 

AFFINITY GROUP, INC.

NATIONAL GENERAL INSURANCE COMPANY

 

 

 

 

By:

/s/ Paul E. Schedler

 

By:

/s/ Bernard J. Buselmeier

 

Name:

Paul E. Schedler

Name:

Bernard J. Buselmeier

Title:

Vice President

Title:

Executive Vice President and

 

 

 

Chief Financial Officer

Date:

May 15, 2002

Date:

May 15, 2002

 

113


EX-10.52 7 j8667_ex10d52.htm EX-10.52

Exhibit 10.52

 

EMPLOYMENT AND

PHANTOM STOCK AGREEMENT

 

THIS AGREEMENT made and entered into as of the 15th day of May, 2002 by and between AFFINITY GROUP, INC., a Delaware corporation (“AGI”), CAMPING WORLD, INC., a Kentucky corporation and a wholly-owned subsidiary of AGI (“Camping World Holding”), CWI, INC., a Kentucky corporation and a wholly-owned subsidiary of Camping World Holding (the “Company”), and MARK T. GILMAN (the “Executive”);

 

W I T N E S S E T H

 

WHEREAS, the Company proposes to employ the Executive in the operations of the Company and the Company is desirous of affording Executive incentives, in the form of phantom stock of the Company, in connection therewith;

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the Company and Executive hereby agree as follows:

 

ARTICLE I

 

EMPLOYMENT

 

Section l.l.   Employment.  The Company hereby employs the Executive as the President and Chief Executive Officer of the Company to perform such duties and discharge such functions, consistent with the senior executive office held by Executive, in and about the business and affairs of the Company, or one or more of its subsidiaries, as the board of directors of the Company may from time to time determine.  Executive agrees, during the term hereof, to diligently and in good faith perform and discharge such duties and functions and Executive shall devote all of his working time, energy and ability exclusively to the performance of his duties hereunder.  Executive shall not directly or indirectly engage or participate in the operations or management of, or render any services to, any other businesses or enterprises, provided, however, Executive may from time to time serve on the board of directors of charitable organizations as long as such involvement does not have a materially adverse effect on the performance by Executive of his duties hereunder.

 

Section l.2.  Basic Compensation.  The Company agrees to pay Executive a base annual salary of $350,000.  Basic compensation payable under this section shall be payable in accordance with such practices and procedures as are generally applicable to other employees of the Company.

 

Section l.3.  Fringe Benefits.  While Executive is in the employ of the Company, the Company agrees to provide to Executive such benefits as may be provided by the Company from time to time to its similarly situated employees, including, without limitation, those set forth on Exhibit A attached hereto.

 

Section 1.4.  Severance.  If the Company terminates the employment of the Executive without Cause, the Company shall (i) make a lump sum severance payment equal to twelve (12) months of the Executive’s current base compensation paid pursuant to Section 1.2 hereof, and (ii) pay to the Executive the amount of the bonus, if any, accrued to the date of such termination under section 1.5 hereof.  Such severance payment shall be made within thirty (30) days after the determination of the amount of the accrued bonus calculated pursuant to the provisions of section 1.5 hereof.  It is agreed that any termination

 

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of employment is without prejudice to any other remedy to which the Company may be entitled, either by law, in equity or under this Agreement and without prejudice to Executive’s Phantom Stock Interest.

 

The Company has the absolute right to terminate this Agreement, and the employment of the Executive hereunder, for Cause without any further obligation to the Executive in respect of severance payments to the Executive hereunder.  For purposes of this Agreement, Cause shall mean:

 

(i)                                     the commission of a felony or a crime involving moral turpitude or the commission of any other act or omission involving dishonesty or fraud with respect to the Company;

 

(ii)                                  conduct which brings the Company into public disgrace or disrepute;

 

(iii)                               gross negligence or willful gross misconduct with respect to the Company;

 

(iv)                              breach of a fiduciary duty to the Company;

 

(v)                                 a breach of Article III of this Agreement; or

 

(vi)                              Executive’s failure to cure a breach of any term of this Agreement (other than Article III) within thirty (30) days after receipt of written notice from the Company specifying the act or omission that constitutes such breach.

 

The Executive shall not be entitled to severance under this section 1.4 if the employment of the Executive is terminated for any of the following reasons:

 

(i)                                     the Executive terminates this Agreement at any time;

 

(ii)                                  death of the Executive;

 

(iii)                               the Disability of the Executive.

 

Section 1.5.  Bonus.  Executive shall be entitled to earn a bonus based upon the Company’s Operating Profit.  The bonus shall be an amount equal to one and one-half percent (1.5%) of the Company’s Operating Profit for each year during the term hereof.  The bonus shall be payable on a quarterly basis in arrears for each calendar quarter during the term hereof.  The bonus for any partial quarter during the term hereof shall be prorated based on the number of days within such quarter falling within the term hereof.  The bonus for the first three quarters of each calendar year shall be calculated based upon the annualized budget for the Company for the calendar year in which such quarters fall and the bonus for each such quarter shall be paid to Executive at the end of the first bi-weekly payroll period following the end of such quarter.  The bonus for the fourth quarter of each calendar year shall be equal to (a) one and one-half percent (1.5%) of the Company’s actual Operating Profit for the calendar year then ended, less (b) the aggregate amount of the bonus paid to Executive for the first three quarters of the calendar year then ended.  The bonus for the fourth quarter of each calendar year shall be paid to Executive on or before March 15 of the following year.

 

Section l.6.  Term.  The term of this Agreement shall commence on the date of this Agreement and continue through the fifth anniversary of the date of this Agreement provided, however, that Executive shall have the continuing option to immediately terminate the employment provided by section l.l hereof by giving two (2) weeks’ notice thereof to the Company and the Company shall have the continuing option to immediately terminate the employment provided by section l.l hereof by giving written notice thereof to Executive which notice may be effective immediately.  Upon any such termination, all of the rights and obligations set forth in this Article I shall terminate provided, however, that the Company shall pay to Executive the severance, if any, payable under section 1.4 hereof and no termination of Executive under

 

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any circumstance shall prejudice Executive’s right to the Phantom Stock Interest provided under Article II of this Agreement.

 

ARTICLE II

 

PHANTOM STOCK INTEREST

 

Section 2.l.  Award of Phantom Stock Interest.  The Company hereby awards the Phantom Stock Interest to the Executive.

 

Section 2.2.  Payment of Phantom Stock Interest.  The Company shall pay, and Executive shall be entitled to receive, the value of the Phantom Stock Interest, which shall be paid as follows:

 

(a)          in the event of a Sale, at the same time and in the same form of consideration (on the same proportionate basis) as is paid to the seller in the Sale;

 

(b)         in the case of an Offering, (i) at the election of the Executive, in the form of registered stock issued in the Offering as long as, in the opinion of the underwriters in the Offering, such issuance to the Executive would not have an adverse impact on the Offering, or (ii) if it is determined that such issuance to Executive would have an adverse impact on the Offering or if the Executive does not elect to receive registered securities, then in cash as described in subsection (c) below;

 

(c)          in the case of a Private Placement, an Offering described in subsection (b)(ii) above, or in the case of the occurrence of any other Determination Date, in cash as follows:

 

(i)                                     One-third (1/3) thereof within thirty (30) days of the determination of such cash value in accordance with the provisions of section 4.3 hereof, and

 

(ii)                                  One-third (1/3) thereof on the first anniversary of the Determination Date, and

 

(iii)                               One-third (1/3) thereof on the second anniversary of the Determination Date.

 

Section 2.3.  Beneficiary.  Executive may designate (by filing with the Company a written beneficiary designation form in form reasonably acceptable to the Company) one or more primary beneficiaries or contingent beneficiaries to receive all or a specified part of the cash value of the Phantom Stock Interest which, at the time of Executive’s death, may remain unpaid under this Agreement and Executive may change or revoke any such designation from time to time. No such designation, change or revocation shall be effective unless executed by Executive and accepted by the Company during Executive’s lifetime.  Each such designation, change or revocation shall be effective under this Agreement until changed or revoked in the manner specified herein.  No such change or revocation shall require the consent of any beneficiary theretofore designated by Executive.  If Executive fails to designate a beneficiary, or designates a beneficiary and thereafter revokes such designation without naming another beneficiary, or designates one or more beneficiaries and all such beneficiaries so designated fail to survive Executive, then the beneficiary of the Phantom Stock Interest, or the part thereof as to which Executive’s designation fails, as the case may be, shall be the representative of Executive’s estate.  Unless Executive has otherwise specified in the beneficiary designation, the beneficiary or beneficiaries designated by Executive shall become fixed as of Executive’s death so that, if a beneficiary survives Executive but dies before the receipt of all payments due such beneficiary, such remaining payments shall be payable to the representative of such beneficiary’s estate.

 

Section 2.4.   Benefits Not Transferable.  Neither Executive nor any beneficiary hereunder shall have any trans­ferable interest in the payments due hereunder nor any right to anticipate, alienate, dispose of, pledge or encumber the same prior to actual receipt thereof, nor shall the same be subject to attachment,

 

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garnishment, execution following judgment or other legal process instituted by creditors of Executive or any such beneficiary provided that the unpaid cash value of Executive’s Phantom Stock Interest and any payments due hereunder shall at all times be subject to set-off for debts owed by the Executive to the Company or its affiliates.

 

Section 2.5.  Nature of the Company’s Obligation.  The Company shall maintain a record of the Phantom Stock Interest but the Company shall not be required to segregate any funds or other assets to be used for the payment of benefits under this Agreement and no such record shall be considered as evidence of the creation of a trust fund, an escrow or any other segregation of assets for the benefit of Executive or any beneficiary of Executive.  The obligation of the Company to make the payments described in this Agreement is an unsecured contractual obligation of the Company only, and neither Executive nor any beneficiary of Executive shall have any beneficial or preferred interest by way of trust, escrow, lien or otherwise in and to any specific assets or funds.  Executive specifically acknowledges that the Phantom Stock Interest to be awarded pursuant to the terms of this Agreement are not securities in the Company and do not create any right in the equity or capital of the Company or any of its affiliates.  Executive and each beneficiary of Executive shall look solely to the general credit of the Company for satisfaction of any obligations due or to become due under this Agreement, it being expressly acknowledged by the Executive that the obligations of the Company hereunder are junior and subordinate in right of payment to the obligations of the Company to its or AGI’s lenders.  If the Company should, in its sole discretion, earmark or set aside any funds or other assets to pay benefits hereunder, the same shall, nevertheless, remain and be regarded as part of the general assets of the Company subject to the claims of its general creditors (and shall not be considered to be held in a fiduciary capacity for the benefit of Executive or any beneficiary hereunder), and neither Executive nor any beneficiary of Executive shall have any legal, beneficial, security or other property interest therein.  Upon delivery by the Company to Executive of the consideration as provided in section 2.2, the rights and obligations of the Company and Executive under this Article II shall terminate and Executive shall have no other or further rights under this Article or in respect hereof.

 

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ARTICLE III

 

COVENANT NOT TO COMPETE

 

Section 3.l.  Covenant Not to Compete.  Executive hereby covenants that, for a period of eighteen (18) months next following the Determination Date (or such shorter period for which the Company continues to be owned or operated by the Parent or its affiliates), Executive shall not be engaged or interested in any business which competes, directly or indirectly, with the retail, publication or membership businesses of the Company or any subsidiary of the Company (whether as a proprietor, partner with another, shareholder (other than as a less than 5% shareholder in a publicly-traded company), agent or consultant of, employee of or lender to, another) in the recreational vehicle, camping, outdoor living or other markets then served by the Company or such subsidiary, except as a proprietor, partner, shareholder, employee or consultant in or to the Company or any entity controlled by, controlling or under common control with the Company, provided that if the employment of Executive is terminated by the Company without Cause, the preceding covenant shall not apply (without affecting the obligations hereinafter contained in this section 3.l in respect of disclosures or solicitations by Executive) unless the Executive shall have been paid severance pursuant to section 1.4 hereof.  Executive agrees that he will not at any time disclose to any person or other entity who or which is, or reasonably may be expected to be, in competition with the Company or its affiliates, any confidential information or trade secrets of the Company, any subsidiary of the Company or any of their respective affiliates, the contents of any customer lists of the Company, any subsidiary of the Company or any of their respective affiliates or the general needs of the customers or other contracting parties with the Company, any subsidiary of the Company or any of their respective affiliates, provided, however, the foregoing shall not prevent Executive from responding to the request of a governmental agency or pursuant to a court order or as otherwise required by law.  For a period of one (1) year following the Determination Date, Executive agrees not to offer employment to, not to discuss the nature of any prospective employment opportunities with, and not to otherwise solicit any employee of the Company or such subsidiary (or any person who was an employee of the Company or such subsidiary within 180 days of the Determination Date) on his own behalf, on behalf of any employer of the Executive, on behalf of any entity with which the Executive is acting as a consultant or with which the Executive is then otherwise affiliated.

 

Section 3.2.  Remedies.  Recognizing that a breach of the covenant contained in section 3.1 would cause the Company irreparable injury and the damages at law would be difficult to ascertain, Executive consents to the granting of equitable relief by way of a restraining order or temporary or permanent injunction by any court of competent jurisdiction to prohibit the breach or enforce the performance of the covenants contained in section 3.l.  The invalidity or unenforceability of any provision of this Article or the application thereof to any person or circumstance shall not affect or impair the validity or enforceability of any other provision or the application of the first provision to any other person or circumstance.  Any provision of this Article that might otherwise be invalid or unenforceable because of contravention of any applicable law, statute or governmental regulation shall be deemed to be amended to the extent necessary to remove the cause of such invalidation or unenforceability and such provision as so amended shall remain in full force and effect as a part hereof.

 

ARTICLE IV

 

DEFINITIONS AND GENERAL PROVISIONS

 

Section 4.l.  Definitions.  As used in this Agreement, the following terms shall have the respective meanings set forth below:

 

Accounting Period:  If the Determination Date falls on December 15th through December 31st, inclusive, the Fiscal Year of the Company in which the Determination Date falls; if the Determination Date falls on January 1st through June 14th, inclusive, the Fiscal Year of the Company endingimmediately

 

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prior to the date on which the Determination Date falls; if the Determination Date falls on June 15th through December 14th, inclusive, the Rolling Four Fiscal Quarters ending immediately prior to the date on which the Determination Date falls.

 

Base Cost:  The Company Value as of June 30, 2002, calculated as the remainder of (x) the sum of (i) the Formula Operating Asset Value and (ii) Current Assets minus (y) Liabilities.

 

Company Value:  (a) If the Determination Date is occasioned by the sale of all or substantially all of the Operating Assets of the Company, the remainder of (x) the sum of (i) the net pre-tax consideration received in the sale of all or substantially all of the Operating Assets, (ii) Current Assets and (iii) the fair market value on the Determination Date of the assets of the Company, if any, not included in the sale, minus (y) the sum of (i) the Base Cost, (ii) Operating Liabilities not assumed by the purchaser or transferee and (iii) Liabilities other than Operating Liabilities.  If any of such consideration shall have been paid in notes or other securities, the Company shall, by resolution of its board of directors, establish a fair market value therefore, which value shall be conclusively binding upon the parties hereto and, in establishing the value of debt securities, in addition to such other considerations as the board of directors of the Company may deem relevant, the amounts payable thereunder shall be discounted to their present value on the basis of such discount rate as is deemed appropriate by the board of directors.

 

(b) If the Determination Date is occasioned by a Private Placement by the Company or by Camping World Holding or the sale of more than 51% of the equity interests in the Company or Camping World Holding, Company Value shall be the remainder of (x) the Full Company Consideration received in such Private Placement or sale of equity interests minus (y) the sum of (i) the Base Cost and (ii) any Liabilities required to be paid or satisfied at the time of closing such Private Placement or sale and any liabilities retained directly or indirectly by the shareholder of the issuer in such Private Placement or the seller after such sale.

 

(c) If the Determination Date is occasioned by an Offering of shares of the common stock of the Company or Camping World Holding, the Company Value shall be the remainder of the market capitalization of the Company or Camping World Holding, as the case may be, at the time of such Offering minus (y) the sum of (i) the Base Cost and (ii) any Liabilities required to be paid or satisfied at the time of closing such Offering and any liabilities retained directly or indirectly by the shareholders after the Offering.

 

(d) If the Determination Date is occasioned by an event other than an event described in any of the foregoing three paragraphs, Company Value shall be the remainder of (x) the sum of (i) the Formula Operating Asset Value and (ii) Current Assets minus (y) the sum of (i) Base Cost and (ii) Liabilities other than Operating Liabilities provided, however, that if any event of the type described in any of the foregoing three paragraphs is consummated within one hundred eighty (180) days after the Determination Date, Company Value shall be determined as if the Determination Date had been occasioned by such event.

 

Current Assets:  The sum of (x) cash, investments, marketable securities, prepaid items and inventory as reflected on the books and records of the Company and its subsidiaries on a consolidated basis; (y) the market value of notes receivable of the Company; and (z) the accounts receivable of the Company subject to such allowance for bad or doubtful accounts receivable as is reflected on the books of the Company, all as determined in accordance with generally accepted accounting principles.  Current Assets and Liabilities shall be determined as of the last day of the Accounting Period.  Current Assets shall not include any assets relating to or arising from the operation of the “MVP” insurance program.

 

Determination Date:  The date of the first of the following events to occur: (i) termination of the Executive’s employment, whether by death or otherwise, (ii) a closing of a Sale, (iii) an Offering, (iv) a Private Placement, or (v) the fifth anniversary of the date of this Agreement.

 

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Disability:  The physical or mental incapacity of Executive for a period of more than sixty (60) consecutive days, the determination of which by the board of directors of the Company shall be conclusive on the parties hereto.

 

Fiscal Quarter:  The fiscal quarter of the Company ending on the last day of the calendar quarter.

 

Fiscal Year:  The fiscal year of the Company as the case may be, ending on the last day of the calendar year.

 

Formula Operating Asset Value:  The product of eight (8) and Operating Profit of the Company for the Accounting Period.

 

Full Company ConsiderationIn connection with a Private Placement by the Company or by Camping World Holding or the sale of more than 51% of the equity interests in the Company or Camping World Holding, Full Company Consideration is intended to represent the amount that would have been paid if the Private Placement or equity sale resulted in the purchaser acquiring 100% of the shares of common stock of the subject entity.  Therefore, in connection with a Private Placement by the Company or by Camping World Holding or the sale of equity interests in the Company or Camping World Holding, in either case involving the purchaser acquiring 100% of the shares of common stock of the Company or Camping World Holding, Full Company Consideration shall be equal to the net pre-tax consideration received in such Private Placement or sale.  In connection with a Private Placement by the Company or by Camping World Holding or the sale of equity interests in the Company or Camping World Holding, in either case involving more than 51% but less than 100% of the shares of common stock of the Company or Camping World Holding, Full Company Consideration shall be equal to (x) the net pre-tax consideration received in such Private Placement or sale of equity interests divided by (y) the decimal equivalent of the percentage of equity interests in the Company or Camping World Holding issued in such Private Placement or sold in such sale.  As an example, if 75% of the shares of common stock of the Company are sold for $60 million, Full Company Consideration shall be determined by dividing $60 million by .75, resulting in Full Company Consideration of $80 million.

 

Liabilities:  All obligations (whether absolute, accrued or contingent, choate or inchoate) of the Company and/or its subsidiaries which are required to appear on financial statements prepared in accordance with generally accepted accounting principles consistently applied provided that

 

(i)                                     if the Determination Date is occasioned by a Sale, the obligation of the Company, Camping World Holding, AGI, or the Parent, as the case may be, for the payment of federal and state income taxes, if any, arising from the Sale (net of the tax benefits, if any, arising from payments in respect of this Agreement or any similar agreement) shall be considered a liability whether or not such liability is required to be reflected as a liability in accordance with generally accepted accounting principles; provided, however, that in determining the amount, if any, to be included in Liabilities under this subsection (i), (x) if the Determination Date is occasioned by the sale of more than 51% of the equity interests in the Parent or in AGI, the amount to be included in Liabilities under this subsection (i) shall be determined as if the sale had been a sale of the equity interests in the Company and the selling price for such equity interests had been the Company Value as determined under subsection (d) of the definition of Company Value, and (y) in the event the Sale is of less than 100% of the equity interests in Camping World Holding or in the Company, the amount included in Liabilities under this subsection (i) shall be determined as if the Sale had been a Sale of 100% of the equity interests of the applicable entity;

 

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(ii)                                  the liability of the Company for deferred revenues shall not be considered a liability whether or not such liabilities are required to be reflected as a liability in accordance with generally accepted accounting principles; and

 

(iii)                               the liability of the Company, Camping World Holding, AGI, the Parent, or any subsidiary of the Company (x) in respect of this Agreement or any similar agreement or (y) to purchase its equity securities (or warrants for such securities), whether under a “put” agreement or otherwise, shall not be considered a Liability for purposes hereof.

 

Liabilities shall be determined by the chief financial officer of the Company (or the Independent Accountant) as provided in section 4.3 hereof.  Liabilities shall include those intercompany Liabilities that have been allocated to the Company in accordance with generally accepted accounting principles consistently applied.

 

Offering:  An offering and sale of shares of the common stock of the Company, Company World Holding, AGI or the Parent pursuant to a registration statement under the United States Securities Act of 1933, as amended

 

Operating Assets:  The real and personal properties, tangible and intangible, used in the regular ongoing operation of the Company and its subsidiaries, as the case may be, which would be acquired by a purchaser of such entities (or the assets thereof) in order to continue the uninterrupted operation of the business thereof in substantially the manner as theretofore operated but excluding therefrom cash, investments, marketable securities, accounts and notes receivable, inventories, prepaid items and similar assets which would not normally be acquired by a purchaser in an asset acquisition (or for which special adjustment to the purchase price would be made).

 

Operating Liabilities:  Any Liability or other obligation (whether absolute, accrued or contingent, choate or inchoate) which would be required to be assumed by a buyer of all or substantially all of the assets of the Company and its subsidiaries in order to continue, uninterrupted, the business operations of the Company unless, in connection with such assumption, there would customarily be made an adjustment to the purchase price for such liabilities.  Operating Liabilities do not include (i) indebtedness for money borrowed or guarantees of any such indebtedness, (ii) refinancings of indebtedness of the kind referred to in clause (i) above, (iii) indebtedness in respect of any subscription agreement, stock or warrant “put” or “call” agreement, phantom stock agreement or similar obligation in respect of an equity or other interest in the Parent measured by an increase in the equity value of the Parent, including, without limitation, the obligations under this Agreement, and (iv) current payables.

 

Operating Profit:  With respect to any Accounting Period (i) the net income of the Company derived from the ongoing business operations of such entity or entities for such period plus (ii) interest, federal and state income taxes (or any provision for such taxes), depreciation, amortization, financing costs and management fees.  Operating Profit shall be determined on the accrual method of accounting and in accordance with generally accepted accounting principles consistently applied, provided that (i) in no event shall tradeout or barter transactions or extraordinary items of revenue or expense (including revenue or expense from non-operating investments, revenue or expense from the sale or purchase of Operating Assets or entities or revenue or expense not derived from business operations) be reflected in net income, (ii) amounts paid or received in settlement of (or payment of judgments in respect of) litigation which did not arise in the ordinary course of the business operations of such entity or entities or any of their respective subsidiaries, shall not be reflected in net income (it being understood that subsidiaries of the Company do have litigation, such as the litigation in the Company, which shall be considered litigation in the “ordinary course” of business operations) and (iii) revenue and expenses relating to the “MVP” insurance program shall not be reflected in net income. If there has occurred a Sale of Operating Assets within the Accounting Period and, in such Sale, not all of the Operating Assets have been sold, provided that the net proceeds of

 

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such Sale have been received by the Company prior to the date on which Current Assets and Liabilities of the Company are calculated as herein provided, the net income relating to such Operating Assets shall be deleted from the calculation of Operating Profit.  If there has occurred a purchase of Operating Assets, the income from which is reflected in the Accounting Period, and such Operating Assets were not owned by the Company for the entire Accounting Period, the Operating Profit with respect to such Operating Assets shall be included, on a historical basis, as if the Company (or its subsidiaries) had owned such Operating Assets for the entire Accounting Period.

 

Parent:  Affinity Group Holding, Inc., a Delaware corporation, or such other entity which holds in excess of eighty (80%) percent of the issued and outstanding equity securities of AGI.

 

Phantom Stock Interest:  The equivalent value of the aggregate of (a) 12% of Company Value up to and including $10 million of Company Value, plus (b) 13% of Company Value in excess of $10 million up to and including $20 million of Company Value, plus (c) 14% of Company Value in excess of $20 million up to and including $30 million of Company Value, plus (d) 15% of Company Value in excess of $30 million up to and including $40 million of Company Value, plus (e) 16% of Company Value in excess of $40 million up to and including $50 million of Company Value, plus (f) 17% of Company Value in excess of $50 million up to and including $60 million of Company Value, plus (g) 18% of Company Value in excess of $60 million up to and including $70 million of Company Value, plus (h) 19% of Company Value in excess of $70 million up to and including $80 million of Company Value, plus (i) 20% of Company Value in excess of $80 million .  Attached hereto as Exhibit B is an example of the calculation of the Phantom Stock Interest based upon the assumptions set forth therein.

 

Private Placement:  The issuance by the Company, the Parent, AGI, or Camping World Holding, as the case may be, of shares of common stock of the issuing entity in a private placement which results in the current owners of the issuing entity owning less than 51% of the issuer after the transaction

 

Rolling Four Fiscal Quarters:  Four consecutive Fiscal Quarters.

 

Sale:  The sale of all or substantially all of the Operating Assets of the Company, or the sale in one transaction (or a series of related transactions) of more than 51% of the equity interests in the Parent, in AGI, in Camping World Holding or in the Company (except, in any of the foregoing cases, to an entity controlled by, controlling or under common control with the Parent).

 

Section 4.2.  Withholding Taxes.  The Company may withhold from any payment to be made under this Agreement (and transmit to the proper taxing authority) such amount as it may be required to withhold under any federal, state or other law.

 

Section 4.3.  Administration.  The Company and its executive officers shall have full power to interpret, construe and administer this Agreement, including authority to determine any dispute or claim with respect thereto.  The Company shall give prompt written notice to Executive of the determination by the Company of any matter provided herein, and, unless notice objecting to such determination is given as provided herein, the determination of the Company in any matter, made in good faith, shall be binding and conclusive upon Executive and all other persons having any right or benefit hereunder.  Unless Executive shall give notice to the Company objecting to the Company’s calculation of Current Assets, Liabilities, Operating Liabilities or Operating Profit for any period (or any other calculation to be determined for the purposes of this Agreement) within thirty days after notice of the determination thereof by the Company, such calculation shall conclusively be deemed to have been accepted by the parties hereto.  The cash value of the Phantom Stock Interest shall be set forth in a certificate of the chief financial officer of the Company, the determination of which shall be made within one hundred fifty (150) days of the Determination Date and shall be conclusive and binding upon the Executive provided that, if the Executive shall disagree with the amount of the Current Assets, Liabilities, Operating Liabilities or Operating Profit as determined by the chief

 

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financial officer of the Company (written notice of which shall be given by the Executive within thirty (30) days of the receipt of such determination by the chief financial officer), Current Assets, Liabilities, Operating Liabilities or Operating Profit shall be determined by the independent certified public accountants of the Company or, if the Company has not then engaged a firm of independent certified public accountants, any nationally recognized firm of public accountants selected by the Company (the “Independent Accountant”).  The Independent Accountant shall determine the Current Assets, Liabilities, Operating Liabilities or Operating Profit of the Company within thirty (30) days after its appointment and shall be instructed to deliver to the Company and the Executive a written report of its determination of the amount of such Current Assets, Liabilities, Operating Liabilities or Operating Profit.

 

The cost of the accounting services performed by the Independent Accountant shall be borne by the Company (but the cost thereof shall be considered a liability of the Company for purposes of determining Liabilities) unless the amount of the Current Assets, Liabilities, Operating Liabilities or Operating Profit as determined by the Independent Accountant is the same as the amount determined by the Company’s chief financial officer (or is an amount which results in a lower value for the Executive of the Phantom Stock Interest or the bonus payable under section 1.5), in which event the entire cost of the services of the Independent Accountant shall be borne by the Executive and shall be deducted by the Company from the  Phantom Stock payment to be made pursuant to section 2.2 hereof or the bonus payable under section 1.5, as the case may be.

 

Any of the obligations of the Company hereunder may be performed by an affiliate of the Company and such performance by an affiliate shall be deemed to satisfy any such obligation of the Company hereunder.

 

Section 4.4.  Notices.  All notices, requests and other communications from any of the parties hereto to the other shall be in writing and shall be considered to have been duly given or served when personally delivered to any individual party, an executive officer of any corporate party, or on the first day after the date of deposit with Federal Express for next day delivery, postage prepaid, or on the third day after deposit in the United States mail, certified or registered, return receipt requested, postage prepaid, or on the date of telecopy, fax or similar telephonic transmission during normal business hours, provided that the recipient has specifically acknowledged by telephone receipt of such telecopy, fax or telephonic transmission; addressed, in all cases, to the party at his or its address set forth below, or to such other address as such party may hereafter designate by written notice to the other party:

 

(i)  If to the Company to:

 

2575 Vista Del Mar Drive

Ventura, CA  93001

Attn:  Stephen Adams

 

(ii)  If to Executive to:

 

Mark T. Gilman

1253 Harlequin Court NW

Silverdale, WA 98383

 

Section 4.5.  Binding Effect.  The provisions of this Agreement shall not give Executive any rights to continue to be employed or otherwise retained by the Company or any affiliate thereof.  Except as so provided, this Agreement shall be binding upon and inure to the benefit of the parties hereto, the respective successors and assigns of the Company and the beneficiaries, personal representatives and heirs of Executive.

 

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Section 4.6.  Controlling Law.  This Agreement shall be construed, and the legal relations between the parties determined, in accordance with the laws of the state of Delaware.

 

Section 4.7.  Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original without the production of the others, but all of which together shall constitute one and the same instrument.

 

Section 4.8.  Entire Agreement.  This Agreement, together with the letter agreement dated as of the date hereof between AGI and the Executive, contains the entire understanding of the parties with respect to the subject matter hereof and may not be varied, modified or amended except by a writing signed by the parties to be charged.  The making, execution and delivery of this Agreement by the parties hereto have been induced by no representations, statements, warranties or agreements of the other except those herein expressed.

 

Section 4.9.  Headings.  The division of this Agreement into sections and paragraphs and the titles assigned thereto is only a matter of convenience for reference and shall not define or limit any of the terms or provisions thereof.

 

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IN WITNESS WHEREOF, the individual party has hereunto set his hand and the corporate party has caused these presents to be executed by a proper officer thereunto duly authorized all as of the day and year first above written.

 

 

 

AFFINITY GROUP, INC.

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Mark J. Boggess

 

 

 

Mark J. Boggess

 

 

 

Its: Vice President and Chief Financial Officer

 

 

 

CAMPING WORLD, INC.

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Mark J. Boggess

 

 

 

Mark J. Boggess

 

 

 

Its: Vice President and Chief Financial Officer

 

 

 

CWI, INC.

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Mark J. Boggess

 

 

 

Mark J. Boggess

 

 

 

Its: Vice President and Chief Financial Officer

 

 

 

 

 

/s/ Mark T. Gilman

 

 

 

Mark T. Gilman

 

 

125


EX-10.53 8 j8667_ex10d53.htm EX-10.53

Exhibit 10.53

 

Amendment to Employment Agreement dated August 1, 1993 between Stephen Adams and the Company.

 

[TYPED ON AFFINITY GROUP, INC. LETTERHEAD]

 

 

September 1, 2002

 

 

Stephen Adams

Affinity Group, Inc.

2575 Vista Del Mar Drive

Ventura, CA   93001

 

Re:          Employment Agreement dated as of August 1, 1993 between Affinity Group, Inc. (the “Company”) and Stephen Adams, as amended (the “Employment Agreement”)

 

 

Dear Steve:

 

The term of the Employment Agreement continues until September 1, 2002.  The Company desires to continue your employment in accordance with the terms of the Employment Agreement and you have acknowledged that you are willing to continue such employment.  Therefore, the terms of the Employment Agreement shall be extended for an additional one (1) year period beginning on the date hereof and continuing until September 1, 2003.

 

If the foregoing properly sets forth our understanding, I would appreciate your so acknowledging by executing the counterpart of this letter in the space provided below.

 

 

 

 

AFFINITY GROUP, INC.

 

 

 

 

 

 

 

 

 

By:

/s/

 

 

 

 

Its:

President

 

 

 

Accepted and agreed to as of the 1st day of September, 2002.

 

 

/s/ Stephen Adams

 

 

Stephen Adams

 

 

 

126


EX-21 9 j8667_ex21.htm EX-21

Exhibit 21

 

Subsidiaries of Registrant

 

The following subsidiaries are direct or indirect subsidiaries of the Company:

 

VBI Inc., a Delaware corporation

Golf Card International Corp., a Delaware corporation

Camp Coast to Coast, Inc., a Delaware corporation

Coast Marketing Group, Inc., a Delaware corporation

Golf Card Resort Services, Inc., a Delaware corporation

TL Enterprises, Inc., a Delaware corporation

Golf Card Holding Corporation, a Delaware corporation

GSS Enterprises, Inc., a Delaware corporation

Woodall Publications Corporation, a Delaware corporation

AGI Properties of Colorado, Inc., a Delaware corporation

Affinity Group Thrift Holding Corporation, a Delaware corporation

Affinity Road and Travel Club, Inc., a Texas corporation

Affinity Brokerage, Inc., a Delaware corporation

Camping Realty, Inc., a Kentucky corporation

Camping World, Inc., a Kentucky corporation

Camping World Insurance Services of Nevada, Inc., a Nevada corporation

CWI, Inc., a Kentucky corporation

CW Michigan, Inc., a Delaware corporation

CW Texas, LP, a Minnesota limited partnership

Ehlert Publishing Group, Inc., a Minnesota corporation

Exposition Group, Inc., a Minnesota corporation

AGI Real Estate Holding, Inc., a Delaware corporation

Thunder Press, a California corporation

Camping World RV Sales, Inc., a Delaware corporation

Adventure Mall, Inc., a Delaware corporation

Power Sports Media, Inc., a Delaware corporation

Affinity Advertising, LP, a Minnesota limited partnership

 

127


EX-24 10 j8667_ex24.htm EX-24

Exhibit 24

 

POWER OF ATTORNEY

 

 

KNOW ALL MEN BY THESE PRESENTS, that AFFINITY GROUP HOLDING, INC., a Delaware corporation (the “Company”), and each of the undersigned directors of the Company, hereby constitutes and appoints Stephen Adams, Joe McAdams and Mark J. Boggess, and each of them (with full power to each of them to act alone), its/his true and lawful attorney-in-fact and agent, for it/him and on its/his behalf in its/his name, place and stead, in any and all capacities to sign, execute, affix its/his seal thereto and file the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 under the Securities Exchange Act of 1934, as amended, including any amendment or amendments thereto, with all exhibits and any all documents required to be filed with respect thereto with any regulatory authority.

 

There is hereby granted to said attorneys, and each of the, full power and authority to do and perform each and every act and thing, requisite and necessary to be done in respect of the foregoing as fully as it/he or itself/himself might or could do if personally present, thereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.

 

This Power of Attorney may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same instrument and any of the undersigned directors may execute this Power of Attorney by signing any such counterpart.

 

IN WITNESS WHEREOF, AFFINITY GROUP HOLDING, INC. has caused this Power of Attorney to be executed in its name by its President and Chief Executive Officer as of the 3rd day of March 2003.

 

 

 

AFFINITY GROUP HOLDING, INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Joe B. McAdams

 

 

 

 

Joe B. McAdams, President and

 

 

 

Chief Executive Officer

 

 

128



 

The undersigned directors of AFFINITY GROUP HOLDING, INC., a Delaware corporation, have hereunto set their hands as of the 5th day of March 2003.

 

 

 

/s/ Stephen Adams

 

 

/s/ Joe B. McAdams

 

 

 

Stephen Adams

 

Joe B. McAdams

 

 

 

 

 

 

 

/s/ Mark T. Gilman

 

 

/s/ David B. Garvin

 

 

 

Mark T. Gilman

 

David B. Garvin

 

 

 

 

 

 

 

/s/ Wayne Boysen

 

 

/s/ David Frith-Smith

 

 

 

Wayne Boysen

 

David Frith-Smith

 

 

 

 

 

 

 

/s/ John Ehlert

 

 

/s/ George Parker

 

 

 

John Ehlert

 

George Parker

 

 

129


EX-99.1 11 j8667_ex99d1.htm EX-99.1

Exhibit 99.1

 

AFFINITY GROUP HOLDING, INC.

 

STATEMENT PURSUANT TO 18 U.S.C. SECTION 1350

 

 

I, Joe McAdams, President and Chief Executive Officer of Affinity Group Holding, Inc., a Delaware corporation (the “Company”), hereby certify as follows:

 

1.                                       This statement is provided pursuant to 18 U.S.C. Section 1350 in connection with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (the “Periodic Report”);

 

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

 

3.                                       The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of dates and for the periods indicated therein.

 

 

Date:  March 21, 2003

 

 

 

/s/ Joe McAdams

 

 

 

Joe McAdams

 

 

President and Chief Executive Officer

 

 

130


EX-99.2 12 j8667_ex99d2.htm EX-99.2

Exhibit 99.2

 

AFFINITY GROUP HOLDING, INC.

 

STATEMENT PURSUANT TO 18 U.S.C. SECTION 1350

 

 

I, Mark J. Boggess, Vice President and Chief Financial Officer of Affinity Group Holding, Inc., a Delaware corporation (the “Company”), hereby certify as follows:

 

1.                                       This statement is provided pursuant to 18 U.S.C. Section 1350 in connection with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (the “Periodic Report”);

 

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

 

3.                                       The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of dates and for the periods indicated therein.

 

 

Date:  March 21, 2003

 

 

 

/s/ Mark J. Boggess

 

 

 

Mark J. Boggess

 

 

Vice President and Chief Financial Officer

 

 

131


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