10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2006

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-12085

NATIONAL R.V. HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	No. 33-0371079
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
100 West Sinclair Street, Perris, California	92571
(Address of principal executive offices)	(Zip Code)

(951) 436-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $.01 per share	New York Stock Exchange - Arca
(Title of class)	(Name of each Exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  o     No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes  o     No  x

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

Yes  x     No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

o

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

Large accelerated filer     o Accelerated filer     x Non-accelerated filer     o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o     No  x

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant (assuming for these purposes, but without conceding, that all executive officers and directors are “affiliates” of the registrant) was approximately  $52,250,537 as of the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing sale price upon the New York Stock Exchange reported for such date.

There were 10,339,484 shares of the registrant’s common stock issued and outstanding as of  March 19, 2007.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the definitive proxy statement for the 2007 Annual Meeting of Stockholders to be held with respect to the Company’s fiscal year ended December 31, 2006 (unless such information is included in an amendment to this Form 10-K).

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This report contains information that may constitute “forward-looking statements.” Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that the Company expects or anticipates will occur in the future—including statements about the Company’s future expectations, performance, plans, and prospects, as well as assumptions about future events, and statements expressing general optimism about future operating results—are forward-looking statements. As and when made, management believes that these forward-looking statements are reasonable. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company’s historical experience and its present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part I, “Item 1A. Risk Factors” and elsewhere in this report and those described from time to time in the Company’s future reports filed with the Securities and Exchange Commission.

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PART I

Item 1. Business

General

National R.V. Holdings, Inc. (the “Company”) through its wholly-owned subsidiary, National RV, Inc. (“NRV”), is one of the nation’s leading producers of motorized recreational vehicles, often referred to as RVs or motorhomes.   NRV began manufacturing RVs in 1964.  From its Perris, California facility, NRV designs, manufactures and markets Class A gas and diesel motorhomes under model names Dolphin, Pacifica, Sea Breeze, Surf Side, Tradewinds and Tropi-Cal.  Based upon retail registrations for the year ended December 31, 2006, NRV is the seventh largest domestic manufacturer of Class A motorhomes.

Prior to February 20, 2007, high-end  (“Highline”) Class A diesel motorhomes were designed, manufactured and marketed through another wholly-owned subsidiary, Country Coach, Inc. (“CCI”) operating from Junction City, Oregon.  As discussed in more detail in Recent Developments, CCI was sold on February 20, 2007.

As used herein, the term “Company” refers to National R.V. Holdings, Inc. and NRV unless the context otherwise requires. All data and other statistical information concerning the Company in this Item 1 (Business) and in Item 1A (Risk Factors) give effect to the sale of CCI and, therefore, excludes CCI-related information. The Company was incorporated in Delaware in 1988.  Its headquarters are located at 100 West Sinclair Street, Perris, California 92571, and its telephone number is (951) 436-3000.

Recent Developments

On February 20, 2007, the Company completed the sale of CCI to Country Coach Holdings LLC (“CC Holdings”), an entity owned primarily by Riley Investment Management, LLC (“Riley”).  Mr. Bryant R. Riley, who owns approximately 1.2 million shares of the Company’s common stock, is the sole equity owner of Riley.  The sale was conducted pursuant to a Merger and Asset Purchase Agreement (the “Merger Agreement”) entered into on February 16, 2007 by and among CC Holdings, Country Coach Merger LLC (“Merger Sub”) and Riley, on one hand, and the Company and CCI, on the other. The acquisition took the form of a merger whereby CCI merged with and into Merger Sub with Merger Sub surviving as a wholly-owned subsidiary of CC Holdings (the “Merger”).  In addition, in connection with the transactions contemplated by the Merger Agreement, the Company also transferred certain assets (the “Additional Assets”) to Merger Sub held by the Company related to the business of CCI and Merger Sub assumed certain liabilities of the Company related to the business of CCI.  At the closing of the Merger, Merger Sub was renamed Country Coach LLC.  The Company received total consideration of $38.7 million  (the “Consideration”) for the sale of CCI and the transfer of the Additional Assets.  In connection with the Merger, the Company amended its existing credit facility with Wells Fargo Bank and UPS Capital Corporation and used $24.5 million of the Consideration to reduce amounts owed by the Company under the credit facility. (See Note 17 in the accompanying notes to the consolidated financial statements for additional information regarding the sale of CCI.)

In December 2006, the Company and an unrelated party entered into an agreement for the possible sale and leaseback of NRV’s manufacturing facilities owned by the Company.  The Company has not committed to the sale and leaseback and is considering alternative options.  (See Note 10 in the accompanying notes to the consolidated financial statements for further discussion and terms of sale and leaseback.)

Motorized Recreational Vehicle Industry Overview

Motorhomes

Motorhomes are self-powered RVs built on a motor vehicle chassis. The interior typically includes a driver’s area, kitchen, bathroom, dining, living room and sleeping areas. Motorhomes are self-contained, with their own power generation, heating, cooking, refrigeration, sewage holding and water storage facilities, so that they can be lived in without being attached to utilities. Motorhomes are generally categorized into A, B and C classes based upon standards established by the Recreational Vehicle Industry Association (the “RVIA”). Class A motorhomes are constructed on a medium-duty to heavy-duty truck chassis, which includes the engine, drive train and other operating components. Retail prices for Class A motorhomes range from $58,000 to $1,630,000, with the majority in the $58,000 to $400,000 range.  Class B motorhomes are van campers, which generally contain fewer features than Class A or Class C motorhomes and generally range in retail price from $41,000 to $74,000. Class C motorhomes are built on a van or pick-up truck chassis, which includes an engine, drive train components and a finished cab section, and generally range in retail price from $48,000 to $140,000.

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Trends and Demographics

According to the RVIA’s wholesale statistics, total Class A motorhome industry unit sales in 2006 decreased 13.7% to 32,700 from 37,900 in 2005. The aggregate wholesale value of the Class A motorhome industry’s shipments for the year ended December 31, 2006 is not yet available from the RVIA. The aggregate wholesale value of the Class A motorhome industry’s shipments for the year ended December 31, 2005 was approximately $4.9 billion. The average wholesale price of Class A motorhomes increased 4.2% in 2005 to $128,614 from $123,406 in 2004. Statistical information regarding the aggregate wholesale value of Class A industry shipments and average wholesale price of Class A motorhomes were not available for the year ended December 31, 2006 as of the date of this report.

Between 1998 and 2006, the number of Class A motorhome manufacturers decreased from 27 to 26. In addition, during this period, the aggregate retail market share of the ten largest Class A motorhome manufacturers increased from 92.5% to 94.1%.

RVs are purchased for a variety of purposes, including camping, visiting family and friends, sightseeing, vacationing and enjoying outdoor activities and sporting events. According to a 2005 University of Michigan study (latest available study), approximately 7.9 million households (or 8.0% of all vehicle owning households) in the United States owned RVs in 2005, up from 6.9 million in 2001, 6.4 million in 1997, 5.8 million in 1993 and 5.8 million in 1988. In addition, the study indicated that 64% of all current RV owners and 34% of all former RV owners plan to purchase another RV in the future. This study further indicated that 67% of all future RV purchases will be used RVs (RVIA and market share statistics reflect new product sales only) with 13% of these used RVs older than 11 years.

Based on the 2005 study done by the University of Michigan, ownership of RVs reaches its highest level among those Americans aged 55 to 64, with 10.0% of households in this category owning RVs. According to the study, the number of households in this group, which constitutes the Company’s primary target market, is projected to grow by 3.6 million households, or 20%, from 2005 to 2010. Baby Boomers are defined as those born between the years 1947 and 1967, and thus the leading edge of the Baby Boomer generation began turning 55 in 2002. This generation is expected to be more affluent and retire earlier than past generations. As Baby Boomers enter and travel through the important 55 to 64 age group for RV sales, the Company believes that they represent the potential for a secular uptrend in the RV industry.

As motorhomes have increased in popularity due, in part, to the entry of the Baby Boomer generation into the target market, the purchasers of these products have grown more sophisticated in their tastes. The Company believes that as a result, customers have demanded more value for their money, and brand recognition and loyalty have become increasingly important. These trends have favored companies that can deliver quality, value and reliability on a sustained basis.

Business Development and Strategy

The Company’s business development and operating strategy is to deliver high quality, innovative products that offer superior value to enhance the Company’s position as one of the nation’s leading manufacturers of RVs. This strategy focuses on the following key elements: (i) building upon and promoting recognition of the Company’s brand names; (ii) offering the highest value products at multiple price points to appeal to first time and repeat buyers; (iii) utilizing vertically integrated manufacturing processes; and (iv) capitalizing on the Company’s historical reputation to expand its presence in the market.

Building upon and Promoting Recognition of the Company’s Brand Names

The Company believes that its brand names and historical reputation for manufacturing quality products with excellent value have fostered strong consumer awareness of the Company’s products and have contributed to its overall growth during the past decade. The Company intends to capitalize on its brand name recognition in order to increase its sales and market share, facilitate the introduction of new floorplans and enhance its dealer network.

Offering the Highest Value Products at Multiple Price Points to Appeal to First Time and Repeat Buyers

The Company currently offers six distinct models of RVs with 32 floor plans, which are available in a variety of lengths, color schemes and interior designs and range in suggested retail price from $91,000 to $268,000. Each model is intended to attract customers seeking an RV within their price range by offering value superior to competitive products from other manufacturers. RVIA data indicates that most new motorhome purchasers have previously owned a recreational vehicle, and the Company’s models are positioned to address the demands of these repeat customers as well as first time buyers.

Utilizing Vertically Integrated Manufacturing Processes

The Company designs and manufactures a significant number of the components used in the assembly of its products, rather than purchasing them from third parties. The Company believes that its vertically integrated manufacturing processes allow it to achieve cost savings and better quality. The Company’s in-house research and development staff and on-site component manufacturing departments enable the Company to ensure a timely supply of necessary products and to respond rapidly to market changes.

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Capitalizing on the Company’s Historical Reputation to Expand its Presence in the Market

The Company’s NRV product offerings compete in the most common and competitive price points in the RV industry. Through continued product development, a focus on quality, and strategic pricing, NRV reintroduced the Surf Side, its entry-level model and expanded its product offerings with the Pacifica, a diesel product filing a price point between the Tropi-Cal and Tradewinds.  In 2007, NRV will continue to target the expansion of its dealer body. The Company continues to seek to expand its share of this market by capitalizing on its historical reputation, developing new products of superior quality while reducing its costs, expanding its dealer network and satisfying the desire of many current RV owners to purchase more upscale vehicles.

Company’s Products

The Company’s product strategy is to offer the highest value RVs across a wide range of retail prices in order to appeal to a broad range of potential customers and to capture the business of brand-loyal repeat purchasers who tend to trade up with each new purchase. The Company’s motorhomes are designed to offer all the comforts of home within a 235 to 399 square foot area. Accordingly, the interior of the recreational vehicle is designed to maximize use of available space. The Company’s products are designed with six general areas, which are integrated to form comfortable and practical mobile accommodations. The six areas are the driver’s compartment, living room, kitchen, dining room, bathroom and bedroom. In many models, the Company offers up to four “slide-outs”, which are compartments that can be expanded to create additional living space when the motorhome is parked.

For each model, the Company offers a variety of interior layouts and designs, as well as exterior graphic and paint schemes.  The Company’s products are offered with a wide range of accessories and options and manufactured with high-quality materials and components. Each vehicle is equipped with a wide range of kitchen and bathroom appliances, audio and video electronics, communication and systems monitoring devices, furniture, climate control systems and storage spaces.

The Company’s vehicles are built by integrating manufacturing and assembly line processes. The Company generally operates one production shift for most assembly activities. The Company believes that the vertically integrated manufacturing systems and processes it has developed enable it to efficiently and consistently produce high-quality products.

Among other items, the Company fabricates, molds and finishes fiberglass to produce its front and rear-end caps, manufactures its own walls and roofs, assembles sub-floors and molds plastic components. In addition to assembling its vehicles and installing various options and accessories, the Company manufactures many of its installed amenities such as cabinetry, showers and bathtubs.  The Company believes that by manufacturing these components on site, rather than purchasing them from third parties, it achieves cost savings, better quality and timely supply of necessary components. Chassis, plumbing fixtures, hardware, furniture and appliances are purchased in finished form from various suppliers.

The Company purchases the principal raw materials and certain other components used in the production of its RVs from third parties. Other than the chassis, and some chassis components, some sidewall materials, and some fabrics, these components and raw materials typically have short delivery lead times. All materials are generally available from numerous sources, and the Company has not experienced any significant shortages of raw materials or components.

Models

Tradewinds

The 40’ Tradewinds is a bus-style diesel pusher built on the Freightliner XC raised rail chassis, offering considerable strength in addition to features like a 400 HP Cummins ISL diesel engine, Allison MH3000 transmission, and an 85-inch ceiling. The Tradewinds features large three and four slide rooms that add to the already spacious living space. This motorhome receives intricate full exterior paint designs, in addition to interior appointments like OptimaLeather™, upgraded electronics and several interior upgrades. Suggested retail prices for the Tradewinds start at $268,000. The Tradewinds debuted in 1997, but was not built for model-year 2005. It was reintroduced in 2005 for model-year 2006.

Pacifica

The 36’ to 40’ Pacifica is a bus-style diesel pusher built on the Freightliner XC raised rail chassis, offering considerable strength in addition to features like a 350 Caterpillar C7 diesel engine, Allison MH3000 transmission, and an 85-inch ceiling. The Pacifica features large three and four slide rooms’ that add to the already spacious living area. This motorhome receives intricate full exterior paint designs, in addition to interior appointments like OptimaLeather™, upgraded electronics and several interior upgrades. Suggested retail prices for the Pacifica start at $222,000. The Pacifica debuted in 2006.

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Tropi-Cal

The Tropi-Cal is a competitively priced diesel pusher built on the Freightliner XC-Series Chassis. The 33’, 34’, 35’, 37’, and 39’ Tropi-Cal floorplans feature two, three and four slide-outs and include expansive basement storage, excellent cargo carrying capacities and comfortable, convenient layouts. The Tropi-Cal offers a distinctive vinyl graphics package and a partial and full paint option.  The Tropi-Cal LX is a modestly priced diesel motorhome with many luxury appointments usually found on much more expensive Highline motorcoaches. Built on a raised rail Freightliner XC Series chassis with patented DuraFrame® technology, Tropi-Cal LX has richly appointed interiors with a choice of three fabulous decors.  The Tropi-Cal products seek to capitalize on brand loyalty earned since the original nameplate introduction in the early 1990s. Suggested retail prices for the Tropi-Cal start at $169,000. The Tropi-Cal was originally introduced as a gasoline motorhome in 1994 and made its debut as a diesel pusher in 2002.

Dolphin

The Dolphin was re-designed from the ground up for 2006, incorporating several innovative industry trends such as the “big box” house and aggressive new front and rear caps. The Dolphin is available in four floorplans, and is built on either the Ford or Workhorse gas-powered chassis. These models are full-basement, bus-style motorhomes with up to three slides. The Dolphin LX is an upgraded Dolphin, offering certain distinct features, exterior styling and floorplans often reserved for higher-priced diesel motorhomes. Many optional Dolphin features become standard on the Dolphin LX, and the LX features many items not available on the standard Dolphin. The Dolphin products are produced in 32’ to 36’ lengths. Suggested retail prices for the Dolphin start at $130,000. The Class A Dolphin motorhome was first introduced in 1985. However, the Dolphin brand dates back to 1963.

Sea Breeze

The Sea Breeze is a moderately priced, bus-style motorhome, offered on a Ford gas-powered chassis. A full-height motorhome, the Sea Breeze offers considerable basement storage. The Sea Breeze features Corian® countertops, power heated side-view mirrors, deluxe trim and heated water and waste holding tanks. The Sea Breeze offers floorplans ranging from 31’ to 35’ in length. Also offered under the Sea Breeze name is the Sea Breeze LX built on either the Ford or Workhorse W-22 chassis. The Sea Breeze LX offers many upgrades not available in the standard Sea Breeze. The Sea Breeze LX models are produced in 31’ to 36’ lengths. Suggested retail prices for the Sea Breeze start at $107,000. The Class A Sea Breeze product was introduced in 1992.

Surf Side

The Surf Side was originally offered from 1999 through the 2001 model year and has returned for the 2006 model year as an entry-level priced coach. The Surf Side is offered on a Ford gas-powered chassis and offers floorplans produced in 29’ to 34’ lengths. Each Surf Side offers competitive styling, full-basement pass-through storage, insulated and heated water and waste holding tanks and lightweight aluminum basement compartment doors. Suggested retail prices for the Surf Side start at $91,000.

On September 24, 2004, the Company sold its travel trailer business assets to Weekend Warrior, a privately owned, California-based ramp-trailer manufacturer. The sale was designed to allow the Company to further concentrate its efforts and resources on its growing motorhome business.  The sale was reported as a discontinued operation.

Arrangements with Chassis Suppliers

One of the principal components used in the manufacture of motorhomes is the chassis, which includes the engine, drive train and other operating components.  The Company obtains the required chassis for its NRV Class A motorhomes from a limited number of manufacturers. As is standard in the industry, arrangements with such suppliers permit them to terminate their relationship with the Company at any time. Lead times for the delivery of chassis frequently exceed two months and the RV industry as a whole has from time to time experienced temporary shortages of chassis.  If any of the Company’s suppliers were to discontinue the manufacture of chassis utilized by the Company in the manufacture of its Class A motorhomes, materially reduce their availability to the RV industry in general or limit or terminate their availability to the Company in particular, the business and financial condition of the Company could be materially and adversely affected.

Product Warranty

The Company provides retail purchasers of its motorhomes with a limited warranty against defects in materials and workmanship. Excluded from the Company’s warranties are chassis manufactured by third parties and other components, typically those that are warranted by the Company’s suppliers of these items. Service covered by warranty must be performed at either of the Company’s in-house service facilities or any of its dealers or other authorized service centers. The warranty terms for NRV motorhomes is one year basic and five years structural.

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Trademarks and Patents

The Company has registered NRV’s Dolphin, DuraFrame, DuraSlide, Islander, Marlin, National RV, Pacifica, Palisades, Sea Breeze, Sea View, Splash, Surf Side, Tradewinds, Tropi-Cal, Viper and Your Own Private Island trademarks and believes they are material to the Company’s business. The Company has additional trademarks filed and pending registration. In addition, the Company has four patents covering RV sub-floors, exterior doors, stow-away beds and one design patent covering a ramp block.

Product Development

The Company utilizes research and development staff that concentrates on product development and enhancements. New ideas are presented to the staff from a variety of sources, including management, wholesale and retail sales representatives, dealers, suppliers, trade shows and consumers. The staff utilizes computer-aided design equipment to assist in the development of new products and floor plans and to analyze suggested modifications of existing products and features. After the initial step of development, prototype models for new products are constructed and refined. In the case of modifications to certain features, new molds for various parts, such as front-end caps, storage doors and dashes are produced and tested. New product prototypes are produced both off-line as well as directly on the production line. The Company believes that the maintenance of an in-house research and development staff enables the Company to respond rapidly to ongoing shifts in consumer tastes and demands. Total research and development expenses, excluding the CCI expenses, were $0.4 million, $0.6 million and $0.5 million, for the years ended December 31, 2006, 2005 and 2004, respectively.

Planned Product Introductions

In 2006, the Company introduced the Pacifica, an upper mid-range diesel pusher, expanding the number of price points at which the Company competes in the market place.  The Company plans to redesign two existing models in 2007 as model-year 2008 coaches.  The Company also plans to introduce new floorplans in its existing products to target certain market niches not previously represented. Throughout much of the Company’s product offerings, model change will herald new and updated interior and exterior color schemes, and new floorplans will be debuted throughout the calendar year.

Distribution and Marketing

The Company markets NRV products through a network of approximately 90 dealer locations in 32 states and 5 Canadian provinces. These dealers generally carry all or a portion of NRV’s product lines along with competitors’ products.

The Company generally promotes its products through product support at dealer locations, product brochures, live plant tours, product walk-throughs on DVD, attendance at trade and consumer shows, direct mail promotions, company web-sites, corporate newsletters, press releases, promotional appearances, trade and consumer magazine advertising, RV owner rallies that include limited free service and its in-house magazine publications. From time to time, the Company also offers dealer incentives. In addition, to help promote customer satisfaction and brand loyalty, the Company sponsors NRV clubs for owners of the Company’s products. The clubs publish newsletters on a monthly or quarterly basis and organize RV rallies and other activities. The Company continually seeks consumer preference input from several sources, including dealers, RV owners and the Company’s sales representatives, and, in response, the Company implements changes in the design, decor and features of its products. The Company’s website also offers an extensive listing of the Company’s models, floor plans and features, including “virtual tours” of some models.

Consistent with industry practice, the Company enters into off-balance sheet agreements, called repurchase agreements, with lenders providing financing (flooring) arrangements for dealers purchasing the Company’s motorhome units. These units are used to collateralize the loan between the dealers and their lenders.  The repurchase agreement provides the Company (manufacturer) to be paid directly by the lender upon delivery of the unit to the dealer location on the condition that the Company is required to repurchase the unit should the dealer default on the flooring agreement with its lender.  The Company’s loss exposure would be the difference between the value of the lien held by the flooring institution and the price for which the Company is able to resell the unit, adjusted for shipping and refurbishing costs prior to ultimate sale. Losses under these agreements have not been material to the Company.  Management monitors these active agreements on units sold and will record a liability and reduction to sales and cost of goods sold in the event that the Company is required to perform under the terms of the repurchase agreement.  (See Note 10 in the accompanying notes to the consolidated financial statements for additional information on repurchase agreements.)

Many finance companies and banks provide retail financing to purchasers of RVs. Certain provisions of the U.S. tax laws applicable to second residences, including the deductibility of mortgage interest, currently apply to motorhomes used as qualifying residences.

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Cyclicality, Seasonality and Economic Conditions

The RV industry has been characterized by cycles of growth and contraction in consumer demand, and reflects prevailing economic conditions, which affect disposable income for leisure-time activities. Declines in consumer confidence driven by concerns about the availability and price of gasoline, inflation, increases in interest rates, reductions in available financing, and political uncertainty has had, and may in the future have, an adverse impact on RV sales. Seasonal factors, over which the Company has no control, also have an effect on the demand for the Company’s products. Demand in the RV industry declines over the winter season, while sales are generally highest during the spring and summer months.

Competition

The motorhome market is intensely competitive, with a number of other manufacturers selling products that compete with those of the Company. According to Statistical Surveys, Inc., a provider of industry information concerning retail sales, the three leading manufacturers accounted for approximately 51.2%, 54.8% and 55.8% of total retail units sold in the Class A motorhome market during the years ended December 31, 2006, 2005 and 2004, respectively. These companies and certain other competitors have substantially greater financial and other resources than the Company. Sales of used motorhomes also compete with the Company’s products. The Company competes on the basis of value, quality, price and design. According to Statistical Surveys, Inc., the Company’s Class A retail market share of new product unit sales, exclusive of CCI sales, was 5.0%, 5.0% and 4.8% for the years ended December 31, 2006, 2005 and 2004, respectively.

Dependence on Certain Dealers and Concentration of Dealers in Certain Regions

For the year ended December 31, 2006, three dealers accounted for 17%, 11% and 6% of the Company’s annual net sales, excluding CCI sales. Also, the Company’s top ten dealers accounted for approximately 58%, 58% and 70% of the Company’s annual net sales during the years ended December 31, 2006, 2005 and 2004, respectively. The loss by the Company of one or more of these dealers could have a material adverse effect on the Company’s financial condition and results of operations. In addition, a significant portion of the Company’s sales is from dealers located in states in the western part of the United States. Consequently, a general downturn in economic conditions or other material events in the western region could materially adversely affect the Company’s sales.

Government Regulation

The Company is subject to federal, state and local regulations governing the manufacture and sale of their products, including the provisions of the National Traffic and Motor Vehicle Safety Act (the “Motor Vehicle Act”), the Transportation Recall Enhancement, Accountability and Documentation Act (the “TREAD” Act) and the Federal Motor Vehicle Safety Standards (“FMVSS”). Certain states require approval of coach designs and provide certification tags proving compliance before coaches can be sold into that state. The Motor Vehicle Act authorizes the National Highway Traffic Safety Administration (“NHTSA”) to require a manufacturer to recall and repair vehicles that contain safety defects or fail to comply with the FMVSS. In addition, the Company has, from time to time, instituted voluntary recalls of certain motorhome units.  The Company is also subject to some federal and state consumer protection and unfair trade practice laws and regulations relating to the sale, transportation and marketing of motor vehicles, including so-called “Lemon Laws.”

Federal and state laws and regulations also impose upon vehicle operators various restrictions on the weight, length and width of motor vehicles, including trucks and motorhomes, that may be operated in certain jurisdictions or on certain roadways.

Amendments and changes in enforcement with respect to these laws and regulations and the implementation of new laws and regulations could significantly increase the costs of manufacturing, purchasing, operating or selling the Company’s products and could have a material adverse effect on the Company’s business, results of operations and financial condition. The failure of the Company to comply with these present or future laws or regulations could result in fines imposed on the Company, civil and criminal liability, or suspension of operations, any of which could have a material adverse financial effect on the Company.

The Company’s manufacturing operations are subject to a variety of federal and state environmental regulations relating to the use, generation, storage, treatment, emissions and disposal of hazardous materials and wastes and noise pollution. Such laws and regulations are becoming more stringent, and it is likely that future amendments to these environmental statutes and additional regulations promulgated there under will be applicable to the Company, its manufacturing operations and its products in the future. The failure of the Company to comply with present or future regulations could result in fines being imposed on the Company, civil and criminal liability, suspension of operations, alterations to the manufacturing process, or costly cleanup or capital expenditures.

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Employees

As of December 31, 2006 and excluding CCI employees, the Company employed a total of 891 people (including temporary employees), of which 661 were involved in manufacturing, 91 in service, 57 in engineering, 50 in administration, 29 in sales and marketing and 3 in research and development.  None of the Company’s personnel are represented by labor unions. The Company considers its relations with its personnel to be good.

Available Information

National R.V. Holdings, Inc.’s Internet website address is www.nrvh.com. The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through the Company’s website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission.

Item 1A. Risk Factors

(References to “we”, “us” or “our” in the following discussion refer to the Company.)

In addition to the other information set forth in this report, you should carefully consider the following factors that could materially affect our business, financial condition or future results. The risks described below are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Risks Related to Our Operating Performance and Our Industry

We have incurred significant losses in recent years, and if our losses continue, and we are unable to achieve and maintain profitability, our stock price will likely suffer.

Including the results of operations of the Company’s former CCI business, we have had net losses totaling $24.3 million, $19.8 million and $9.5 million for the years ended December 31, 2006, 2005 and 2004, respectively. Continued losses could reduce our liquidity and cause us to reduce our expenditures on capital improvements, machinery and equipment and research and development. This could have a negative effect on our ability to maintain production schedules, manufacture products of high quality and develop and manufacture new products that will achieve market acceptance. This could in turn, have a negative impact on sales and earnings. If we continue to suffer losses, we could be unable to implement our business and financial strategies or meet our obligations when due. Our failure to achieve and sustain our profitability will negatively impact the market price of our common stock.

Our operating results may fluctuate.

Our net sales, gross margin and operating results may fluctuate significantly from period to period due to factors such as the mix of products sold, the level of discounting employed on our products, the ability to utilize or expand manufacturing resources efficiently, material shortages, the introduction and consumer acceptance of new models offered by our competition, warranty expense, the addition or loss of dealers, the timing of trade shows and rallies and factors affecting the recreational vehicle industry as a whole, such as cyclicality and seasonality. In addition, our overall gross margin will be affected by shifts in the type of models sold.

The RV industry has been characteristically cyclical and seasonal, which can have a negative effect on our operating results and our stock price.

The RV industry has been characterized by cycles of growth and contraction in consumer demand, reflecting prevailing economic conditions, which affect disposable income for leisure-time activities. Declines in consumer confidence driven by concerns about the availability and price of gasoline, inflation, increases in interest rates, reductions in available financing, and political uncertainty have had, and may in the future have, an adverse impact on RV sales. Seasonal factors, over which we have no control, also have an effect on the demand for our products. Demand in the RV industry generally declines over the winter season, while sales are generally highest during the spring and summer months. We cannot assure that the factors currently adversely affecting our business will not continue, or have an adverse effect beyond their present scope.

We depend on certain dealers and concentration of dealers in certain regions.

For the year ended December 31, 2006, three NRV dealers accounted for 17%, 11% and 6% of the annual net sales. Also, their top ten dealers accounted for approximately 58%, 58% and 70% of our annual net sales during the years ended December 31, 2006, 2005 and 2004, respectively. The loss of one or more of these dealers could have a material adverse effect on our financial condition and results of operations. In addition, a significant portion of our sales is from dealers located in states in the western part of the United States. Consequently, a general downturn in economic conditions or other material events in the western region could materially adversely affect our sales.

9

Reduced availability of financing for our dealers or retail customers could adversely affect revenues and margins.

Our RV dealers, as well as retail buyers of RV products, generally secure financing from third party lenders. Any reduction in the availability of such financing or significant increase in the cost of such financing resulting from higher interest rates may have an adverse effect on our business. Availability of financing is dependent on the lending practices of financial institutions, financial markets, governmental policies and economic conditions, all of which are largely beyond our control. For example, in the recent past, floorplan lenders have tightened credit availability, which has negatively affected the timing and accomplishment of our sales to our RV dealers, resulting in higher levels of finished goods inventory and associated financing costs. In response to lower demand, we offered retail-financing incentives to consumers resulting in a reduction in net sales, which negatively affected profitability.

High inventories of recreational vehicles among dealers could continue to negatively affect our sales volume and profit margins.

The level of recreational vehicle inventories among dealers can have a significant impact on manufacturing, shipments, inventory levels and operating results. As wholesale shipments of recreational vehicles within the industry exceed retail sales of vehicles, inventories at the dealer level expand to a point where dealers significantly cut orders from manufacturers. As manufacturers respond to reduced demand, many offer wholesale and retail discounts and incentives in an effort to maintain production volumes. As a result, dealer inventories may expand further resulting in an increasing need for discounts and sales incentives, or in the alternative, a need for dramatic reduction in overall production levels by manufacturers. Increased discounts and incentives, and reduced production levels negatively affect our revenues and profitability.

For some of our components, we depend on a small group of suppliers, and the loss or business interruption of any of these suppliers could affect our ability to obtain components at competitive prices, which would decrease our margins.  Further, any defects in the third-party components or raw materials we incorporate into our motorhomes could negatively affect our sales and financial results.

Most recreation vehicle and bus components are readily available from a variety of sources. However, a few components are produced by only a small group of quality suppliers that have the capacity to supply large quantities on a national basis. Our NRV subsidiary purchases gasoline-powered chassis from Ford Motor Company and Workhorse Custom Chassis and rear engine diesel-powered chassis from Freightliner Custom Chassis Corporation.  We generally maintain a one to two month production supply of a chassis in inventory. Historically, in the event of an industry-wide restriction of supply, chassis manufacturers have allocated chassis among our competitors and us based on the volume of chassis previously purchased. If Ford Motor Company, Workhorse Custom Chassis or Freightliner Custom Chassis Corporation were to discontinue the manufacturing of motor home chassis, or if as a group all of our chassis suppliers significantly reduced the availability of chassis to the industry, our business could be adversely affected. Similarly, shortages, production delays or work stoppages by the employees of these chassis manufacturers or other chassis suppliers could have a material adverse effect on us. Finally, as is standard in the industry, arrangements with chassis suppliers are terminable at any time by either the chassis supplier or us. If we cannot obtain an adequate chassis supply, this could result in a material adverse effect on our financial condition and results of operations.

In addition to the chassis, we incorporate a variety of components and raw materials from third parties into our recreational vehicles. Any defects in these components or raw materials could cause us to incur significant expense in repairing, replacing or finding alternatives to the components or raw materials, could negatively impact the sales of affected motorhomes and could cause a material adverse impact on our financial results and financial condition.

Fuel shortages, or higher prices for fuel, could have a negative effect on sales of recreational vehicles.

The recreational vehicles produced by us require gasoline or diesel fuel for their operation. Gasoline and diesel fuel have, at various times in the past, been difficult to obtain, and there can be no assurance that the supply of gasoline and diesel fuel will continue uninterrupted, that rationing will not be imposed or that the price of, or tax on, fuel will not significantly increase in the future. Shortages of gasoline and diesel fuel and rapid significant increases in fuel prices have had a significant adverse effect on the demand for recreational vehicles in the past and could have a material adverse effect on demand in the future. Such a reduction in overall demand for recreational vehicles could have a materially adverse impact on our revenues and profitability.

10

The consolidation of distribution channels within the RV industry could have a material negative effect on revenues and profitability.

Over the last several years, several large-scale recreational vehicle dealers have grown to represent a significant presence in the industry. The expansion of large-scale dealers and the continued consolidation of dealerships among large players may result in increased pricing pressures in the industry in general. Such pressure exerted by the distribution channel may have a material adverse effect on our revenues and profitability.

A rise in the frequency or size of workers’ compensation, and other claims against us, may result in a material adverse effect on our business, operating results and financial condition.

In the ordinary course of business, we are subject to litigation related to workers’ compensation and other employee related claims. We substantially self-insure these claims with a self-insurance retention level for claims below specified limits. An increase in frequency in claims below the self-insurance retention level may adversely affect our financial results. In addition, insurance is not available for some kinds of claims; an insurance carrier may deny coverage resulting in potential litigation expenses and additional exposure to losses. Workers’ compensation insurance costs are directly attributable to experience in the workplace. Any increase in the frequency and size of such claims, as compared to our experience in prior years, may cause the premiums required for insurance to rise significantly. Further, sizable claims may damage our reputation that may adversely affect our future operating and financial results.

A rise in the frequency or size of warranty claims against us may result in a material adverse effect on our business, operating results and financial condition.

We provide customers of our products with a basic one-year warranty covering defects in material or workmanship and a five-year warranty on certain structural components.  Although we maintain reserves for such claims, which to date have been adequate, there can be no assurance that warranty expense levels will remain at current levels or that such reserves will continue to be adequate. A large number of warranty claims exceeding our current warranty expense levels could have a material adverse effect on our results of operations, financial condition, and cash flows. Further, some jurisdictions have laws providing for a multiple recovery on warranty claims in some circumstances. The possibility for class actions also exists. In addition to the warranty expenses incurred by us, sizable product warranty claims may damage our reputation among dealers, builders and consumers that may adversely affect our future operating and financial results.

Repurchase agreements with floorplan lenders could result in increased costs.

Most dealers finance all, or substantially all, of the purchase price of their inventory under floor plan arrangements with banks or finance companies under which the lender pays us directly. Dealers typically are not required to commence loan repayments to such lenders for a period of at least six months. The loan is collateralized by a lien on the motorhome. Consistent with industry practice, we have entered into repurchase agreements with these lenders. In general, the repurchase agreements require us to repurchase a unit if the dealer defaults on the financed unit. Upon a dealer default, the agreements generally require us to repurchase RVs at the election of the lender provided certain conditions are met, such as repossession of the RV by the lender, the RV being new and unused and the time elapsed between invoice date and demand for repurchase being no longer than a specified period which is typically 18 months or less. Increase in the significance or number of future losses under such agreements could have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

A rise in the frequency or size of “lemon law” and product liability claims against us may result in a material adverse effect on our business, operating results and financial condition.

We are involved in legal proceedings in the ordinary course of business, including a variety of warranty, “lemon law” and product liability claims typical in the recreation vehicle industry. With respect to product liability claims, our insurance policies cover, in whole or in part, defense costs and liability costs for personal injury or property damage (excluding damage to our motorhomes). We cannot be certain that our insurance coverage will be sufficient to cover all future claims against us. Any increase in the frequency and size of these claims, as compared to our experience in prior years, may cause the premiums that we are required to pay for insurance to raise significantly. It may also increase the amounts we pay in punitive damages, which may not be covered by our insurance. These factors may have a material adverse effect on our results of operations and financial condition. In addition, if these claims rise to a level of frequency or size that is significantly higher than similar claims made against our competitors, our reputation and business will be harmed.

Changes in labor practices could adversely affect our labor costs and profitability.

Currently, none of our employees are members of any union or covered under any collective bargaining agreement. We provide competitive wages and a variety of benefits to our employees, including group life, dental, vision services, hospitalization, major medical plans, and a 401(k) plan. Although we consider our relations with employees to be good, any material changes in labor costs or practices, including those resulting from union activity may have a negative impact on our profitability.

11

Increased costs, including costs of component parts and labor may adversely affect our profitability if such costs cannot be offset because of market forces.

Our financial results may be significantly adversely affected by the availability and pricing of manufacturing components (particularly those with substantial steel, copper, fiberglass or lumber content) and labor. We attempt to mitigate the effect of any cost inflation in raw materials, components and labor by negotiating with current or new suppliers, contract price escalators, increasing labor productivity or increasing the sales prices of our products. However, we cannot assure that such actions will not have an adverse impact on the competitiveness of our products and result in declining revenues. If we are unable to successfully offset increases in manufacturing costs, this could have a material adverse impact on margins, operating income and cash flows. If we increase prices to offset higher manufacturing costs, the benefit of such increases may lag behind the rise in manufacturing costs.

The RV industry is highly competitive and some of our competitors have significantly greater resources than we have.

The market for motorized products is highly concentrated. This concentration is due in part to the higher barriers to entry within the motorized market, including the significant capital required for fixed asset investment, higher level of government regulation and dependence on a limited number of chassis suppliers. Consolidation within the industry may also increase overall competitive pressure. A number of our competitors have made acquisitions over the last five years that have increased their market share. Existing or new competitors could adversely affect our revenues and profit margins. For example, these competitors could develop products superior to our recreational vehicle offerings or that could achieve better consumer acceptance than our products.

According to Statistical Surveys, Inc., the three leading manufacturers accounted for approximately 51.2% of total retail units sold in the Class A motorhome market during the year ended December 31, 2006. These companies and certain other competitors have substantially greater financial and other resources than we have. Sales of used motorhomes also compete with our products. We compete on the basis of value, quality, price and design. According to Statistical Surveys, Inc., NRV Class A retail market share of new product unit sales, exclusive of CCI, was 5.0% for the year ended December 31, 2006.

Sustained increases in these competitive pressures could have a material adverse effect on our results of operations. There can be no assurance that existing or new competitors will not develop products that are superior to our recreational vehicles or that achieve better consumer acceptance, thereby adversely affecting our market share, sales volume and profit margins.

Changes in consumer preferences, and our ability to effectively adapt to those preferences, may adversely affect revenues and profitability.

Consumer preferences for our recreational vehicles are likely to change over time, and as a result, we continually introduce new features, designs and models to meet changing consumer demand. Delays in the introduction of new models or product features, or a lack of market acceptance of new features, designs or models, could have a material adverse effect on our business and operating results. As a result, we may incur significant additional costs in designing or redesigning models that are not accepted in the marketplace. We may also experience production difficulties, such as inefficiencies in purchasing and increased labor costs, as new models are introduced. In addition, new product introductions may reduce revenues from existing models and adversely affect operating results. There can be no assurance that any new models or products will be introduced to the market on time or that they will be successful when introduced.

New product introductions may result in unanticipated expenses resulting in reduced earnings.

The introduction of new products is critical to our future success. We incur additional costs when new products are introduced, such as research and development costs, engineering costs, and initial labor or purchasing inefficiencies. Additionally, we may incur unexpected expenses, including those associated with unexpected engineering or design flaws that could force a recall of a new product. We may be prompted to offer additional incentives to stimulate the sales of products, not adequately accepted by the market, or to stimulate sales of older or obsolete products. These types of costs could be substantial and could have a significant adverse effect on our financial results.

Changes in favorable tax laws could adversely affect our results of operations.

Certain U.S. tax laws currently afford favorable tax treatment for the purchase and sale of recreational vehicles that are used as the equivalent of second homes. These laws and regulations have historically been amended frequently, and it is likely that additional amendments and additional regulations affecting our products, or us, may be enacted in the future. Amendments to these laws and regulations and the implementation of new regulations could have a material adverse effect on our results of operations.

12

Risks Related to Regulation and Compliance

Changes to, or increases in, the regulations governing our businesses could have a material impact on operating and financial results.

We are subject to numerous federal, state and local regulations governing the manufacture and sale of our products, including the provisions of the National Traffic and Motor Vehicle Safety Act (the “Motor Vehicle Act”), the Transportation Recall Enhancement, Accountability and Documentation Act (the “TREAD” Act) and the Federal Motor Vehicle Safety Standards (“FMVSS”). Certain states require approval of coach designs and provide certification tags proving compliance before coaches can be sold into that state. The Motor Vehicle Act authorizes the National Highway Traffic Safety Administration (“NHTSA”) to require a manufacturer to recall and repair vehicles that contain safety defects or fail to comply with the FMVSS. In addition, we have, from time to time, instituted voluntary recalls of certain motorhome units. Future recalls of our products, if any, could have a material adverse effect on us and harm our reputation. We are also subject to some federal and state consumer protection and unfair trade practice laws and regulations relating to the sale, transportation and marketing of motor vehicles, including so-called “Lemon Laws.”

Federal and state laws and regulations also impose upon vehicle operators various restrictions on the weight, length and width of motor vehicles, including trucks and motorhomes, that may be operated in certain jurisdictions or on certain roadways

Amendments and changes in enforcement with respect to these laws and regulations and the implementation of new laws and regulations could significantly increase the costs of manufacturing, purchasing, operating or selling our products and could have a material adverse effect on our business, results of operations and financial condition. Our failure to comply with these present or future laws or regulations could result in fines imposed, civil and criminal liability, or suspension of operations, any of which could have a material adverse financial effect on us.

We may be unable to comply in the future with financial covenants in our credit facility, which could restrict our ability to operate.

At December 31, 2006, we had a $40 million asset-based revolving credit facility with UPS Capital Corporation (“UPSC”) and Wells Fargo Bank, after exercising two consecutive $5 million options to the line of credit in May and June 2006. The revolving credit facility expires in August 2008. Borrowing availability is based on eligible accounts receivable and inventory. The credit facility contains, among other provisions, certain financial covenants, including funded debt to Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), and a fixed charge coverage ratio. If these financial covenants are not met, our availability under the credit facility will be reduced.   On February 21, 2007, we entered into a Loan Modification Agreement to the credit facility with Wells Fargo Bank. The agreement provides that Wells Fargo Bank replace UPSC and become the Agent and sole lender and reduces the credit facility from $40 million to $15 million. All existing covenant defaults are waived under the agreement and it further provides that certain financial covenants be amended to establish new minimum EBITDA requirements in April 2007. While we do not anticipate any events of default, in such an event, the lender could restrict our borrowings under the line of credit which could restrict or limit our ability to react to changes in market conditions and acquire properties or businesses and if we were unable to obtain a waiver on the line of credit from Wells Fargo Bank, the underlying assets could be called by Wells Fargo Bank. If our debt were to be accelerated, there is no assurance that we would be able to repay it. There are no guarantees that we could obtain sufficient financing resources as an alternative to the line of credit, which could have a material negative impact on our financial position, results of operations and cash flows.

Failure to comply with environmental regulations could result in significantly increased costs and capital expenditures.

Our manufacturing operations are subject to a variety of federal and state environmental regulations relating to the use, generation, storage, treatment, emissions, and disposal of hazardous materials and wastes and noise pollution. Such laws and regulations are becoming more stringent, and it is likely that future amendments to these environmental statutes and additional regulations promulgated there under will be applicable to us, our manufacturing operations and our products in the future. Our failure to comply with present or future regulations could result in fines being imposed on us, civil and criminal liability, suspension of operations, alterations to the manufacturing process, costly cleanup or significant capital expenditures.

13

Other Risks

Provisions in our charter documents, and of Delaware law, may make it difficult for a third party to acquire our company and could depress the price of our common stock.

Certain provisions of our Certificate of Incorporation and By-laws, as well as Delaware corporate law, may be deemed to have anti-takeover effects and may delay, defer or prevent a takeover attempt that a stockholder might consider in its best interest. Such provisions also may adversely affect prevailing market prices for the Common Stock. Certain of such provisions allow the Company’s Board of Directors to issue, without additional stockholder approval, preferred stock having rights senior to those of the Common Stock. In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which prohibits us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

Item 1B. Unresolved Staff Comments

There are no material unresolved Securities and Exchange Commission (“SEC”) staff comments as of the date of this report.

Item 2. Properties

The Company currently owns and operates manufacturing facilities in Perris, California where NRV products are designed and manufactured.  The Perris properties include five buildings encompassing approximately 607,000 square feet located on 49 acres.  The corporate offices are located on the Perris premises.  The Perris, California facilities are subject to the Agreement referred to below.

In December 2006, the Company and an unrelated party signed a Purchase and Sale Agreement (“Agreement”), for the possible sale and conveyance of property owned by the Company. “Property” in the agreement is defined as land, inclusive of five buildings, improvements and related intangible assets and contracts. Terms of the agreement provide the condition that a leaseback contract for property sold be entered into and take effect concurrently to the consummation of the closing of the Agreement with the buyer acting as landlord, NRV as tenant, and the Company as guarantor.  The Company has not committed to the sale and leaseback and is considering alternative options.  (See Note 10 in the accompanying notes to the consolidated financial statements for discussion and terms of sale and leaseback.)

Item 3. Legal Proceedings

The Company is involved in legal proceedings in the ordinary course of business, including a variety of warranty, “lemon law,” product liability (all of which are typical in the recreation vehicle industry) and employment claims. With respect to product liability claims, the Company’s insurance policies cover, in whole or in part, defense costs and liability costs for personal injury or property damage (excluding damage to Company motorhomes). While it is impossible to estimate with certainty the ultimate legal and financial liability with respect to this litigation, management is of the opinion that the final resolution of any such litigation could have a material adverse effect on the Company’s financial position, results of operations or liquidity in a reporting period, and management has provided an estimated reserve for such contingencies in the consolidated financial statements.

On June 29, 2006, NRV filed a lawsuit against Crane Composites, Inc. and Crane Co., the manufacturer and parent company of defective sidewall fiberglass supplied to NRV for breach of contract, breach of warranty, misrepresentation and other causes of action.  The lawsuit, now pending in the U.S. District Court for the Central District of California, seeks compensatory and punitive damages.

Item 4. Submission of Matters to a Vote of Security Holders

None

PART II

As used herein, the term “Company” refers to National R.V. Holdings, Inc. including its two wholly-owned subsidiaries, NRV and CCI, unless the context otherwise requires.  All data and other statistical information concerning the Company in Part II represent the consolidated results of the Company and do not give effect to the sale of CCI.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s Common Stock, par value $0.01 per share (the “Common Stock”), has been trading under the symbol “NVH” on NYSE Arca, Inc. since October 13, 2006 and, prior to such date, on the New York Stock Exchange (“NYSE”) since December 14, 1998.  The Company moved its listing to NYSE Arca because it no longer met the NYSE’s market capitalization and stockholders’ equity continued listing criteria.

14

2006	High		Low
First Quarter	$	7.05	$	5.88
Second Quarter	$	6.50	$	5.18
Third Quarter	$	5.50	$	2.94
Fourth Quarter	$	4.27	$	3.01

2005	High		Low
First Quarter	$	12.05	$	9.70
Second Quarter	$	10.17	$	7.80
Third Quarter	$	8.35	$	5.06
Fourth Quarter	$	6.89	$	4.00

On March 19, 2007, the last reported sales price for the Common Stock quoted on the NYSE Arca exchange was $2.46 per share. At March 19, 2007, there were approximately 57 record holders of Common Stock. Such number does not include persons whose shares are held of record by a bank, brokerage house or clearing agency, but does include such banks, brokerage houses and clearing agencies.

Dividends

The Company has not paid any cash dividends or distributions on its Common Stock and has no intention to do so in the foreseeable future. The Company presently intends to retain any retained earnings for general corporate purposes, including business expansion, capital expenditures and possible acquisitions. The declaration and payment of future dividends will be at the sole discretion of the Board of Directors and will depend on the Company’s profitability, financial condition, capital needs, future prospects and other factors deemed relevant by the Board of Directors. The Company’s current credit agreement with Wells Fargo Bank restricts the declaration and payment of dividends.

Item 6. Selected Financial Data

The following selected consolidated financial data should be read in conjunction with the Company’s consolidated financial statements and the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere herein.  This historical selected financial data does not give effect to the sale of CCI on February 20, 2007. (See Note 17 in the accompanying notes to the consolidated financial statements.)

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SELECTED CONSOLIDATED FINANCIAL INFORMATION

(In thousands, except per share and unit amounts)

	Years Ended December 31,
Consolidated Statements of Operations Data:	2006			2005			2004			2003			2002
Net sales	$	397,118		$	463,610		$	436,813		$	312,548		$	267,920
Cost of goods sold	390,899			451,622			405,858			306,333			269,827
Gross profit (loss)	6,219			11,988			30,955			6,215			(1,907		)
Selling expenses	13,052			15,301			11,616			9,500			10,925
General and administrative expenses	14,499			14,801			13,626			7,466			7,430
Other expense	—			—			632			—			—
Impairment of goodwill (1)	—			—			—			—			6,126
Operating (loss) income	(21,332		)	(18,114		)	5,081			(10,751		)	(26,388		)
Interest expense	2,777			1,492			327			399			357
Other income	(138		)	(78		)	(90		)	(6		)	(117		)
Loss (gain) on disposal of land and equipment	97			59			—			(1		)	(355		)
(Loss) income from continuing operations before income taxes	(24,068		)	(19,587		)	4,844			(11,143		)	(26,273		)
Provision for (benefit from) income taxes (2)	265			181			13,161			(4,116		)	(7,716		)
Loss from continuing operations	(24,333		)	(19,768		)	(8,317		)	(7,027		)	(18,557		)
Loss from discontinued operations	—			—			2,155			2,301			2,212
Gain from sale of discontinued operations	—			—			(281		)	—			—
Benefit from income taxes	—			—			(737		)	(853		)	(847		)
Loss from discontinued operations, net of taxes	—			—			(1,137		)	(1,448		)	(1,365		)
Net loss	$	(24,333	)	$	(19,768	)	$	(9,454	)	$	(8,475	)	$	(19,922	)
Basic loss per common share:
Continuing operations	$	(2.35	)	$	(1.91	)	$	(0.81	)	$	(0.71	)	$	(1.90	)
Discontinued operations	—			—			(0.12		)	(0.15		)	(0.14		)
Net loss	$	(2.35	)	$	(1.91	)	$	(0.93	)	$	(0.86	)	$	(2.04	)
Diluted loss per common share:
Continuing operations	$	(2.35	)	$	(1.91	)	$	(0.81	)	$	(0.71	)	$	(1.90	)
Discontinued operations	—			—			(0.12		)	(0.15		)	(0.14		)
Net loss	$	(2.35	)	$	(1.91	)	$	(0.93	)	$	(0.86	)	$	(2.04	)
Weighted average number of common shares outstanding:
Basic	10,339			10,338			10,217			9,900			9,788
Diluted	10,339			10,338			10,217			9,900			9,788
Other Data:
Class A units sold	2,324			2,792			2,968			2,417			1,919

	December 31,
Consolidated Balance Sheet Data:	2006		2005		2004		2003		2002
Total assets	$	135,524	$	127,390	$	140,233	$	130,242	$	142,067
Working capital	$	2,303	$	26,136	$	49,094	$	49,669	$	55,941
Long-term debt (including capital leases)	$	124	$	169	$	185	$	—	$	19
Stockholders’ equity	$	36,119	$	59,662	$	79,290	$	87,783	$	94,093

(1)The impairment of goodwill was attributable to the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, effective January 1, 2002.

(2)The 2004 provision for taxes established a full valuation reserve of $11.2 million against the Company’s net deferred tax asset in accordance with SFAS No. 109.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

The Company is one of the nation’s leading producers of motorized recreational vehicles, often referred to as RVs or motorhomes.  During 2006, the Company’s financial position was severely affected by defective fiberglass material supplied by Crane Composites requiring incremental costs to rework and resell more than 70 motorhomes manufactured by NRV and also by the continuing decline of the Class A motorhome market.  In response to these conditions, the Company implemented initiatives to increase market share through new product and floorplan introductions and the addition of new dealers, to reduce material and related obsolescence costs and to further reduce manufacturing and other overhead costs.  Additionally, in 2006, the Company began the process of exploring financing opportunities to raise new capital and explore strategic alternatives.

On February 20, 2007, the Company completed the sale of CCI to CC Holdings, an entity owned primarily by Riley. Mr. Bryant R. Riley is the sole equity owner of Riley and is a related party. The sale was conducted pursuant to a Merger Agreement entered into on February 16, 2007 by and among CC Holdings, Merger Sub, and Riley, on one hand, and the Company and CCI, on the other. The acquisition took the form of a merger whereby CCI merged with and into Merger Sub with Merger Sub surviving as a wholly-owned subsidiary of the Merger.  In addition, in connection with the transactions contemplated by the Merger Agreement, the Company also transferred Additional Assets to Merger Sub held by the Company related to the business of CCI and Merger Sub assumed certain liabilities of the Company related to the business of CCI.  At the closing of the Merger, Merger Sub was renamed Country Coach LLC.  The Company received total consideration of $38.7 million for the sale of CCI and the transfer of the Additional Assets.

The Company undertook this sale to raise capital to enable the Company to reduce its debt and provide the necessary funding and resources to support the turnaround of the NRV business.  The Company used approximately $24.5 million of the proceeds from the sale of CCI to pay off its credit facility and the remainder of the proceeds will be used for working capital purposes.

In conjunction with the sale of CCI, the Company amended its credit agreement with a third amendment on February 21, 2007, reducing its line of credit from $40 million to $15 million.  The amendment replaced UPS Capital with Wells Fargo Bank as agent to the credit agreement.  It also provided for the consent to the sale of stock of CCI, a reduction in inventory sub-limit, a reduction in letter of credit sub-facility amount, an increase in the interest rate and a waiver for the events of default for the months ending October, November and December 2006.  The amendment added a prior written consent requirement for any sale and leaseback transaction involving the Perris, California real estate.  A fourth amendment dated March 13, 2007 provides for the setting of new financial covenants in April 2007.  (See Note 17 in the accompanying notes to the consolidated financial statements for more information on the amendments to the Company’s credit agreement.)

In December 2006, the Company and an unrelated party entered into an agreement for the possible sale and leaseback of NRV’s manufacturing facilities owned by the Company.  Terms of the agreement provide that a leaseback contract for property sold be entered into and take effect concurrently to the consummation of the closing of the purchase and sale agreement with the Buyer acting as landlord, NRV as tenant, and the Company as guarantor.  The Company has not committed to the sale and leaseback and is considering alternative options.  (See Note 10 in the accompanying notes to the consolidated financial statements for discussion and terms of sale and leaseback.)

For the year ended December 31, 2006, the Company had a net loss of $24.3 million or $2.35 per share.  At December 31, 2004, the Company established a full valuation allowance against its deferred tax asset and recorded the corresponding non-cash charge in its December 31, 2004 financial results. As a result of the full tax valuation allowance established starting with the year ended December 31, 2004, subsequent financial losses do not include an income tax benefit.

The Company finished with a 7.3% retail market share for the year ended December 31, 2006, a 4% increase in market share from 2005.  During 2006, only half of the top ten Class A manufacturers realized an increase in market share as reported by Statistical Surveys, Inc. The Company’s Class A motorhome retail unit shipments were down 10% in 2006 compared to 2005.  Industry wide, retail sales of Class A motorhomes were down 13% in 2006 compared to 2005.  The Company expects its market share of Class A motorhomes to decrease in 2007 as a result of the sale of CCI.

Product Development

The Company has continuously re-designed and introduced new products.  During 2006, the Company’s NRV subsidiary introduced the Pacifica, a mid-range diesel product, and CCI introduced two new Highline products, the Tribute and Rhapsody.  The Tribute is an entry-level highline product while the Rhapsody is positioned at the upper end, just below the Prevost Conversion.

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New model introductions and new floorplans, together with interior and exterior product enhancements, have historically proven successful in the marketplace. Management believes that focusing on the customer and providing great products that support the customer’s lifestyle will drive future growth for the Company.

Operating Performance

During 2006, the RV industry experienced a 14% decline in wholesale Class A unit shipments while the Company experienced a decline of 17%.  The Company’s net sales decreased 14.3% from 2005 to 2006. The operating results of the Company were significantly impacted by the industry-wide slump in demand for Class A motorhomes, as well as by the adverse affect on sales due to the Company’s liquidity challenges and the uncertainty caused by the strategic process itself.  A build-up in finished goods inventory at the Company, and within the industry, led to the continuation of sales discounting to reduce the excess inventories.  The Company also experienced an unexpected, substantial cost increase resulting from the identification, rework and redistribution of units affected by defective fiberglass material supplied to the Company.  Other factors leading to the decline in operating performance include significant investments in a new product introduction, the effect of lower production rates resulting in lower fixed-cost absorption and the costs of dealing with the liquidity issue much of which was caused by the defective fiberglass material and the strategic process.

Looking Ahead

Some of the objectives the Company addressed last year will continue to be emphasized during the current year, including product development, consolidating facilities and increasing customer satisfaction. In addition, the Company will continue to focus on increasing its dealer body in open markets during 2007.

The Company continues to invest heavily in the area of product development. In addition to launching the Pacifica diesel motorhome in 2006, the Company’s NRV subsidiary also introduced a new full-length slide room and a slide-plus-one (telescoping slide) for use in its units. The latter innovation has a patent pending, as it is the first of its kind in the industry. Both of these latter innovations will be implemented into several of the Company’s brands during 2007. The Company also continues to pursue methods of construction for its motorhomes that will accomplish all of the following: reduce cost of construction, reduce the weight of the motorhomes, and add strength. Several projects to this end are well under way.

Given the significant reduction in sales levels, the Company is also in the process of reducing its operating foot print in order to lower both fixed and variable costs and increase its capacity utilization. At its Perris facilities, the Company essentially has two operating facilities—one on each side of the street comprised of 607,000 square feet in five buildings. The Company is working on consolidating its operations to one side of the street and either selling off or leasing out the remaining excess property. While such a strategy limits the Company’s upside growth, it will not preclude the Company from adding additional facilities in the future in other locations as demand dictates.

The Company is continually striving to increase its customer support by improving club support, telephone support for owners and dealers, and parts fulfillment. The Company utilizes various techniques such as surveys and focus groups to ensure that it is improving in the area of customer satisfaction.

The Recreation Vehicle Industry Association’s (RVIA) market expansion campaign, GO RVing, now in its ninth year, is fostering greater awareness and garnering media attention. Though RVIA expects substantial growth for the industry in the long-term or decade ahead, RVIA expects a continued, yet minimal, decline in the industry during 2007.

The Company continues to pursue its strategy of adding new dealers. To this end, it has divided the country into five geographic regions, and in each region has identified the specific markets where it needs to add a dealer, or in some cases, work with an existing dealer to enhance the Company’s market share. While the Company was handicapped during the latter part of 2006 in this effort by uncertainty in the market place, it is once again in a position to aggressively pursue this effort.

This analysis of the Company’s financial condition and operating results should be read in conjunction with the accompanying consolidated financial statements including the notes thereto.

Critical Accounting Policies

The Company’s discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, including the operating results of CCI, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The Company has performed an evaluation of its ability to continue as a going concern and believes it has sufficient financial resources to fund its operations through at least March 2008. Accordingly, the consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of the assets and the satisfaction of liabilities in the normal course of business. The preparation of these consolidated financial statements requires the Company to make estimates and judgments that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses for each period.

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The following represents a summary of the Company’s critical accounting policies, defined as those policies that the Company believes are: i) the most important to the portrayal of the Company’s financial condition and results of operations, and ii) that require the Company’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.

Valuation of Inventory

Inventory is valued at the lower of cost (estimated using the first-in, first-out method) or market and takes into consideration abnormally low production levels.  The Company periodically evaluates the carrying value of inventories and maintains a reserve for excess and obsolescence to adjust the carrying value as necessary to the lower of cost or market or to amounts on hand to meet expected demand in the near term. Specifically, service and slow-moving parts not being used in the manufacture of current model year motorhomes are reviewed by the Company to determine which can be used in production, which can be used for future service and warranty repairs of customer-owned motorhomes, and which can be returned to suppliers for full or partial credit.  In addition, motorhomes held in finished goods or work-in-process are evaluated by the Company and the value of those motorhomes are adjusted to an estimated net realizable value based on a combination of the National Automobile Dealers Association Guide and the Company’s general industry knowledge. The inventory reserves are reviewed each fiscal quarter and revisions are made as necessary. Unfavorable changes in excess and obsolete inventory estimates as well as actual production levels following below normal capacity volumes would result in a decrease in gross profit.

Valuation of Long-Lived Assets

In  2003, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” In accordance with SFAS No. 144, the Company assesses the fair value and recoverability of its long-lived assets whenever events and circumstances indicate the carrying value of an asset may not be recoverable from estimated future cash flows expected to result from its use and eventual disposition. In doing so, the Company makes assumptions and estimates regarding future cash flows and other factors. The fair value of the long-lived assets is dependent upon the forecasted performance of the Company’s business and the overall economic environment. When the Company determines that the carrying value of the long-lived assets may not be recoverable, it measures impairment based upon a forecasted discounted cash flow method. The following table provides the estimated useful lives used for each asset type:

Land improvements	5-40 years
Buildings and building improvements	5-40 years
Machinery and equipment	3-12 years
Office equipment	3-15 years

Leasehold improvements, which are included in buildings and building improvements, made at the inception or during the term of the lease and assets under capital leases are amortized over the shorter of the useful life of the assets or a term that includes required lease periods and renewals that are deemed to be reasonably assured at the date the leasehold improvements are purchased or when the capital lease is entered into.

Warranty Reserve

The Company’s warranty reserve is established based on its best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. The Company records an estimate for future warranty-related costs based on recent actual warranty claims and historical experience. Also, the Company’s recall reserve is established, as necessary, based on management’s estimate of the cost per unit to remedy a recall problem and the estimated number of units that will ultimately be brought in for the repair. While the Company’s warranty costs have historically been within its expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same warranty costs that it has in the past. A significant increase in dealer shop rates, the cost of parts or the frequency of claims could have a material adverse impact on the Company’s operating results for the period or periods in which such claims or additional costs materialize.

Workers’ Compensation Self-Insurance Reserve

The Company’s workers’ compensation reserve is established based on its best estimate of the amounts necessary to settle future and existing employee workers’ compensation claims incurred as of the balance sheet date. The Company records a reserve estimate for future workers’ compensation related costs based on the Company’s historical workers’ compensation

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claims paid history using an actuarial incurred but not reported (IBNR) approach. The Company cannot provide assurance that these costs will continue at these levels, increase or decrease, in the near term. A significant change in California workers’ compensation legislation, the cost of claims or the frequency of claims could have a material adverse impact on the Company’s operating results for the period or periods in which such claims or additional costs materialize.

Legal Proceedings

The Company is involved in legal proceedings in the ordinary course of business, including a variety of warranty, “lemon law” and product liability claims typical in the recreation vehicle industry. With respect to product liability claims, the Company’s insurance policies cover, in whole or in part, defense costs and liability costs for personal injury or property damage (excluding damage to Company motorhomes). While it is impossible to estimate with certainty the ultimate legal and financial liability with respect to this litigation, management is of the opinion that while the final resolution of any such litigation may have an impact on the Company’s consolidated results for a particular reporting period, the ultimate disposition of such litigation will not have any material adverse effect on the Company’s financial position, results of operations or liquidity.

Revenue Recognition

The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements (“SAB 104”). SAB 104 requires that four basic criteria must be met before revenue can be recognized: i) persuasive evidence of an arrangement exists, ii) delivery has occurred and title and the risks and rewards of ownership have been transferred to the customer, iii) the price is fixed and determinable, and iv) collectibility is reasonably assured.

The majority of sales are made to dealers who finance their purchases under flooring arrangements with banks and finance companies.   Certain shipments are sold to customers under cash on delivery (“COD”) terms.  The Company recognizes revenue on COD sales upon payment and delivery.  Products are not sold on consignment, dealers do not have the right to return products, and dealers are typically responsible for the interest costs to floor plan lenders.

Sales Incentives

As is common throughout the RV industry, the Company offers incentives to its dealers in the form of discounts and floorplan interest reimbursement programs, rebate and holdback programs, and retail sales incentives given to its dealers’ retail salespersons. The Company recognizes and records the costs of these incentives in accordance with Emerging Issue Task Force (EITF) No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)”.

Discounts and floorplan interest reimbursement programs are offered to dealers on purchases of certain units. The Company recognizes the cost of discounts and floorplan interest reimbursement as a reduction of revenue and records the cost of these programs at the later of the offer or when the associated revenue is recognized.

Rebate and holdback programs involve payments by the Company to the dealer based on either a percentage of the net invoice price or a predetermined amount based on the model of the coach sold by the dealer. The dealer incentive program varies by dealer. Not all dealers participate. The purpose of the program is to provide an additional incentive to the dealer to promote sales of the product. The dealers earn the incentive upon the wholesale purchase of the unit from the Company. The Company recognizes these incentives as a reduction of revenue and records the cost of these incentives when the associated revenue is recognized.

The Company often pays retail sales incentives directly to dealer retail salespersons to promote the sale of the product and the return of sale and warranty information. This information assists in providing sales and marketing data to the Company. The Company recognizes the cost of such retail sales incentives as a reduction of revenue and records the cost of such retail sales incentives when the associated revenue is recognized.

Cooperative advertising arrangements exist through which dealers receive a certain allowance of the total purchases from the Company if certain qualitative advertising criteria are met and if specified amounts are spent on the advertisements. A dealer must maintain documentation of all advertising performed that includes the Company’s products and provide that documentation to the Company upon request. Because the Company receives an identifiable advertising benefit from the dealer, the Company recognizes the cost of cooperative advertising as a selling expense and records the cost of cooperative advertising when the units are sold to the dealers.

The Company uses a non-monetary incentive program that rewards RV dealer personnel by performance. Instead of cash, rewards are offered at tiered levels, based on the number of the Company’s products by each dealership participant. Rewards include items such as home electronics, exercise equipment, personal data assistants, trips, and so on. The more a salesperson sells, the more they are eligible to redeem items at the various reward levels set for the program. The Company accrues the estimated costs of the non-monetary loyalty program upon retail sale of a unit in selling expenses.

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Stock-Based Compensation

The Company has stock option plans that enable it to offer equity participation to employees, officers and directors, as well as certain non-employees. Stock options may be granted as incentive or nonqualified options. The Company has two fixed option plans that reserve shares of common stock for issuance to executives, key employees, consultants, and directors. The Company has also issued fixed options outside of such plans pursuant to individual stock option agreements. Options granted to non-employee directors generally vest immediately upon grant and expire five to ten years from the date of grant. Options granted to employees, including employee directors, generally vest in three equal annual installments and expire five to ten years from the date of grant. The price of the options granted pursuant to these plans will not be less than 100 percent of the market value of the shares on the date of grant. There were145,000 options granted during the year ended December 31, 2006.

The benefits provided under these plans are share-based payments subject to the provisions of revised SFAS No. 123, “Share-Based Payment” (“SFAS No. 123R”).  Effective January 1, 2006, the Company adopted SFAS No. 123R, including the provisions of the SEC’s Staff Accounting Bulletin No. 107 (“SAB 107”), and use the fair value method to account for share-based payments with a modified prospective application which provides for certain changes to the method for valuing share-based compensation. The valuation provisions of SFAS No. 123R apply to new awards and to awards that are outstanding on the effective date and subsequently modified or cancelled. Under the modified prospective application, prior periods are not revised for comparative purposes. Total compensation cost for our share-based payments recognized in the year ending December 31, 2006 was $0.8 million.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option pricing model (“Black-Scholes model”) that uses assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. Expected volatilities are based on historical volatility of our common stock and other factors. The expected terms of options granted are based on analyses of historical employee termination rates and option exercises. The risk-free interest rates are based on the U.S. Treasury yield in effect at the time of the grant. Since the Company does not expect to pay dividends on our common stock in the foreseeable future, the estimated dividend yield was 0%. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimated pre-vesting forfeitures based on our historical experience.  (See Note 2 in the accompanying notes to the consolidated financial statements for discussion of details of shared based compensation expense.)

Income Taxes

As part of the process of preparing its consolidated financial statements, the Company estimates its income taxes in each of the taxing jurisdictions in which the Company operates. This process involves estimating actual current tax expense together with assessing any temporary differences resulting from the different treatment of certain items, such as the timing for recognizing revenues and expenses, for tax and financial reporting purposes. These differences may result in deferred tax assets and liabilities, which are included in the consolidated balance sheet. The Company is required to assess the likelihood that its net deferred tax assets, which include net operating loss carryforwards and temporary differences that are expected to be deductible in future years, will be recoverable from future taxable income or other tax planning strategies. SFAS No. 109, “Accounting for Income Taxes” (“SFAS No. 109”) requires that a valuation allowance be established when it is more likely than not that its recorded net deferred tax assets will not be realized. In determining whether a valuation allowance is necessary, the Company is required to take into account all positive and negative evidence with regard to the utilization of a deferred tax asset, including the Company’s past earnings history, market conditions, management profitability forecasts, the character and jurisdiction of such earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a net deferred tax asset. SFAS No. 109 further states that it is difficult to conclude that a valuation allowance is not needed when there is negative evidence such as cumulative losses in recent years.

The provision for tax liabilities involves evaluations and judgments of uncertainties in the interpretation of complex tax regulations by various taxing authorities. In situations involving tax related uncertainties, the Company provides for tax liabilities when it determines it is probable and estimable that additional taxes may be due. As additional information becomes available, or these uncertainties are resolved with the taxing authorities, revisions to these liabilities may be required, resulting in additional provision for or benefit from income taxes in the consolidated statement of operations in the period such determination is made.

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Results of Operations

The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items reflected in the Company’s Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004.

	Percentage of Net Sales Years Ended December 31,
	2006		2005		2004
Net sales	100.0	%	100.0	%	100.0	%
Cost of goods sold	98.4		97.4		92.9
Gross profit	1.6		2.6		7.1
Selling expenses	3.3		3.3		2.7
General and administrative expenses	3.7		3.2		3.1
Other expense	0.0		0.0		0.1
Operating (loss) income	(5.4	)	(3.9	)	1.2
Interest expense	0.7		0.3		0.1
Other income	(0.0	)	(0.0	)	(0.0	)
(Loss) income from continuing operations before income taxes	(6.1	)	(4.2	)	1.1
Provision for income taxes	0.1		0.1		3.0
Loss from continuing operations	(6.2	)	(4.3	)	(1.9	)
Loss from discontinued operations	0.0		0.0		0.5
Income taxes related to discontinued operations	(0.0	)	(0.0	)	(0.2	)
Loss from discontinued operations, net of taxes	(0.0	)	(0.0	)	(0.3	)
Net loss	(6.2	)%	(4.3	)%	(2.2	)%

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

(amounts in thousands, except percentages)

	Years Ended December 31,
Consolidated Statements of Operations Data:	2006			2005			$ Change			% Change
Net sales	$	397,118		$	463,610		$	(66,492	)	(14.3	)%
Cost of goods sold	390,899			451,622			(60,723		)	(13.4	)
Gross profit	6,219			11,988			(5,769		)	(48.1	)
Selling expenses	13,052			15,301			(2,249		)	(14.7	)
General and administrative expenses	14,499			14,801			(302		)	(2.0	)
Operating loss	(21,332		)	(18,114		)	(3,218		)	17.8
Interest expense	2,777			1,492			1,285			86.1
Other income	(138		)	(78		)	(60		)	76.9
Loss on disposal of land and equipment	97			59			38			64.4
Loss from continuing operations before income taxes	(24,068		)	(19,587		)	(4,481		)	22.9
Provision for income taxes	265			181			84			46.4
Net loss	$	(24,333	)	$	(19,768	)	$	(4,565	)	23.1	%

Net sales for the year ended December 31, 2006 decreased $66.5 million, or 14.3%, from the year ended December 31, 2005, primarily as a result of a 16.8% decrease in total unit shipments.  Wholesale diesel motorhome shipments for the year ended December 31, 2006 were 1,187 units, down 15.9% from 1,411 units shipped during the year ended December 31, 2005. Wholesale gas motorhome shipments for the year ended December 31, 2006 were 1,137 units, down 17.7% from 1,381 units for the year ended December 31, 2005.

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Net sales declined at a lower rate than shipments due to a 2.9% increase in the average selling price of motorhomes during the fiscal year.  While the decrease in unit shipments for diesel and gas motorhomes was similar, the average selling price for gas units decreased by 4.0% whereas the average selling price for diesel units increased by 4.6%.  The overall decrease in the average selling price for gas products was due to NRV’s introduction of its new entry-level Surfside product in late 2005 and early 2006.

Market share gains early in the year helped partially mitigate continued industry declines in Class A motorhome shipments; however, by mid-year, the Company’s early gains in market share were reversing on news of the supplier fiberglass problem and the resulting liquidity challenges and the uncertainties arising out of the strategic process. By the fourth quarter, when industry volume actually leveled out, the Company’s downward spiral caused by these uncertainties resulted in continued sales decline.

Gross profit of $6.2 million for the year ended December 31, 2006 represents a decrease of $5.8 million, or 48.1%, from the year ended December 31, 2005.  Gross profit margin for the year ended December 31, 2006 was 1.6%, as compared to 2.6% for the year ended December 31, 2005.  A primary factor that led to the decrease in gross profit was the significant incremental costs to rework and sell those units affected by defective fiberglass materials supplied to the Company.  Also contributing, to a lesser extent, to the reduced gross profit were higher fixed costs per unit of production resulting from lower production volumes during 2006 as compared to 2005 due to declining demand caused in part by the defective fiberglass problem, incremental costs incurred with the introduction of three new products into the market, an increase in workers’ compensation due to a significant injury, costs associated with a tire recall at CCI and higher steel and petroleum costs.

Selling expenses decreased $2.2 million or 14.7% for the year ended December 31, 2006 as compared to the prior year as a result of cost containment initiatives focused upon marketing programs and reduced sales compensation primarily due to the decrease in sales.  As a percent of net sales, selling expenses were 3.3% for the years ended December 31, 2006 and December 31, 2005.

General and administrative expenses decreased $0.3 million or 2.0% for the year ended December 31, 2006 as compared to the prior year.  Increases in expense included the recording of stock option expense of $0.6 million as required by SFAS No. 123R that became effective January 1, 2006, loan fees of $0.2 million associated with amending our loan agreement and approximately $0.5 million in professional fees associated with the strategic process.  Offsetting the increases were reductions of $0.5 million in management incentive compensation, $0.6 million in non-warranty related legal costs and $0.6 million in consulting expenses.

Interest expense for the year ended December 31, 2006 increased $1.3 million or 86.1% compared to the year ended December 31, 2005.  The higher interest expense was due to increased borrowings and rising interest rates on the Company’s line of credit during the year ended December 31, 2006.  The Company’s weighted average borrowing for the year ended December 31, 2006 was $27.3 million, representing a 48% increase over the weighted average borrowing for the year ended December 31, 2005.  The Company’s weighted average interest rate for the year ended December 31, 2006 was 8.53% as compared to 6.97% for the year ended December 31, 2005.

The overall effective tax rate for the year ended December 31, 2006 was 1.1%, compared to an effective tax rate of 0.9% for the year ended December 31, 2005.  For the year ended December 31, 2006, the Company continued to recognize a full valuation allowance against its future income tax benefits but has recorded a provision for various state income taxes of $0.3 million.

The Company plans to continue to provide a full valuation allowance on future tax benefits until it can sustain an appropriate level of profitability and, until such time, the Company would not expect to recognize any significant tax benefits in its future results of operations.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

(amounts in thousands, except percentages)

	Years Ended December 31,
Consolidated Statements of Operations Data:	2005			2004			$ Change			% Change
Net sales	$	463,610		$	436,813		$	26,797		6.1	%
Cost of goods sold	451,622			405,858			45,764			11.3
Gross profit	11,988			30,955			(18,967		)	(61.3	)
Selling expenses	15,301			11,616			3,685			31.7
General and administrative expenses	14,801			13,626			1,175			8.6
Other expense	—			632			(632		)	(100.0	)
Operating (loss) income	(18,114		)	5,081			(23,195		)	(456.5	)
Interest expense	1,492			327			1,165			356.3
Other income	(78		)	(90		)	12			(13.3	)
Loss on disposal of land and equipment	59			—			59			—
(Loss) income from continuing operations before income taxes	(19,587		)	4,844			(24,431		)	(504.4	)
Provision for income taxes	181			13,161			(12,980		)	(98.6	)
Loss from continuing operations	(19,768		)	(8,317		)	(11,451		)	137.7
Loss from discontinued operations	—			2,155			(2,155		)	(100.0	)
Gain from sale of discontinued operations	—			(281		)	281			(100.0	)
Benefit from income taxes	—			(737		)	737			(100.0	)
Loss from discontinued operations, net of taxes	—			(1,137		)	1,137			(100.0	)
Net loss	$	(19,768	)	$	(9,454	)	$	(10,314	)	109.1	%

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Net sales of $463.6 million for the year ended December 31, 2005 represent an increase of $26.8 million, or 6.1%, from the year ended December 31, 2004. Wholesale diesel motorhome shipments for the year ended December 31, 2005 were 1,411 units, up 2.2% from 1,380 units shipped during the year ended December 31, 2004. Wholesale gas motorhome shipments were 1,381 units, down 13.0% from 1,588 units for the year ended December 31, 2004.

The Company increased net sales for the year ended December 31, 2005, as compared to the prior year, despite an 18.1% annual industry-wide decline in the Class A wholesale unit shipments, eroding consumer confidence levels throughout most of 2005, higher gasoline prices and natural disasters in the Eastern part of the United States. In addition, according to Statistical Surveys, Inc., the Company increased its retail market share by 5.9% during 2005. These sales and market share gains were driven by initiatives to add new dealers and an aggressive product development program in 2004 and 2005.

The gross profit margin for the year ended December 31, 2005 was 2.6% (or a $12.0 million gross profit) compared to a 7.1% gross margin (or a $31.0 million gross profit) for the year ended December 31, 2004. The lower gross margin for the year ended December 31, 2005 was caused by higher sales incentives resulting from a weakening Class A market and an industry-wide build-up in inventories, increased spending on engineering and product development at NRV, where several new product lines were introduced or placed into production, higher material handling costs, higher mid-year manufacturing costs as the Company’s work-in-process inventories increased, higher material costs associated with obsolescence as sales declined leading into model-year change, multiple weeks of shutdowns, and finally, higher warranty costs driven by a higher rates and higher cost of settlement of claims on older highline coaches, partially offset by a decreasing effect in the estimate of workers’ compensation costs as the Company refines its estimates based on more mature experience rates.

Selling expenses increased $3.7 million, or 31.7%, for the year ended December 31, 2005 as compared to the year ended December 31, 2004. Selling expenses for the year ended December 31, 2005 increased mainly due to higher sales, media and marketing costs to support the Company’s marketing programs and dealer expansion initiatives.

General and administrative expenses totaling $14.8 million for the year ended December 31, 2005 were up $1.2 million, or 8.6%, compared to the year ended December 31, 2004. The increase in general and administrative expenses is principally due to higher staffing levels to support ongoing Sarbanes-Oxley compliance, partially offset by lower audit and professional fees.

Other expense for the year ended December 31, 2004 was primarily the loss on the sale of the real property in Florida totaling $0.3 million and the impairment of an emissions control system totaling $0.3 million. There were no such charges incurred during the year ended December 31, 2005.

Interest expense for the year ended December 31, 2005 increased $1.2 million compared to the year ended December 31, 2004. The higher interest expense was due to increased average borrowings and rising interest rates on the Company’s line of credit during the year ended December 31, 2005. The Company’s weighted average interest rate for the year ended December 31, 2005 was 6.97% as compared to 5.49% for the year ended December 31, 2004.

The overall effective tax rate for the year ended December 31, 2005 was 0.9%, compared to an effective tax rate of 418.3% for the year ended December 31, 2004. The effective tax rate for the year ended December 31, 2004 gives effect to a charge to establish a full valuation allowance in the amount of $11.2 million against the Company’s net deferred tax asset as of December 31, 2004. For the year ended December 31, 2005, the Company continued to recognize a full valuation allowance against its future income tax benefits but had recorded a provision for various state income taxes of $0.2 million.

On September 24, 2004, the Company sold its travel trailer business assets to Weekend Warrior, a privately owned, California-based ramp-trailer manufacturer. The loss from discontinued operations for the year ended December 31, 2004 totaled $1.1 million and included a pre-tax gain on the sale of $0.3 million.

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Liquidity and Capital Resources

The Company has incurred net losses of $24.3 million, $19.8 million and $9.5 million for the years ended December 31, 2006, 2005 and 2004, respectively. The Company used cash from operating activities of $13.0 million and $15.8 million for the years ended December 31, 2006 and 2004, respectively, and provided cash from operating activities of $1.4 million for the year ended December 31, 2005. The RV industry has been historically cyclical and subject to downturns during periods of weak economic conditions. With a continued downturn in the industry and a deterioration of the Company’s margin, which was caused by multiple factors, the Company experienced a continuation of losses during the year ended December 31, 2006. These conditions led the Company to further assess its short-term liquidity needs and plans to achieve profitability.

During the year ended December 31, 2006, the Company financed its operations primarily through its existing working capital and its line of credit with UPS Capital Corporation and Wells Fargo Bank. At December 31, 2006, the Company had $0.02 million in cash and cash equivalents (excluding restricted cash and cash equivalents totaling $0.7 million required to secure a letter of credit on surety bonds in connection with certain obligations with several State Departments of Motor Vehicles, collateralize the Company’s credit cards and secure a legal case appeals bond). The Company had working capital of $2.3 million and $26.1 million at December 31, 2006 and 2005, respectively. The decrease in working capital for the year ended December 31, 2006 from 2005 was mainly attributable to an increase in accounts payable of $19.3 million, an increase in the line of credit of $17.0 million and a reduction in receivables of $2.4 million, partially offset by an increase in inventories of $12.5 million and a decrease in current accrued expenses of $3.1 million.

For the year ended December 31, 2006, net cash used in operating activities was $13.0 million, which was primarily attributable to a $24.3 million loss, a $19.6 million increase in inventories and a $3.4 million decrease in accrued expenses, partially offset by a $19.3 million increase in accounts payable, a $7.2 million reserve and write down of inventories, $4.2 million of depreciation and amortization and a $2.4 million decrease in receivables. For the year ended December 31, 2005, net cash provided by operating activities was $1.4 million, which was primarily attributable to a $10.7 million decrease in inventories, $3.9 million of depreciation and amortization, a $3.1 million increase in accounts payable and a $2.5 million increase in accrued expenses, mostly offset by a $19.8 million net loss. For the year ended December 31, 2004, net cash used in operating activities totaled $15.8 million, which was substantially attributable to a $27.3 million increase in inventories ($2.8 million of which was sold to Weekend Warrior as part of the travel trailer business sale) and a $9.5 million net loss, partially offset by a non-cash charge of $11.9 million deferred income tax provision, which is primarily due to the Company recording an $11.2 million valuation allowance against its deferred tax assets, $3.9 million of depreciation and amortization, a $2.4 million increase in accounts payable and a $1.3 million inventory valuation adjustment.

For the year ended December 31, 2006, the Company used $3.6 million of cash in investing activities, which primarily resulted from $3.4 million of purchases of property, plant and equipment. For the year ended December 31, 2005, the Company used $2.4 million of cash in investing activities, which primarily resulted from $4.6 million of purchases of property, plant and equipment, partially offset by $2.2 million in repayments on the note receivable. For the year ended December 31, 2004, the Company used $0.4 million of cash for investing activities, including $4.9 million for purchases of property, plant and equipment, with the single largest expenditure being the purchase of the Florida service center totaling $0.8 million. These capital expenditures were mostly offset by the proceeds from the sale of assets totaling $3.6 million, with the largest single sale of assets being the sale of the Florida property totaling $1.9 million, by the proceeds from the sale of discontinued operations totaling $0.5 million, and by the note receivable repayments of $0.5 million.

For the year ended December 31, 2006, the Company provided $16.6 million of cash from financing activities, which was primarily due to advances under the line of credit of $17.0 million. For the year ended December 31, 2005, the Company provided $1.0 million of cash from financing activities, which was primarily due to an increase in the book overdraft of $1.8 million, partially offset by repayments on the line of credit of $0.6 million. Net cash provided by financing activities for the year ended December 31, 2004 was $14.2 million, mainly due to the advances on the line of credit totaling $12.7 million, an increase in book overdraft of $0.8 million and $0.7 million in proceeds from issuance of common stock through the exercise of stock options.

At December 31, 2006, the Company had an asset-based revolving credit facility with UPS Capital Corporation and Wells Fargo Bank for $40 million, after exercising two consecutive $5 million increases to the line of credit in May and June 2006. The credit facility is collateralized by all of the Company’s assets, with borrowing availability based on the Company’s eligible accounts receivable and inventory.  Terms of the credit facility require the Company to maintain a blocked account, whereby remittances from the Company’s customers are applied directly against the outstanding credit facility balance. The credit facility contains, among other provisions, certain financial covenants, including funded debt to Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), and a fixed charge coverage ratio, that should the Company fail to comply, will result in a reduction of the credit availability to the Company. At December 31, 2006, the Company did not comply with the covenant provisions causing a reduction in the Company’s $40 million average monthly borrowing

25

availability to an amount between $24 million and $32 million, depending on eligible inventory and accounts receivable, until the Company regained compliance with the covenants.  Initial amounts borrowed under the revolving credit facility bear interest at the prime rate listed in the Wall Street Journal plus 0.50 percentage points and may be subsequently adjusted down based on a trailing twelve month funded debt to EBITDA calculation. At December 31, 2006, the interest rate on the outstanding borrowings under the line of credit was 8.75%. The weighted average interest rate for the borrowings under the line of credit during the years ended December 31, 2006 and 2005 were 8.53% and 6.97%, respectively.

On February 20, 2007, the Company completed the sale of CCI.   The Company received total consideration of $38.7 million for the sale of CCI and the transfer of the Additional Assets.  The Company undertook this sale to improve its working capital position, raise capital to enable the Company to reduce its debt and provide the necessary funding and resources to support the turnaround of the NRV business.  The Company used approximately $24.5 million of the proceeds from the sale of CCI to pay off its credit facility and the remainder of the proceeds will be used for working capital purposes.

In conjunction with the sale of CCI, the Company entered into an agreement to modify its credit agreement on February 21, 2007, that among other things reduced the credit facility to $15 million and waived the events of default resulting from the failure to comply with financial covenants for the months ended October, November and December 2006.  The amendment provides for the setting of new financial covenants in April of 2007.  The base interest rate was increased to the prime rate plus 1.50 percentage points.  (See Note 17 in the accompanying notes to the consolidated financial statements for additional terms of Loan Modification Agreement No. 3)

Management’s plan to achieve operational profitability includes continuing or starting a variety of initiatives to improve its earnings and working capital position, including: (i) new product and floor plan introductions in 2007, (ii) new dealer additions to fill open market areas or replace under-performing dealers, (iii) decreases in overall sales incentives by tailoring programs that provide the maximum value to the Company, (iv) reduction of material and related obsolescence costs, (v) improvement of manufacturing efficiencies, (vi) further reductions of manufacturing and other overhead costs, and (vii) decreases in the costs of warranty.

In order to fund on-going operations through at least March 31, 2008, the Company remains dependent upon its ability to utilize outside financing through borrowings on its line of credit until it achieves sustained operational profitability through a combination of increased sales, cost reductions and improved product margins. After consideration of the restrictions of the borrowing capacity noted above, the Company believes it has sufficient financial resources to fund its operations through at least March 31, 2008. However, the Company’s ability to meet its obligations beyond March 2008 is dependent on its ability to generate positive cash flows from operations and is dependent on continued borrowings under its line of credit.  If management is unable to achieve its operational profitability plan or unforeseen events occur and its existing line of credit is insufficient to allow the Company to meet its obligations, the Company may need to implement alternative plans that could include long-term financing collateralized by real estate, a possible sale and leaseback transaction involving its Pervis California facilities, the pursuit of several strategic opportunities, obtaining additional debt financing, additional reductions in operating costs, deferral of capital expenditures, deferring the introduction of new products or otherwise scaling back its operations and further reducing its working capital. While the Company believes that it could successfully complete the alternative plans, if necessary, there can be no assurance that such alternatives would be available on acceptable terms and conditions or that the Company would be successful in its implementation of such plans.

Contractual Obligations and Commitments

The following is a schedule of the Company’s known contractual obligations at December 31, 2006:

(in thousands)			Less than		1 - 3		4 - 5		After
Contractual obligations	Total		1 Year		Years		Years		5 Years
Operating leases	$	6,433	$	1,802	$	4,631	$	—	$	—
Capital leases	215		72		143		—		—
	$	6,648	$	1,874	$	4,774	$	—	$	—

(in thousands)			Less than		1 - 3		4 - 5		After
Commercial commitments	Total		1 Year		Years		Years		5 Years
Revolving credit facility	$	29,012	$	29,012	$	—	$	—	$	—
Letter of credit	205		205		—		—		—
	$	29,217	$	29,217	$	—	$	—	$	—

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Repurchase Commitments

It is customary practice for companies in the recreational vehicle industry to enter into repurchase agreements with financing institutions to provide financing to their dealers.  Generally, these agreements provide for the repurchase of products from the financing institution in the event of a dealer’s default.  The risk of loss under these agreements is spread over numerous dealers and further reduced by the resale value of the units, which the Company would be required to repurchase.  Losses under these agreements have not been significant in the periods presented in the consolidated financial statements, and management believes that any future losses under these agreements will not have a significant effect on the Company’s consolidated financial position or results of operations.  The Company’s undiscounted maximum potential exposure under these agreements approximated $147 million at December 31, 2006.

Letter of Credit

The Company had an outstanding letter of credit in the amount of $0.2 million for the year ended December 31, 2006, which collateralizes obligations for which the Company is liable. The Company is required to maintain compensating cash balances with the issuing financial institution of this letter of credit.

Effects of Inflation

Higher steel and petroleum prices during 2006, while partially passed along to customers in the form of surcharges, had an adverse effect on the Company’s profit margins throughout the year. Such adverse effects have continued through the early months of 2007. For the year ended December 31, 2006, the effects of increasing interest rates became increasingly significant to the Company, as the Company uses a variable rate line of credit, and the Company increased its average borrowings under the line during the year ended December 31, 2006 as compared to 2005.

Recent Accounting Pronouncements

In June 2006, the Emerging Issue Task Force EITF reached a consensus on issue EITF 06-2 “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43” (“EITF 06-2”). Accordingly, an employee’s right to a compensated absence under a sabbatical or other similar benefit arrangement (a) that requires the completion of a minimum service period and (b) in which the benefit does not increase with additional years of service accumulates pursuant to paragraph 6(b) of EITF 06-2 for arrangements in which the individual continues to be a compensated employee and is not required to perform duties for the entity during the absence. Therefore, assuming all of the other conditions of paragraph 6 of EITF 06-2 are met, the compensation cost associated with a sabbatical or other similar benefit arrangement should be accrued over the requisite service period.  The provisions of this consensus should be applied in financial reports for fiscal years beginning after the date the consensus is ratified by the Board. Entities should recognize the effects of applying the consensus as a change in accounting principle through retrospective application to all prior periods unless it is impracticable to do so. The Company had been accounting for benefits similar to sabbatical leave in accordance with the provisions of this consensus. Consequently, the adoption of the provisions of this consensus will not have a material impact on the consolidated financial position, results of operations and cash flows of the Company.

In June 2006, the Financial Accounting Standards Board (“FASB’) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”  (“FIN 48”). This Interpretation clarifies the accounting for uncertainty in income taxes recognized in companies’ financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” This Interpretation prescribes a recognition threshold and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact, if any, of FIN 48 on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”).  SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principals and expands disclosures about fair value measurements.  The statement does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements.  The statement emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability.  Companies that have assets and liabilities measured at fair value will be required to disclose information that enables the users of its financial statements to access the inputs used to develop those measurements.  The reporting entity is encouraged, but not required, to combine the fair value information disclosed under this statement with the fair value information disclosed under other accounting pronouncements.  SFAS No. 157 is effective for fiscal years beginning after November 15, 2007.  The Company is in the process of evaluating the provisions of the statement, but does not anticipate that the adoption of SFAS No. 157 will have a material impact on the Company’s consolidated financial statements.

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In September 2006, the SEC released Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides guidance on how the effects of prior-year uncorrected financial statement misstatements should be considered in quantifying a current year misstatement. SAB 108 requires registrants to quantify misstatements using both an income statement (rollover) and balance sheet (iron curtain) approach and evaluate whether either approach results in a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. If prior year errors that had been previously considered immaterial are now considered material based on either approach, no restatement is required as long as management properly applied its previous approach and all relevant facts and circumstances were considered. If prior years are not restated, the cumulative effect adjustment is recorded in opening retained earnings as of the beginning of the fiscal year of adoption. SAB 108 is effective for fiscal years ending on or after November 15, 2006. The application of the guidance of SAB 108 did not have an impact on our consolidated financial condition or results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement No. 115” (“SFAS No. 159”).  SFAS No. 159 permits an entity to elect fair value as the initial and subsequent measurement attribute for many financial assets and liabilities. Entities electing the fair value option would be required to recognize changes in fair value in earnings.  Entities electing the fair value option are required to distinguish, on the face of the statement of financial position, the fair value of assets and liabilities for which the fair value option has been elected and similar assets and liabilities measured using another measurement attribute.  SFAS No. 159 is effective for fiscal years beginning after November 15, 2007.  The adjustment to reflect the difference between the fair value and the carrying amount would be accounted for as a cumulative-effect adjustment to retained earnings as of the date of initial adoption. The Company is currently evaluating the impact, if any, of SFAS No. 159 on its consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company has no significant financial instruments. The Company has not entered into any derivative financial instruments. The Company does not have any significant foreign currency exposure because it does not transact business in foreign currencies. However, the Company is exposed to interest rate changes related primarily to cash borrowings on the Company’s credit facility. The weighted average interest rate for the borrowings on the credit facility during the year ended December 31, 2006 was 8.53%. For every 0.25% increase in interest rates, the Company would expect an annual increase in interest expense of approximately $2,500 for every $1.0 million borrowed.

Item 8. Consolidated Financial Statements and Supplementary Data

The information required by this item is contained in the consolidated financial statements listed in Item 15(a) 1 under the caption “Consolidated Financial Statements.”

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has conducted an evaluation, as of December 31, 2006, of the Company’s disclosure controls and procedures; as such term is defined under Exchange Act Rule 13a-15(e). Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this annual report.

Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined under Exchange Act Rule 13a-15(e).  The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

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The Company’s internal control over financial reporting includes those policies and procedures that a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors; and c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Integrated Framework. Based on our assessment and those criteria, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2006.

The Company’s independent registered public accounting firm, Swenson Advisors, LLP, has audited management’s assessment of the effectiveness of the Company’s internal control over financial reporting as stated in their report that is included herein.

Changes in Internal Control over Financial Reporting

There were no change in the Company’s internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the fiscal quarter ended December 31, 2006 that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required for this Item will be set forth in the Company’s definitive Proxy Statement for its 2007 Annual Meeting of Stockholders to be held with respect to the Company’s fiscal year ended December 31, 2006 or by an amendment to this Form 10-K to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2006, which information is incorporated herein by reference.

Code of Business Conduct and Ethics

The Company has adopted a written code of conduct and ethics (the “Code”), which is applicable to all of the Company’s officers, directors and employees, including the Company’s Chief Executive Officer and Chief Financial Officer (collectively, the “Senior Officers”). In accordance with the rules and regulations of the Securities and Exchange Commission and the rules of the New York Stock Exchange, a copy of the Code has been posted on the Company’s website at http://www.nrvh.com. The Company intends to disclose any changes in or waivers from the Code applicable to any Senior Officers on its website or by filing a Form 8-K.

Item 11. Executive Compensation

The information required for this Item will be set forth in the Company’s definitive Proxy Statement for its 2007 Annual Meeting of Stockholders to be held with respect to the Company’s fiscal year ended December 31, 2006 or by an amendment to this Form 10-K to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2006, which information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required for this Item will be set forth in the Company’s definitive Proxy Statement for its 2007 Annual Meeting of Stockholders to be held with respect to the Company’s fiscal year ended December 31, 2006 or by an amendment to this Form 10-K to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2006, which information is incorporated herein by reference.

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Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required for this Item will be set forth in the Company’s definitive Proxy Statement for its 2007 Annual Meeting of Stockholders to be held with respect to the Company’s fiscal year ended December 31, 2006 or by an amendment to this Form 10-K to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2006, which information is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required for this Item will be set forth in the Company’s definitive Proxy Statement for its 2007 Annual Meeting of Stockholders to be held with respect to the Company’s fiscal year ended December 31, 2006 or by an amendment to this Form 10-K to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2006, which information is incorporated herein by reference.

PART IV

Item 15. Exhibits and Consolidated Financial Statement Schedules

(a)	List of Documents filed as part of this Report
1.	Consolidated financial statements:
	REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
	CONSOLIDATED BALANCE SHEETS
	CONSOLIDATED STATEMENTS OF OPERATIONS
	CONSOLIDATED STATEMENTS OF CASH FLOWS
	CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.	Consolidated financial statement schedule
	SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

3.Exhibits

2.1	Merger and Asset Purchase Agreement dated as of February 16, 2007 by and among Country Coach Holdings LLC, Country Coach Merger LLC, Riley Investment Management, LLC, the Company and CCI.
3.1	The Company’s Restated Certificate of Incorporation. (2)
3.2	Amended and Restated Bylaws of National R.V. Holdings, Inc. (8)
4.1	Specimen-Certificate of Common Stock. (1)
10.1	1996 Stock Option Plan. (3)
10.2	1997 Stock Option Plan. (4)
10.3	1999 Stock Option Plan. (5)
10.4	Form of the Company’s Stock Option Grant Agreement. (6)
10.5	CCI Bus Facility Lease Agreement between Sterling Pacific and CCI dated as of November 6, 2003. (6)
10.6	Lee Joint Venture Real Property Lease Agreement between CCI and the Lee Joint Venture dated as of October 12, 1995. (6)
10.7	Lee Joint Venture Real Property Lease Agreement Amendment between the Company and the Lee Joint Venture dated as of November 2, 1999. (6)
10.8	Lee Joint Venture Real Property Lease Renewal Agreement between CCI and the Lee Joint Venture dated as of January 2, 2001. (6)
10.9	Credit Agreement, dated as of August 12, 2005, between the Company, NRV, CCI and UPS Capital Corporation and Wells Fargo Bank, as lenders. (7)
10.10	Loan Modification Agreement, dated October 4, 2005, between the Company, NRV, CCI and UPS Capital Corporation and Wells Fargo Bank, as lenders. (7)
10.11	Loan Modification Agreement No. 2, dated August 10, 2006, between the Company, NRV, CCI and UPS Capital Corporation and Wells Fargo Bank, as lenders. (9)

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10.12	Loan Modification Agreement No. 3, dated February 21, 2007, between the Company, NRV, CCI and UPS Capital Corporation and Wells Fargo Bank, as lenders.
10.13	Loan Modification Agreement No. 4, dated March 13, 2007, between the Company, NRV, and Wells Fargo Bank, as lenders.
10.14	Purchase and Sale Agreement dated as of December 27, 2006 between the Company and First Industrial Acquisitions, Inc.
10.15	Amendments 1 through 4 to Purchase and Sale Agreement dated as of December 27, 2006 between the Company and First Industrial Acquisitions, Inc.
21.1	List of Subsidiaries
23.1	Consent of Independent Registered Public Accounting Firm.
23.2	Consent of Independent Registered Public Accounting Firm.
31.1	Rule 13a-14(a) Certification of Principal Executive Officer.
31.2	Rule 13a-14(a) Certification of Principal Financial Officer.
32.1	Certifications Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)Previously filed as an exhibit to the Company’s Registration Statement on Form S-1 filed on August 16, 1993 (File No. 33-67414) as amended by Amendment No. 1 thereto filed on September 22, 1993 and Amendment No. 2 thereto filed on September 29, 1993.

(2)Previously filed as an exhibit to the Company’s Registration Statement on Form S-1 filed on December 15, 1993 (File No. 33-72954).

(3)Incorporated by reference from the Company’s Form 10-K for the year ended December 31, 1996.

(4)Incorporated by reference from the Company’s Form 10-K for the year ended December 31, 1997.

(5)Incorporated by reference from the Company’s Form 10-K for the year ended December 31, 2001.

(6)Incorporated by reference from the Company’s 2004 Form 10-K, filed with the SEC on October 11, 2005.

(7)Incorporated by reference from the Company’s quarterly report on Form 10-Q for the quarter ended August 31, 2005.

(8)Incorporated by reference from the Company’s Form 8-K dated November 22, 2005 filed with the SEC on November 28, 2005.

(9)Incorporated by reference from the Company’s quarterly report on Form 10-Q for the quarter ended August 31, 2006.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NATIONAL R.V. HOLDINGS, INC.
Dated: March 23, 2007	By	/s/ Thomas J. Martini
		Thomas J. Martini,
		Chief Financial Officer
		(Principal Accounting and Finance Officer)

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

Signature	Capacity in Which Signed	Date
/s/ Doy B. Henley	Chairman of the Board	March 23, 2007
Doy B. Henley
/s/ Bradley C. Albrechtsen	Director, Chief Executive Officer	March 23, 2007
Bradley C. Albrechtsen	and President (Principal Executive Officer)
/s/ Thomas J. Martini	Chief Financial Officer	March 23, 2007
Thomas J. Martini	(Principal Accounting and Financial Officer)
/s/ Greg McCaffery	Director	March 23, 2007
Greg McCaffery
/s/ James B. Roszak	Director	March 23, 2007
James B. Roszak
/s/ David J. Humphreys	Director	March 23, 2007
David J. Humphreys

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of National R.V. Holdings, Inc.:

We have completed integrated audits of National R.V. Holdings, Inc.’s consolidated financial statements and of its internal control over financial reporting as of December 31, 2006 in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of National R.V. Holdings, Inc. and its subsidiaries (the Company) at December 31, 2006 and December 31, 2005, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (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 of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for share-based compensation in year ended December 31, 2006.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit.   We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with general accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The financial statements of National R.V. Holdings, Inc. as of December 31, 2004 were audited by other auditors whose

33

report dated October 6, 2005, except for the restatement discussed in the second and sixth paragraphs of Note 2 (not presented herein) to the consolidated financial statements appearing under Item 8 of the Company’s 2004 Annual Report on Form 10-K/A, as to which the date is March 21, 2006, stated the financial statements presented fairly, in all material respects, the financial position of National R.V. Holdings, Inc. as of December 31, 2004 and for the year then ended.

/s/ Swenson Advisors, LLP

San Diego, California

March 29, 2007

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Stockholders of
National R.V. Holdings, Inc.

In our opinion, the consolidated statements of operations, of stockholders’ equity and of cash flows for the year ended December 31, 2004 present fairly, in all material respects, the results of operations of National R.V. Holdings, Inc. and its subsidiaries and their cash flows for the year ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.  In addition, in our opinion, the financial statement schedule for the year ended December 31, 2004 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit.  We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Orange County, California
October 6, 2005, except for the restatement discussed in the second and sixth paragraphs of Note 2 (not presented herein) to the consolidated financial statements appearing under Item 8 of the Company’s 2004 Annual Report on Form 10-K/A, as to which the date is March 21, 2006

34

NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	16		$	11
Restricted cash and cash equivalents	387			201
Receivables, less allowance for doubtful accounts ($299 and $392, respectively)	18,995			21,533
Inventories	74,417			61,940
Deferred income taxes	475			1,281
Prepaid expenses	2,108			2,359
Total current assets	96,398			87,325
Long-term restricted cash and cash equivalents	341			—
Property, plant and equipment, net	37,430			38,457
Other assets	1,355			1,608
Total assets	$	135,524		$	127,390
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Book overdraft	$	2,227		$	2,582
Accounts payable	39,552			20,218
Accrued expenses	23,150			26,273
Line of credit	29,012			12,059
Current portion of capital leases	63			57
Total current liabilities	94,004			61,189
Long-term accrued expenses	4,802			5,089
Deferred income taxes	475			1,281
Long-term portion of capital leases	124			169
Total liabilities	99,405			67,728
Commitments and contingencies (Note 10)	—			—
Stockholders’ equity:
Preferred Stock, $0.01 par value, 5,000 shares authorized, 4,000 issued and outstanding	—			—
Common Stock, $0.01 par value, 25,000,000 shares authorized 10,339,484 issued and outstanding	103			103
Additional paid-in capital	38,353			37,563
Retained (deficit) earnings	(2,337		)	21,996
Total stockholders’ equity	36,119			59,662
Total liabilities and stockholders’ equity	$	135,524		$	127,390

The accompanying notes are an integral part of the consolidated financial statements.

35

NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Year Ended December 31,
	2006			2005			2004
Net sales	$	397,118		$	463,610		$	436,813
Cost of goods sold	390,899			451,622			405,858
Gross profit	6,219			11,988			30,955
Selling expenses	13,052			15,301			11,616
General and administrative expenses	14,499			14,801			13,626
Other expense	—			—			632
Total operating expenses	27,551			30,102			25,874
Operating (loss) income	(21,332		)	(18,114		)	5,081
Other (income) expense:
Interest expense	2,777			1,492			327
Other income	(41		)	(19		)	(90		)
Total other expense	2,736			1,473			237
(Loss) income from continuing operations before income taxes	(24,068		)	(19,587		)	4,844
Provision for income taxes	265			181			13,161
Loss from continuing operations	(24,333		)	(19,768		)	(8,317		)
Discontinued operations:
Loss from discontinued operations	—			—			2,155
Gain from sale of discontinued operations	—			—			(281		)
Income taxes related to discontinued operations	—			—			(737		)
Loss from discontinued operations, net of taxes (Note 15)				—			(1,137		)
Net loss	$	(24,333	)	$	(19,768	)	$	(9,454	)
Basic and diluted loss per common share:
Continuing operations	$	(2.35	)	$	(1.91	)	$	(0.81	)
Discontinued operations	—			—			(0.12		)
Total	$	(2.35	)	$	(1.91	)	$	(0.93	)
Weighted average number of common shares outstanding:
Basic and Diluted	10,339			10,338			10,217

The accompanying notes are an integral part of the consolidated financial statements.

36

NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended December 31,
	2006			2005			2004
Cash flows from operating activities:
Net loss	$	(24,333	)	$	(19,768	)	$	(9,454	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	4,238			3,890			3,905
Bad debt expense	174			270			32
Reserve and write down of inventories	7,171			1,767			1,280
Loss on asset disposal	97			59			391
Tax benefit related to exercise of stock options	—			—			254
Deferred income tax provision	—			—			11,894
Share-based compensation	790			—			—
Changes in assets and liabilities:
Decrease (increase) in receivables	2,364			(1,827		)	970
(Increase) decrease in inventories	(19,648		)	10,725			(27,279		)
Decrease (increase) in prepaid expenses	251			645			(1,266		)
Increase in accounts payable	19,334			3,130			2,366
(Decrease) increase in accrued expenses	(3,410		)	2,527			1,117
Net cash provided by (used in) operating activities	(12,972		)	1,418			(15,790		)
Cash flows from investing activities:
(Increase) decrease in restricted cash and cash equivalents	(527		)	50			(1		)
Decrease (increase) in other assets	136			(177		)	(86		)
Proceeds from sale of property, plant and equipment and other assets	211			84			3,601
Proceeds from sale of discontinued operations	—			—			500
Note receivable repayments	—			2,213			469
Purchase of property, plant and equipment	(3,402		)	(4,603		)	(4,914		)
Net cash used in investing activities	(3,582		)	(2,433		)	(431		)
Cash flows from financing activities:
Net advances under (payments on) line of credit	16,953			(631		)	12,690
Deferred financing costs	—			(236		)	—
(Decrease) increase in book overdraft	(355		)	1,779			803
Principal payments on long-term debt	—			—			(19		)
Principal payments on capital leases	(39		)	(37		)	(8		)
Proceeds from issuance of common stock	—			140			707
Net cash provided by financing activities	16,559			1,015			14,173
Net increase (decrease) in cash and cash equivalents	5			—			(2,048		)
Cash and cash equivalents, beginning of year	11			11			2,059
Cash and cash equivalents, end of year	$	16		$	11		$	11
Supplemental cash flow information:
Income taxes paid	$	285		$	290		$	554
Interest paid	$	2,646		$	1,430		$	324
Supplemental schedule of non-cash investing and financing activities:
Note received in sale of travel trailer business	$	—		$	—		$	2,682
Capital lease acquisitions of property and equipment	$	—		$	27		$	245
Reclassification of leased inventory	$	—		$	394		$	—

The accompanying notes are an integral part of the consolidated financial statements.

37

NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Common Stock			Additional Paid-In		Retained Earnings
	Shares	Amount		Capital		(Deficit)			Total
Balance, December 31, 2003	10,190	$	102	$	36,463	$	51,218		$	87,783
Common stock issued under option plans	112	1		706		—			707
Tax benefit related to exercise of stock options	—	—		254		—			254
Net loss	—	—		—		(9,454		)	(9,454		)
Balance, December 31, 2004	10,302	103		37,423		41,764			79,290
Common stock issued under option plans	37	—		140		—			140
Net loss	—	—		—		(19,768		)	(19,768		)
Balance, December 31, 2005	10,339	103		37,563		21,996			59,662
Share-based compensation	—	—		790		—			790
Net loss	—	—		—		(24,333		)	(24,333		)
Balance, December 31, 2006	10,339	$	103	$	38,353	$	(2,337	)	$	36,119

The accompanying notes are an integral part of the consolidated financial statements.

38

NATIONAL R.V. HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

National R.V. Holdings, Inc. (the “Company”) operates in one business segment that designs, manufactures and markets Class A motorhomes through its wholly-owned subsidiaries, National RV Inc. (“NRV”) and Country Coach, Inc. (“CCI”). The RVs are marketed primarily to dealers in the United States by NRV under the Dolphin, Pacifica, Sea Breeze, Surf Side, Tradewinds and Tropi-Cal brand names and by CCI under brand names including Affinity, Allure, Inspire, Intrigue, Magna, Tribute and bus conversions under the Country Coach Prevost brand.

On February 20, 2007, the Company completed the sale of CCI and received total consideration of $38.7 million. The Company used approximately $24.5 million of the proceeds to pay off its credit facility and the remainder will be used for working capital purposes. In connection with the sale of CCI, the Company amended its credit agreement reducing its line of credit from $40 million to $15 million. (See Note 17 for additional information regarding the sale of CCI.)

Additionally, on December 27, 2006, the Company entered into an agreement for the possible sale and leaseback of NRV’s manufacturing facilities that can provide $31.7 in additional working capital. (See Note 10 for further discussions and terms of the sale and leaseback.)

2. Summary of Significant Accounting Policies

BASIS OF PRESENTATION

The Company amended and restated its 2004 Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 21, 2006. The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries NRV and CCI, which are presented in accordance with accounting principles generally accepted in the United States of America. All significant intercompany transactions have been eliminated in consolidation.  As further discussed in Note 15, the operating results of the travel trailer business have been reclassified as discontinued operations for all periods presented.

RECLASSIFICATIONS

Certain reclassifications, none of which affected net loss or retained earnings, have been made to prior year amounts to conform to the current year presentation.

USE OF ESTIMATES

Management is required to make certain estimates and assumptions in order to prepare consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Such estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The Company’s most significant estimates relate to valuation of inventories, realization of deferred tax assets, recoverability of long-lived assets, workers’ compensation accruals, warranty accruals and accrued losses for contingent liabilities. The estimation process required to prepare the Company’s consolidated financial statements requires assumptions to be made about future events and conditions, and as such, is inherently subjective and uncertain. Actual results may differ from estimates, and it is at least reasonably possible that the effect of the estimates on the consolidated financial statements will materially change within one year of the date of the consolidated financial statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist primarily of cash and cash equivalents, restricted cash and cash equivalents, receivables, prepaid expenses, accounts payable, accrued expenses, book overdraft, line of credit and capital lease obligations. The carrying amounts of the Company’s financial instruments approximate their respective fair values due to their relatively short maturities. The Company also had an outstanding letter of credit in the amount of $0.2 million for the years ended December 31, 2006 and 2005, which collateralizes obligations the Company is liable for. The Company is required to maintain compensating cash balances with the issuing financial institutions of this letter of credit. (See Note 4 for further discussion on restricted cash and cash equivalents.)

CONCENTRATIONS

Financial instruments that subject the Company to credit risk consist primarily of trade receivables from dealerships, which are approved by the dealers’ lenders prior to shipment. The Company generally does not require collateral from its customers. Such credit risk is considered by management to be limited due to the Company’s broad customer base, and terms requiring most of the dealers’ lenders to pay the Company directly in fifteen business days or less after the dealers’ receipt of a unit. For the year ended December 31, 2006, three dealers accounted for 15%, 11% and 10% of the Company’s net sales. In addition, the Company’s top ten dealers accounted for approximately 67%, 66% and 72% of net sales for the years ended December 31, 2006, 2005 and 2004, respectively. At December 31, 2006, three dealers accounted for 10%, 9% and 7% of the Company’s trade receivables.

The Company currently buys certain key components of its products from limited suppliers. Although there are a limited number of manufacturers of these key components, management believes that other suppliers could provide similar key

39

components on comparable terms. A change in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which would adversely affect operating results.

The Company’s NRV subsidiary purchases gasoline-powered chassis that are manufactured by Ford Motor Company and Workhorse Custom Chassis, and rear engine diesel-powered chassis from Freightliner Custom Chassis Corporation.  The Company’s CCI subsidiary manufactures its own chassis, the DynoMax, which is used as the base upon which all CCI motorhomes are built, except for the Prevost bus conversions, which utilize a Prevost bus shell. The Company generally maintains a one to two month production supply of chassis in inventory. If any of the Company’s present chassis manufacturers were to cease manufacturing or otherwise reduce the availability of their chassis, the business of the Company could be materially and adversely affected.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include deposits in banks and short-term investments with original maturities of three months or less.

RESTRICTED CASH

The Company is required to hold in trust certain deposits to guarantee the Company to perform under certain legal obligations, and to secure credit availability. Total restricted cash and cash equivalents were collateral reserves of $0.7 million and $0.2 million at December 31, 2006 and 2005, respectively. (See Note 4 for further discussion on restricted cash and cash equivalents.)

RECEIVABLES

The Company’s accounts receivables are recorded at net realizable value based on the amount invoiced and bear no interest. The majority of the Company’s accounts receivables are related to motorhome sales, with parts receivables representing a minimal portion. The allowance for doubtful accounts is management’s best estimate of the amount of probable credit losses in the existing accounts receivable based upon management’s current knowledge of customers, customer compliance with original terms of sale or dealer financing (“flooring”) arrangements, historical collectability and recognition of bad debts, and current economical and industry conditions. Adjustments to the allowance for doubtful accounts are charged against general and administrative expenses. Uncollectible balances are charged off against the allowance when management has determined that all reasonable collection efforts have been exhausted.

Consistent with industry practice, the Company enters into off-balance sheet agreements, called repurchase agreements, with lenders providing flooring arrangements for dealers purchasing the Company’s motorhome units. These units are used to collateralize the loan between the dealers and their lenders.  The repurchase agreement provides the Company (manufacturer) to be paid directly by the lender upon delivery of the unit to the dealer location on the condition that the Company is required to repurchase the unit should the dealer default on the flooring agreement with its lender.  The Company’s loss exposure would be the difference between the value of the lien held by the flooring institution and the price for which the Company is able to resell the unit, adjusted for shipping and refurbishing costs prior to ultimate sale. Losses under these agreements have not been material to the Company.  Management monitors these active agreements on units sold and will record a liability and reduction to sales and cost of goods sold in the event that the Company is required to perform under the terms of the repurchase agreement. (See Note 10 for further discussion on recourse on dealer financing.)

The value of the Company’s eligible accounts receivable along with its inventory provides the basis for the Company’s borrowing availability under its credit facility. (See Note 9 for more information on the Company’s credit facility agreement.)

INVENTORIES

Inventories are valued at the lower of cost or market. Cost is estimated using the first-in, first-out (“FIFO”) method, and includes the cost of materials, labor and manufacturing overhead.  The Company periodically evaluates the carrying value of inventories and maintains an allowance for excess and obsolescence to adjust the carrying value as necessary to the lower of cost or market.  The Company recognizes abnormal amounts of idle facility expense, freight, handling costs and wasted material as expenses in the period incurred. The Company allocates fixed production overhead to the cost of conversion based upon the normal capacity of its production facilities.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Major renewals and improvements are capitalized, while routine maintenance and repairs are expensed as incurred. The Company also capitalizes computer software costs that meet both the definition of internal-use software and defined criteria for capitalization in

40

accordance with Statement of Position No. 98-1, “Accounting for the Cost of Computer Software Developed or Obtained for Internal Use.” At the time properties are retired from service, the cost and accumulated depreciation are removed from the respective accounts.

Depreciation expense is computed principally on the straight-line method, over the estimated useful lives of the related assets. In addition, the Company does not estimate a salvage value for any of its property, plant and equipment. The following table provides the estimated useful lives used for each asset type:

Land improvements	5-40 years
Buildings and improvements	5-40 years
Machinery and equipment	3-12 years
Office equipment	3-15 years

Leasehold improvements, which are included in buildings and building improvements, made at the inception or during the term of the lease, and assets under capital leases are amortized over the shorter of the useful life of the assets or a term that includes required lease periods and renewals that are deemed to be reasonably assured at the date the leasehold improvements are purchased or when the capital lease is entered into.

IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company assesses the fair value and recoverability of its long-lived assets whenever events and circumstances indicate the carrying value of an asset may not be recoverable from estimated future cash flows expected to result from its use and eventual disposition. In doing so, the Company makes assumptions and estimates regarding future cash flows and other factors. The fair value of the long-lived assets is dependent upon the forecasted performance of the Company’s business and the overall economic environment. When the Company determines that the carrying value of its long-lived assets may not be recoverable, it measures impairment based upon a forecasted discounted cash flow method.

WORKERS’ COMPENSATION SELF-INSURANCE RESERVE

The Company’s workers’ compensation self-insurance reserve is established based on its best estimate of the amounts necessary to settle future and existing employee workers’ compensation claims incurred as of the balance sheet date. The Company records an undiscounted reserve estimate for future workers’ compensation related costs based on the Company’s historical workers’ compensation claims paid history using an actuarial incurred but not reported (“IBNR”) approach.

PRODUCT WARRANTIES

The Company’s warranty reserve is established based on its best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. The Company records a reserve for estimated future warranty-related costs based on recent actual warranty claims and historical experience. Also, the Company’s recall reserve is established, as necessary, based on management’s best estimate of the cost per unit to remedy a recall problem and the estimated number of units that will ultimately be brought in for the repair. In addition, from time to time, the Company is involved in warranty or “lemon law” litigation arising out of its operations in the normal course of business. The number of such matters as a percentage of sales is low and the aggregate cost to the Company for these actions have not been material. While the Company’s warranty costs have historically been within its expectations and the provisions established, a significant increase in dealer shop rates, the cost of parts or the frequency of claims could have a material adverse impact on the Company’s operating results for the period or periods in which such claims or additional costs materialize and result in a change in estimate of warranty reserves in that period.

CONTINGENT LIABILITIES

In accordance with Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies” (“SFAS No. 5”), the Company periodically reviews the status of significant contingencies to assess the potential financial exposure and to determine whether a loss should be recognized in the consolidated statements of operations or disclosed only in the notes to the consolidated financial statements. In accordance with SFAS No. 5, the Company recognizes and records an estimated loss contingency when (i) it is probable that an asset has been impaired or a liability has been incurred and (ii) the amount of the loss can be reasonably estimated.  For loss contingencies that do not meet both of these conditions, if there is a reasonable possibility that a loss may have been incurred, such losses are disclosed in the notes to the consolidated financial statements. Significant judgment is required to determine the probability that a liability has been incurred and whether such liability is reasonably estimable. The Company estimates accruals based on the best information available at that time, which

41

can be highly subjective. The final outcome of these matters could vary significantly from the amounts included in the accompanying consolidated financial statements.

SHARE-BASED COMPENSATION

The Company adopted the provisions of revised SFAS No. 123 (“SFAS No. 123R”), “Share-Based Payment,” including the provisions of the SEC’s Staff Accounting Bulletin No. 107 (“SAB 107”), on January 1, 2006, using the modified prospective transition method to account for employee share-based awards. The valuation provisions of SFAS No. 123R apply to new awards and to awards that were outstanding at the effective date and subsequently modified or cancelled. Estimated compensation expense for awards outstanding at the effective date were recognized over the remaining service period using the compensation cost calculated for pro forma disclosure purposes under SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). The consolidated financial statements for the year ended December 31, 2006 reflect the adoption of SFAS No. 123R. In accordance with the modified prospective transition method, the consolidated financial statements for prior periods were not restated to reflect, and do not include, the impact of SFAS No. 123R.

Share-based compensation expense recognized during a period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Share-based compensation expense recognized in the Company’s consolidated statement of operations for fiscal 2006 includes compensation expense for share-based payment awards granted prior to, but not yet vested as of December 31, 2005, based on the grant date fair value estimated in accordance with the pro forma provisions of SFAS No. 123, adjusted for estimated forfeitures, and share-based payment awards granted subsequent to January 1, 2006 based on the grant date fair value estimated in accordance with SFAS No. 123R.  For share awards granted in 2006, expenses are amortized under the straight-line attribution method.  For share awards granted prior to 2006, expenses are amortized under the straight-line single option method prescribed by SFAS No. 123.  As share-based compensation expense recognized in the consolidated statement of operations for 2006 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.  SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures were estimated to be approximately 1% for both officers and directors and 10% for other employees in fiscal 2006 based on our historical experience.

For purposes of estimating the fair value of stock options granted during 2006 using the Black-Scholes option pricing model, the Company estimated its stock price volatility to be 45.0%.  The volatility percentage was based on the historical prices of the Company’s common stock.  The expected term of options granted, which was based on historical employee terminations and option exercises, was estimated at an average of 5.0 years.  A risk-free interest rate of 4.69% was used based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of grant.

The adoption of SFAS No. 123R resulted in incremental share-based compensation expense of $0.8 million for the year ended December 31, 2006. The incremental share-based compensation caused the loss from continuing operations and net loss to increase by the same amount and the basic and diluted loss per share to increase by $0.08 per share.

Prior to January 1, 2006, the Company accounted for shared-based awards using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations and provided the required pro forma disclosures of SFAS No. 123.

The following table illustrates the pro forma effect on net loss and loss per share for the years ended December 31, 2005 and 2004, as if the Company had applied the fair value recognition provisions to stock-based employee compensation (in thousands, except per share amounts):

	For the year ended
	December 31,
	2005			2004
Loss from continuing operations	$	(19,768	)	$	(8,317	)
Loss from discontinued operations	—			(1,137		)
Net loss — as reported	(19,768		)	(9,454		)
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	263			569
Pro forma net loss	$	(20,031	)	$	(10,023	)
Basic and diluted net loss per share, as reported
Continuing operations	$	(1.91	)	$	(0.81	)
Discontinued operations	—			(0.12		)
Total basic and diluted net loss per share	(1.91		)	(0.93		)
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	0.03			0.05
Basic and diluted net loss per share pro forma	$	(1.94	)	$	(0.98	)

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The weighted-average fair value of the stock options has been estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average fair value of stock options and the assumptions used to calculate weighted-average fair value are listed below for grants issued during the years ended December 31, 2005 and 2004.

	2005			2004
Dividend yield	0.0		%	0.0		%
Expected volatility	42.7		%	41.0		%
Risk-free interest rate	4.42		%	3.45		%
Expected lives (in years)	5.3			4.2
Weighted average value of stock options granted	$	2.83		$	3.72

At December 31, 2006, the Company had approximately 1.5 million shares reserved for stock option plans and financing arrangements. The price of the options granted pursuant to these plans will not be less than 100 percent of the market value of the shares on the date of grant.  There were no exercises of stock options for the year ended December 31, 2006.  During the year ended December 31, 2005, the exercise of certain of the stock options represented a tax benefit of $0.1 million. In accordance with SFAS No. 109 “Accounting for Income Taxes”, the Company recorded a full valuation allowance on all of the Company’s net deferred tax assets. (See Note 12 for further information regarding deferred income taxes.)

Information regarding these option plans and option agreements for fiscal years 2006, 2005 and 2004 is as follows (shares in thousands):

	Shares		Weighted- Average Exercise Price Per Share
Outstanding at December 31, 2003	1,287		$	12.58
Granted	261		$	9.79
Expired or forfeited	(302	)	$	21.91
Exercised	(112	)	$	6.32
Outstanding at December 31, 2004	1,134		$	10.08
Granted	162		$	6.31
Expired or forfeited	(179	)	$	8.72
Exercised	(37	)	$	3.75
Outstanding at December 31, 2005	1,080		$	9.94
Granted	145		$	6.09
Expired or forfeited	(407	)	$	10.67
Exercised	—		$	—
Outstanding at December 31, 2006	818		$	8.89

The following table summarizes information for those options that are outstanding and exercisable as of December 31, 2006:

	Options Outstanding				Options Exercisable
Exercise Prices	Number of Shares (in thousands)	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number of Shares (in thousands)	Weighted Average Exercise Price
$6.09	145	9.22	$	6.09	145	$	6.09
$6.31	136	8.94	$	6.31	45	$	6.31
$8.50	8	3.59	$	8.50	8	$	8.50
$9.50	179	7.10	$	9.50	120	$	9.50
$10.05	3	7.15	$	10.05	2	$	10.05
$10.08	319	0.42	$	10.08	319	$	10.08
$10.43	3	7.16	$	10.43	2	$	10.43
$12.50	5	7.38	$	12.50	3	$	12.50
$12.83	8	4.57	$	12.83	8	$	12.83
$26.81	12	2.39	$	26.81	12	$	26.81
	818	5.05	$	8.89	664	$	9.18

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The number of exercisable options outstanding under these plans at December 31, 2006, 2005 and 2004 were 663,943, 770,684 and 877,129 shares, respectively, at weighted average prices of $9.18, $9.94 and $10.16 per share, respectively.

LOSS PER SHARE

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities to issue common stock were exercised or converted into common stock. Shares attributable to the exercise of outstanding options that are anti-dilutive are excluded from the calculation of diluted loss per share. No adjustments were made to reported net loss in the computation of loss per share for the years ended December 31, 2006, 2005 and 2004.

	December 31,
(shares in thousands)	2006	2005	2004
Weighted average shares outstanding — basic	10,339	10,338	10,217
Weighted average shares outstanding — diluted	10,339	10,338	10,217
Outstanding “in-the-money” options excluded as impact would be anti-dilutive	—	162	166

REVENUE RECOGNITION

The Company recognizes revenue in accordance with the SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements,” (or “SAB 104”). SAB 104 requires that four basic criteria must be met before revenue can be recognized: i) persuasive evidence of an arrangement exists, ii) delivery has occurred and title and the risks and rewards of ownership have been transferred to the customer, iii) the price is fixed and determinable, and iv) collectibility is reasonably assured.

During the fourth quarter of 2004, NRV began delivering motorhomes to its customers through independent third party carriers. Title and risks of rewards of ownership are transferred to a customer upon delivery of a motorhome to a third party carrier, and a sale is recognized by NRV at the time of shipment.

For the year ended December 31, 2005, CCI began delivering motorhomes to its customers through a combination of independent third party carriers and Company-employed delivery drivers. Similar to NRV, title and risks of rewards of ownership are transferred to a customer upon delivery of a motorhome to a third party carrier. In cases in which CCI uses an independent third party carrier, sales are recognized at the time the motorhomes are delivered to the independent third party carrier. In cases in which CCI uses Company-employed delivery drivers, sales are recognized upon acceptance of the motorhome by the dealer.

SALES INCENTIVES

As is common throughout the RV industry, the Company offers incentives to its dealers in the form of discounts and floorplan interest reimbursement programs, rebate and holdback programs, and retail sales incentives given to its dealers’ retail salespersons. The Company recognizes and records the costs of these incentives in accordance with Emerging Issue Task Force (“EITF”) No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).”

Discounts and floorplan interest reimbursement programs are offered to dealers on purchases of certain units. The Company recognizes the cost of discounts and floorplan interest reimbursement as a reduction of revenue and records the cost of these programs at the later of the offer or when the associated revenue is recognized.

Rebate and holdback programs involve payments by the Company to the dealer based on either a percentage of the net invoice price or a predetermined amount based on the model of the coach sold by the dealer. The dealer incentive program varies by dealer. Not all dealers participate. The purpose of the program is to provide an additional incentive to the dealer to promote sales of certain motorhomes. The dealers earn the incentive upon the purchase of the unit from the Company. The Company recognizes these incentives as a reduction of revenue and records the cost of these incentives when the associated revenue is recognized.

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The Company often pays retail sales incentives directly to dealer retail salespersons to promote the sale of the product and the return of sale and warranty information. This information assists in providing sales and marketing data to the Company. The Company recognizes the cost of such retail sales incentives as a reduction of revenue and records the cost of such retail sales incentives when the associated revenue is recognized.

Cooperative advertising arrangements exist through which dealers receive a certain allowance of the total purchases from the Company if certain qualitative advertising criteria are met and if specified amounts are spent on the advertisements. A dealer must maintain documentation of all advertising performed that includes the Company’s products and provide that documentation to the Company upon request. Because the Company receives an identifiable advertising benefit from the dealer, the Company recognizes the cost of cooperative advertising as a selling expense and records the cost of cooperative advertising when the units are sold to the dealers.

The Company uses a non-monetary incentive program that rewards RV dealer personnel by performance. Instead of cash, rewards are offered at tiered levels, based on the number of the Company’s products sold by each dealership participant. Rewards include items such as home electronics, exercise equipment, personal data assistants, trips, and so on. The more a salesperson sells, the more items they are eligible to redeem at the various reward levels set for the program. The Company accrues the estimated costs of the non-monetary incentive program in selling expenses upon retail sale of a unit.

COST OF GOODS SOLD

Cost of goods sold associated with the sale of inventory produced by the Company is recognized in accordance to the Company’s revenue recognition policy and includes direct material, direct labor and manufacturing overhead. Other components of cost of goods sold include indirect production costs, indirect production support, warranty costs, shipping and handling.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses are expensed as incurred and charged to product development, which is included in cost of goods sold.  Total product development expenses were $1.8 million, $1.6 million and $1.5 million for the years ended December 31, 2006, 2005 and 2004, respectively. Any customer-sponsored research and development activities that the Company may have conducted are not material.

SHIPPING AND HANDLING COSTS

Shipping and handling related to customer sales are included as a component of cost of goods sold. Shipping and handling costs charged to cost of goods sold amounted to $4.0 million, $4.1 million and $4.3 million for the years ended December 31, 2006, 2005 and 2004, respectively.

ADVERTISING AND SALES PROMOTION COSTS

The Company expenses advertising costs as incurred. For the years ended December 31, 2006, 2005 and 2004, advertising and sales promotion costs, including cooperative advertising, were approximately $6.1 million, $6.9 million and $4.1 million, respectively.

INCOME TAXES

As part of the process of preparing its consolidated financial statements, the Company estimates its income taxes in each of the taxing jurisdictions in which it operates. This process involves estimating the Company’s actual current tax expense together with assessing any temporary differences resulting from the different treatment of certain items, such as the timing for recognizing revenues and expenses, for tax and financial reporting purposes. These differences may result in deferred tax assets and liabilities.

The provision for tax liabilities involves evaluations and judgments of uncertainties in the interpretation of complex tax regulations by various taxing authorities. In situations involving tax related uncertainties the Company provides for tax liabilities unless the Company considers it probable and estimable that additional taxes would not be due. As additional information becomes available, or these uncertainties are resolved with the taxing authorities, revisions to these liabilities may be required, resulting in additional provision for or benefit from income taxes in the Company’s consolidated statements of operations.

The Company evaluates the net realizable value of temporary deferred tax differences in accordance with SFAS No. 109, which requires that a valuation allowance be established when it is more likely than not that its recorded net deferred tax asset will not be realized. In determining whether a valuation allowance is required, the Company takes into account all positive and negative evidence with regard to the utilization of a deferred tax asset.

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3. Recently Issued Accounting Pronouncements

In June 2006, the Emerging Issue Task Force EITF reached a consensus on issue EITF 06-2 “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43” (“EITF 06-2”). Accordingly, an employee’s right to a compensated absence under a sabbatical or other similar benefit arrangement (a) that requires the completion of a minimum service period and (b) in which the benefit does not increase with additional years of service accumulates pursuant to paragraph 6(b) of EITF 06-2 for arrangements in which the individual continues to be a compensated employee and is not required to perform duties for the entity during the absence. Therefore, assuming all of the other conditions of paragraph 6 of EITF 06-2 are met, the compensation cost associated with a sabbatical or other similar benefit arrangement should be accrued over the requisite service period.  The provisions of this consensus should be applied in financial reports for fiscal years beginning after the date the consensus is ratified by the Board. Entities should recognize the effects of applying the consensus as a change in accounting principle through retrospective application to all prior periods unless it is impracticable to do so. The Company had been accounting for benefits similar to sabbatical leave in accordance with the provisions of this consensus. Consequently, the adoption of the provisions of this consensus will not have a material impact on the consolidated financial position, results of operations and cash flows of the Company.

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”  (“FIN 48”). This Interpretation clarifies the accounting for uncertainty in income taxes recognized in companies’ financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” This Interpretation prescribes a recognition threshold and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact, if any, of FIN 48 on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”).  SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principals and expands disclosures about fair value measurements.  The statement does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements.  The statement emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability.  Companies that have assets and liabilities measured at fair value will be required to disclose information that enables the users of its financial statements to access the inputs used to develop those measurements.  The reporting entity is encouraged, but not required, to combine the fair value information disclosed under this statement with the fair value information disclosed under other accounting pronouncements.  SFAS No. 157 is effective for fiscal years beginning after November 15, 2007.  The Company is in the process of evaluating the provisions of the statement, but does not anticipate that the adoption of SFAS No. 157 will have a material impact on the Company’s consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS No. 158”) which requires an employer to recognize the over-funded or under-funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization.  SFAS No. 158 also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions.  This statement is effective for fiscal years ending after December 15, 2006.  The Company does not currently provide defined benefit pension or other postretirement plans, therefore the Company has determined that the adoption of this statement will not have an impact on the Company’s consolidated financial statements.

In September 2006, the SEC released Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides guidance on how the effects of prior-year uncorrected financial statement misstatements should be considered in quantifying a current year misstatement. SAB 108 requires registrants to quantify misstatements using both an income statement (rollover) and balance sheet (iron curtain) approach and evaluate whether either approach results in a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. If prior year errors that had been previously considered immaterial are now considered material based on either approach, no restatement is required as long as management properly applied its previous approach and all relevant facts and circumstances were considered. If prior years are not restated, the cumulative effect adjustment is recorded in opening retained earnings as of the beginning of the fiscal year of adoption. SAB 108 is effective for fiscal years ending on or after November 15, 2006. The application of the guidance of SAB 108 did not have an impact on our consolidated financial condition or results of operations.

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 In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement No. 115” (SFAS No. 159).  SFAS No. 159 permits an entity to elect fair value as the initial and subsequent measurement attribute for many financial assets and liabilities. Entities electing the fair value option would be required to recognize changes in fair value in earnings.  Entities electing the fair value option are required to distinguish, on the face of the statement of financial position, the fair value of assets and liabilities for which the fair value option has been elected and similar assets and liabilities measured using another measurement attribute.  SFAS No. 159 is effective for fiscal years beginning after November 15, 2007.  The adjustment to reflect the difference between the fair value and the carrying amount would be accounted for as a cumulative-effect adjustment to retained earnings as of the date of initial adoption. The Company is currently evaluating the impact, if any, of SFAS No. 159 on its consolidated financial statements.

4. Restricted Cash And Cash Equivalents

The Company is required by some states to provide surety bonds through a third party (surety) to guarantee that the Company will perform its contractual obligations with several State Departments of Motor Vehicles. The surety (issuer) of the surety bonds requires that the Company hold in trust as collateral deposits, which accrue interest, equal to the value of the surety bond.  Surety bond terms typically extend to no more than 12 months and are renewed annually.  At December 31, 2006 and 2005, the Company’s collateralizing deposits held in trust on surety bonds were $0.2 million.

On May 18, 2006, the Company entered into a securities account control agreement with a financial institution (secured party) and an intermediary in order to collateralize and secure its credit availability on company credit cards. The Company is required to hold a securities account with the intermediary, which consists of all financial assets or investment properties maintained or credited to the account, to secure the interest of the financial institution issuing the collateralized credit cards. The cumulative credit availability under the agreement is equal to the value held in the securities account. Termination of the agreement may be exercised upon written notice and subsequent settlement of company obligations against the securities account held by the intermediary. The balance of the Company’s securities account with the intermediary at December 31, 2006 was $0.2 million.

During 2006 the Company obtained an appeal bond for $0.3 million securing payment from a November 2005 Judgment awarding plaintiff attorney fees and tax costs associated with the case until the outcome of the appeal is determined. Legal counsel estimates the appeal to extend beyond twelve months. The appeal bond with accrued interest is $0.3 million at December 31, 2006.

A summary and classification of restricted cash and cash equivalents is as follows (in thousands):

	December 31,
	2006		2005
Current:
Irrevocable letter of credit on surety bonds	$	205	$	201
Deposits collateralizing company credit cards	182		—
Total	$	387	$	201

	December 31,
	2006		2005
Long-term:
Cash held on appeals bond	$	341	$	—
Total	$	341	$	—

5. Inventories

Inventories consist of the following (in thousands):

	December 31,
	2006		2005
Finished goods	$	17,736	$	8,545
Work-in-process	29,992		30,870
Raw materials	20,998		19,289
Chassis	5,691		3,236
	$	74,417	$	61,940

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During the years ended December 31, 2006 and 2005, the Company charged against operations $7.2 million and $1.2 million, respectively, of write-downs related to stating inventory at the lower of cost or market.

6. Property, Plant and Equipment

Major classes of property, plant and equipment consist of the following (in thousands):

	December 31,
	2006			2005
Land and improvements	$	8,578		$	8,429
Buildings and improvements	26,858			25,861
Machinery and equipment	21,915			20,431
Office equipment	8,208			8,004
Assets under capital lease	270			270
Construction in progress	945			1,868
	66,774			64,863
Less accumulated depreciation	(29,344		)	(26,406		)
Property, plant and equipment, net	$	37,430		$	38,457

Depreciation expense (including amortization of assets under capital lease) was $4.2 million, $3.9 million and $3.9 million for the years ended December 31, 2006, 2005 and 2004, respectively. The Company sold real property in Florida during 2004 totaling $3.9 million and recorded impairments of an emissions control system and a paint booth due to obsolescence totaling $0.3 million and $0.1 million, respectively, which have been included in other expense.  In December 2006, the Company entered into an agreement with an unrelated party for the potential sale and concurrent leaseback of real estate and certain other tangible and intangible property to NRV. (See Note 17 for additional information on the sale-leaseback agreement.)

7. Accrued Expenses

Accrued expenses consist of the following (in thousands):

	December 31,
	2006		2005
Current accrued expenses:
Workers’ compensation self-insurance reserve	$	1,777	$	2,209
Warranty reserve	10,936		11,705
Accrued sales incentives	3,270		2,385
Payroll and related accrued expenses	4,714		6,188
Other accrued expenses	2,453		3,786
Total current accrued expenses	$	23,150	$	26,273
Long-term accrued expenses:
Workers’ compensation self-insurance reserve	$	4,041	$	4,280
Warranty reserve	143		130
Deferred compensation	618		679
Total long-term accrued expenses	$	4,802	$	5,089

8. Product Warranties

The changes in the carrying amount of the Company’s total product warranty liability for the years ended December 31, 2006 and 2005 were as follows (in thousands):

	Beginning						Ending
	Balance		Accruals (1)		Reductions		Balance
Warranty Reserve fiscal 2006	$	11,835	$	15,631	$	16,387	$	11,079
Warranty Reserve fiscal 2005	$	9,270	$	18,437	$	15,872	$	11,835

(1) The aggregate changes in the liability related to the preexisting warranties were not significant for all years presented and have been included with aggregate changes in the liability for accruals related to the current periods under the title “Accruals.”

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9. Debt and Credit Agreements (in thousands):

	December 31,
	2006			2005
Current:
Revolving line of credit	$	29,012		$	12,059
Long-term debt:
Capital lease obligations	187			226
Less payments due within one year	(63		)	(57		)
Long-term debt	124			169
Total debt	$	29,136		$	12,228

At December 31,2006, the Company had an asset-based revolving credit facility with UPS Capital Corporation (“UPSC”) and Wells Fargo Bank for $40 million, after exercising two consecutive $5 million increases to the line of credit in May and June 2006. Initial amounts borrowed under the revolving credit facility bear interest at the prime rate listed in the Wall Street Journal, plus 0.50 percentage points, allowing for subsequent downward adjustments based on a trailing twelve month funded debt to EBITDA calculation. The credit facility is collateralized by all of the Company’s assets, with borrowing availability based on the Company’s eligible accounts receivable and inventory.  Terms of the credit facility require the Company to maintain a blocked account whereby remittances from the Company’s customers are applied directly against the outstanding credit facility balance. The Company’s current credit agreement restricts the declaration and payment of dividends.  The credit facility contains, among other provisions, certain financial covenants, including funded debt to Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), and a fixed charge coverage ratio, that should the Company fail to comply, will result in a reduction of the credit availability to the Company.

At December 31, 2006, the Company did not comply with the covenant provisions causing a reduction in the Company’s $40 million average monthly borrowing availability to an amount between $24 million and $32 million, depending on eligible inventory and accounts receivable, until the Company regained compliance with the covenants.   At December 31, 2006, the interest rate on the outstanding borrowings under the line of credit was 8.75%. The weighted average interest rate for the borrowings under the line of credit during the years ended December 31, 2006 and 2005 were 8.53% and 6.97%, respectively.

On February 21, 2007, the Company entered into a loan modification, “Loan Modification Agreement No. 3, in conjunction with the sale of CCI, that among other things waived the events of default resulting from failure to comply with financial covenants for the months ended October, November and December 2006.  The amendment provides for the setting of new financial covenants in April of 2007.  The base interest rate was increased to the prime rate plus 1.50 percentage points. (See Note 17 for additional information regarding the amendments to the Company’s revolving credit facility.)

10. Commitments and Contingencies

Litigation:

The Company is involved in legal proceedings in the ordinary course of business, including a variety of warranty, “lemon law,” product liability (all of which are typical in the recreation vehicle industry) and employment claims. With respect to product liability claims, the Company’s insurance policies cover, in whole or in part, defense costs and liability costs for personal injury or property damage (excluding damage to Company motorhomes). While it is impossible to estimate with certainty the ultimate legal and financial liability with respect to this litigation, management is of the opinion that the final resolution of any such litigation could have a material adverse effect on the Company’s financial position, results of operations or liquidity in a reporting period, and has provided an estimated reserve at December 31, 2006 and 2005 of approximately $1.2 million and $1.8 million, respectively, for such contingencies in the consolidated financial statements.

Recourse on Dealer Financing:

Most of the Company’s motorhome sales are made on terms requiring payment within 15 business days or less of the dealer’s

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receipt of the unit. Most dealers finance all, or substantially all, of the purchase price of their inventory under floor plan arrangements with banks or finance companies under which the lender pays the Company directly. Dealers typically are not required to commence loan repayments to such lenders for a period of at least six months. The loan is collateralized by a lien on the motorhome. Consistent with industry practice, the Company has entered into repurchase agreements with these lenders. In general, the repurchase agreements require the Company to repurchase a unit if the dealer defaults on the financed unit. Upon a dealer default, the agreements generally require the Company to repurchase RVs at the election of the lender provided certain conditions are met, such as repossession of the RV by the lender, the RV being new and unused and the time elapsed between invoice date and demand for repurchase being no longer than a specified period which is typically 18 months or less. The Company’s undiscounted maximum potential exposure under these agreements approximated $147 million at December 31, 2006. As with receivables, the risk of loss under the repurchase agreements was spread over a number of dealers and lenders and was reduced by the resale value of the RVs, which the Company would be required to repurchase. Losses under these agreements have not been material in the past and management does not believe that any future losses under such agreements will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. Consequently, no liability has been recognized in the consolidated financial statements.

Leases:

The Company leases some of its copy machines under capital lease agreements. The Company has no other capital lease agreements. In addition, the Company leases a majority of its CCI manufacturing facilities under two non-cancelable operating lease agreements which agreements, expiring by the end of October 2010, represent most of the operating lease payment commitments. The remaining operating lease agreements are for machinery and equipment.

The Company has commitments under certain capital and non-cancelable operating lease agreements. The future minimum capital and operating lease payments, as of December 31, 2006, are as follows (in thousands):

	Capital Leases		Non-cancelable Operating Leases
2007	$	72	$	1,802
2008	72		1,670
2009	63		1,640
2010	8		1,321
Total minimum lease payments	215		$	6,433
Less amount representing interest	28
Capital lease obligations	$	187

Rent expense from non-cancelable operating lease obligations for the years ended December 31, 2006, 2005 and 2004 was approximately $1.8 million, $1.6 million and $1.4 million, respectively.

Sale and Leaseback:

In December 2006, National RV Holdings (Seller-Guarantor) and an unrelated party (Buyer-Lessor) signed a Purchase and Sale Agreement (“Agreement”) for the sale and conveyance of property owned by National RV Holdings. “Property” in the agreement is defined as land, inclusive of five buildings, improvements, intangible assets and contracts. The total purchase price to be paid to the Seller-Guarantor is $31.7 million. Terms of the agreement provide the condition that a leaseback contract for property sold be entered into and take effect concurrently to the consummation of the closing of the purchase & sale agreement with the Buyer acting as landlord, National RV Inc. a subsidiary of National RV Holdings, as tenant, and National RV Holdings as guarantor.  Escrow on the purchase and sale agreement is scheduled to close in early April 2007. Should the parties choose to consummate the agreement the terms of the sales-type lease would be for an initial term of 10 years with two 5-year, non-automated lease renewal options. This would result in an annual straight-line effected non-cancelable operating lease obligation of approximately $3 million per year with an offset of deferred gain on the sale of assets until certain conditions are met whereby the buyer-lessor substantiates its interest in the property. In addition, the guarantor-parent would be required to issue a letter of credit securing the performance of its subsidiary under the sales-type lease. Due to the many unknown factors in the sales-type lease the commitments under the potential operating lease obligation are not reflected in the 5-year lease commitment schedule above.  (See Note 17 for additional information on sale and leaseback agreement.)

Other Commitments:

The Company (“Buyer”), in August 2004, entered into an agreement to acquire, for $3 million, approximately 73 acres of land adjacent to its CCI facility in Junction City, Oregon.  The Sales Agreement and Receipt for Earnest Money (“Sale

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Agreement”) required the Company to pay a deposit of $0.1 million.  The Company has executed four addendums to the Sale Agreement to extend the closing date in lieu of a monthly extension fee.  At December 31, 2006 the Company had entered into the Fourth Addendum extending the closing date to August 1, 2007.  The Company has the option to advance the closing date upon reasonable notice to Seller, provided that there will be no refund by Seller to Buyer for all or any portion of any extension fee previously paid by Buyer pursuant to the fourth addendum.  This Sale Agreement was included in the transfer of assets associated with the sale of CCI.

11. Stockholders’ Equity

Preferred Stock

The Board of Directors has authority to issue 5,000 shares of $0.01 par value Preferred Stock. Currently there are 4,000 Preferred Shares issued and outstanding with the following terms: i) the Preferred Shares are not entitled to receive any dividends, ii) the Preferred Stock has no voting rights, iii) upon liquidation, either voluntary or involuntary, the preferred stockholders are entitled to receive out of the assets of the corporation that are available for distribution, $0.01 per share, and iv) the Preferred Stock is redeemable at the sole discretion of the Company.

12. Income Taxes

The components of the provision for income taxes were as follows (in thousands):

	December 31,
	2006		2005			2004
Current (refundable) payable:
Federal	$	—	$	(23	)	$	28
State	265		204			249
	265		181			277
Deferred:
Federal	—		—			8,702
State	—		—			3,445
	—		—			12,147
Total provision for income taxes	$	265	$	181		$	12,424

Deferred income taxes are recorded based upon differences between the consolidated financial statement and tax basis of assets and liabilities. Temporary differences that give rise to deferred income tax assets and liabilities at December 31, 2006 and 2005 were as follows (in thousands):

	December 31,
	2006			2005
Current:
Accrued expenses	$	5,349		$	7,076
NOL carryforward	—			89
Valuation allowance	(4,874		)	(5,884		)
Deferred income tax assets	$	475		$	1,281
Long-term:
Accrued expenses	$	(803	)	$	(746	)
Fixed assets	2,891			2,912
NOL carryforward	(25,407		)	(13,388		)
Valuation allowance	23,794			12,503
Deferred income tax liabilities	$	475		$	1,281

SFAS No. 109 requires that a valuation allowance be established when it is more likely than not that its recorded net deferred tax asset will not be realized. In determining whether a valuation allowance is required, the Company must take into account all positive and negative evidence with regard to the utilization of a deferred tax asset. SFAS No. 109 further states that it is difficult to conclude that a valuation allowance is not needed when there is negative evidence such as cumulative losses in recent years. The Company recorded $9.4 million and $7.2 million of charges for the years ended December 31, 2006 and 2005, respectively, to a net valuation allowance against the deferred tax assets.  For the year ended December 31, 2006, the net current deferred tax asset and long-term deferred tax liability were $0.5 million and $0.5 million, respectively.  The federal operating loss carryforward of $55.0 million will expire in the year 2026. Pursuant to Internal Revenue Code Section

51

382 and 383, use of the Company’s net operating loss carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within a three-year period. No assessment has been made as to whether such a change in ownership has occurred.

The Company plans to continue to provide a full valuation allowance on future tax benefits until it can sustain an appropriate level of profitability and until such time, the Company would not expect to recognize any significant tax benefits in its future results of operations.

A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective income tax rate is as follows:

	December 31,
	2006		2005		2004
Statutory rate	(35.0	)%	(34.0	)%	34.0	%
State taxes, net of federal taxes	(4.0	)	(4.0	)	5.6
Disallowed state loss carryforwards	0.0		0.0		0.0
Other	(2.6	)	0.7		1.2
Valuation allowance	42.7		38.2		377.5
	1.1	%	0.9	%	418.3	%

13. Defined Contribution Plans

The Company maintains two 401(k) plans serving the Company and the NRV and CCI subsidiaries. Substantially all of the Company’s full-time employees are covered under the plans, which allow for contributions by the employee as well as contributions by the Company. For years prior to 2005, the Company contributed a match of between 20% and 50% of the first 4% to 5% of an employee’s wages, plus other discretionary amounts as approved by the Board of Directors and may be in the form of cash or the Company’s common stock. For the years ended December 31, 2005 and thereafter, the Company contributed a match of 50% of the first 4% to 5% of an employee’s wages, plus other discretionary amounts as approved by the Board of Directors and may be in the form of cash or the Company’s common stock. Company contributions in 2006, 2005 and 2004 were $0.6 million, $0.5 million and $0.4 million, respectively.

14. Related Party Transactions

Mr. Robert B. Lee, a director of the Company from November 1996 to August 2006, is a partner in a joint venture that leases property constituting a majority of Country Coach Inc.’s manufacturing facilities property to the Company. During the years ended December 31, 2006, 2005 and 2004, the Company paid $1.41 million, $1.37 million and $1.35 million, respectively, in lease payments to the joint venture and there were no amounts due to Lee Joint Ventures at December 31, 2006 and 2005. In November 2005, the Company exercised its second and final 5-year renewal option with the lease set to expire in November 2010. The lease agreements call for future payments totaling approximately $5.5 million through the term of the lease. Lease payments are adjusted in accordance with the Consumer Price Index.

Heller Ehrman LLP, a law firm in which Mr. Stephen M. Davis, the current Secretary of the Company and a Company director until June 2004, is a partner, performed legal services for the Company. Fees paid to the law firm were $0.3 million, $0.6 million and $0.2 million during the years ended December 31, 2006, 2005 and 2004, respectively. Amounts due to Heller Ehrman LLP were $0.17 million and $0.03 million at December 31, 2006 and 2005, respectively.

On February 20, 2007, the Company completed the sale of CCI to Country Coach Holdings LLC (“CC Holdings”), an entity owned primarily by Riley Investment Management, LLC (“Riley”). Mr. Bryant R. Riley, who owns approximately 1.2 million shares of the Company’s common stock, is the sole equity owner of Riley.

15. Discontinued Operations

On September 24, 2004, the Company sold its travel trailer business assets to Weekend Warrior, a privately owned, California-based ramp-trailer manufacturer. The sale was designed to allow the Company to further concentrate its efforts and resources on its growing motorhome business. The total selling price of the business was $3.2 million. The sale included inventory totaling $2.8 million and equipment totaling $0.1 million. Weekend Warrior paid $0.5 million at closing with the balance paid in ten equal monthly payments. The note receivable was recorded in the accompanying 2004 consolidated balance sheet, net of $0.04 million of an unamortized discount for imputed interest. Furthermore, a payment of 1% of monthly sales for other assets and trademarks were made on a monthly basis over a twelve-month period ending October 10, 2005 with a minimum due of $0.3 million which was previously recorded in the note receivable in the accompanying consolidated balance sheets. The Company entered into a sublease agreement, as of February 2006, which allowed Weekend

52

Warrior to lease a portion of the Company’s facilities for up to eight months, through September 2006. The sublease was modified in September 2006 to extend the term to March 31, 2007.  For the year ended December 31, 2004, the Company’s net sales from discontinued operations were $14.7.  In addition, for the year ended December 31, 2004, the Company recorded net losses from discontinued operations of $1.1 million.  The 2004 net loss from discontinued operations included a pre-tax gain on the sale of the discontinued operations of $0.3 million.

16. Quarterly Consolidated Financial Data (unaudited)

The following table summarizes the quarterly data for fiscal 2006:

(in thousands, except per share amounts)

	2006 Quarter Ended
	March 31,			June 30,			September 30,			December 31,
Net sales	$	112,895		$	110,214		$	91,999		$	82,010
Gross profit (loss)	$	5,327		$	(58	)	$	808		$	142
Net loss	$	(2,054	)	$	(7,129	)	$	(7,077	)	$	(8,073	)
Basic and diluted loss per common share	$	(0.20	)	$	(0.69	)	$	(0.68	)	$	(0.78	)
Basic and diluted weighted average number of shares	10,339			10,339			10,339			10,339

The following table summarizes the quarterly data for fiscal 2005:

(in thousands, except per share amounts)

	2005 Quarter Ended
	March 31,			June 30,			September 30,			December 31,
Net sales	$	125,625		$	123,225		$	108,232		$	106,528
Gross profit	$	5,615		$	2,101		$	2,165		$	2,107
Net loss	$	(1,444	)	$	(5,434	)	$	(5,930	)	$	(6,960	)
Basic and diluted loss per common share	$	(0.14	)	$	(0.53	)	$	(0.57	)	$	(0.67	)
Basic and diluted weighted average number of shares	10,335			10,339			10,339			10,339

17. Subsequent Events

Sale of Country Coach Business

On February 20, 2007, the Company completed the sale of CCI to Country Coach Holdings LLC (“CC Holdings”), an entity owned primarily by Riley Investment Management, LLC (“Riley”). Mr. Bryant R. Riley, who owns approximately 1.2 million shares of the Company’s common stock, is the sole equity owner of Riley. The sale was conducted pursuant to a Merger and Asset Purchase Agreement (the “Merger Agreement”) entered into on February 16, 2007 by and among CC Holdings, Country Coach Merger LLC (“Merger Sub”), and Riley, on one hand, and the Company and CCI, on the other. The acquisition took the form of a merger whereby CCI merged with and into Merger Sub with Merger Sub surviving as a wholly-owned subsidiary of CC Holdings (the “Merger”).  In addition, in connection with the transactions contemplated by the Merger Agreement, the Company also transferred certain assets (the “Additional Assets”) to Merger Sub held by the Company related to the business of CCI and Merger Sub assumed certain liabilities of the Company related to the business of CCI.  At the closing of the Merger, Merger Sub was renamed Country Coach LLC.  The Company received total consideration of $38.7 million (the “Consideration”) for the sale of CCI and the transfer of the Additional Assets.  In connection with the Merger, the Company amended its existing credit facility with Wells Fargo Bank and UPS Capital Corporation and used $24.5 million of the Consideration to reduce amounts owed by the Company under the credit facility.

The unaudited pro forma condensed consolidated balance sheet presents the financial position of the Company as of December 31, 2006, assuming the sale of CCI occurred on that date.

The unaudited pro forma condensed consolidated statements of operations present the financial results from continuing operations of the Company for the twelve months ended December 31, 2006, assuming the sale had occurred at the beginning of the period.

53

The unaudited pro forma condensed consolidated financial statements are based on estimates and assumptions. The Company believes that the assumptions and estimates used in the preparation of the unaudited pro forma condensed consolidated financial statements are reasonable. These estimates and assumptions have been made solely for the purposes of developing these unaudited pro forma condensed consolidated financial statements. The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the financial position or results of operations that actually would have been realized had CCI been sold or on the dates indicated above, nor is it necessarily indicative of the Company’s future financial position or results of operations.

The unaudited pro forma condensed financial information should be read in conjunction with the historical consolidated financial statements of the Company, including the notes thereto.

National R.V. Holdings, Inc.
Pro Forma Condensed Consolidated Balance Sheet - Unaudited
As of December 31, 2006

(in thousands)	As Reported			Pro Forma Adjustments (a)			Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	16		$	2		$	14
Restricted cash and cash equivalents	387			—			387
Receivables, less $299 allowance for doubtful accounts	18,995			9,195			9,800
Inventories	74,417			45,521			28,896
Deferred income taxes	475			327		(g)	148
Prepaid expenses	2,108			1,282			826
Total current assets	96,398			56,327			40,071
Long-term restricted cash and cash equivalents	341			—			341
Property, plant and equipment, net	37,430			11,768			25,662
Other assets	1,355			—			1,355
Total assets	$	135,524		$	68,095		$	67,429
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Book overdraft	$	2,227		$	507		$	—
				1,720		(b)
Accounts payable	39,552			21,724			9,810
				8,018		(b)
Accrued expenses	23,150			13,555			10,265
				(670		)(c)
Line of credit	29,012			29,012		(b)	—
Current portion of capital leases	63			—			63
Total current liabilities	94,004			73,866			20,138
Long-term accrued expenses	4,802			142			4,660
Deferred income taxes	475			327		(g)	148
Long-term portion of capital leases	124			—			124
Total liabilities	99,405			74,335			25,070
Stockholders’ Equity:
Common Stock	103			—			103
Additional paid-in capital	38,353			—			38,353
Retained (deficit) earnings	(2,337		)	(6,910		)(d)	3,903
				670		(c)
Total stockholders’ equity	36,119			(6,240		)	42,359
Total liabilities and stockholders’ equity	$	135,524		$	68,095		$	67,429

The accompanying explanations of the pro forma adjustments are an integral part of the unaudited pro forma condensed consolidated financial statements.

54

National R.V. Holdings, Inc.

Pro Forma Condensed Consolidated Statement of Operations - Unaudited

For the Year Ended December 31, 2006

(in thousands, except share data)	As Reported			Pro Forma Adjustments (b)			Pro Forma
Net Sales	$	397,118		$	236,470		$	160,648
Cost of goods sold	390,899			220,477			170,422
Gross profit (loss)	6,219			15,993			(9,774		)
Operating expenses	27,551			12,056			15,495
Operating (loss) income	(21,332		)	3,937			(25,269		)
Interest expense and other income, net	2,736			202			1,371
				1,163		(e)
(Loss) income before income taxes	(24,068		)	2,572			(26,640		)
Provision for income taxes	265			62		(f)	203
(Loss) income from continuing operations	$	(24,333	)	$	2,510		$	(26,843	)
Basic and diluted loss per common share:	$	(2.35	)				$	(2.60	)
Weighted average number of shares:
Basic	10,339						10,339
Diluted	10,339						10,339

The accompanying explanations of the pro forma adjustments are an integral part of the unaudited pro forma condensed consolidated financial statements.

Explanation of the Pro Forma Adjustments

The historical condensed consolidated financial statements have been adjusted to give effect to pro forma events that are (1) directly attributable to the sale of CCI; (2) factually supportable; and (3) as they relate to the statement of operations, expected to have a continuing impact on the consolidated results. The following pro forma adjustments are included:

(a)To eliminate the financial results, assets, liabilities and retained earnings related to the sale of CCI.

(b)To record the use of proceeds from the sale of CCI.

(c)To record estimated administrative and other costs incurred by the Company related to the sale of CCI.

(d)To record the estimated gain on disposition.

(e)To record the adjustment of interest costs resulting from the paydown of the line of credit with the proceeds received from the sale of CCI.

(f)To record the adjustment to income tax provision, net of a full tax valuation reserve.

(g)To record elimination of CCI deferred income taxes.

55

Revolving Credit Facility - As Amended

In conjunction with the sale of the Country Coach Inc. business the Company amended its Credit Agreement with a third amendment on February 21, 2007, reducing its line of credit from $40 million to $15 million.  The amendment replaced UPS Capital with Wells Fargo Bank as agent to the Credit Agreement.  The amendment provided for the consent to the sale of stock of Country Coach Inc., a reduction in inventory sub-limit, a reduction in letter of credit sub-facility amount, an increase in interest rate, a waiver for the events of default for the months ended October, November and December 2006 and the addition of a prior written consent requirement by the lender to the Company entering into a sale and leaseback of the Perris, California, real estate.  The base interest rate was increased to the prime rate plus 1.50 percentage points.

A fourth amendment dated March 13, 2007 amended the early termination fee and provided an extension in time for the completion of financial projections to be used to establish financial covenants for April through December 2007. This amendment also extended the deadline for the delivery of the financial statements and compliance certificate required for the calendar months of January and February 2007.

Sale-leaseback Agreement - As Amended

On February 9, 14 and 21, 2007, National R.V. Holdings Inc. (Seller-Guarantor) and an unrelated party (Buyer-Lessor) amended the December 27, 2006 Purchase and Sale Agreement related to the possible sale and conveyance of property owned by National RV Holdings.  The Review Period Expiration Date and Closing Date were the only terms and conditions that were modified within these three amendments.  The first two amendments extended the Review Period Expiration Date and Closing Date by one week while the February 21, 2007, amendment extended the Review Period Expiration Date and Closing Date to March 20 and March 23, 2007, respectively.

A fourth Amendment to the December 27, 2006 Purchase and Sale Agreement was entered into on March 19, 2007.  This amendment extended the Review Period Expiration Date to April 5, 2007 and the Closing Date to April 12, 2007.  In addition, the expiration date for the Condition Precedent regarding approval by the board of directors of Seller was extended until April 4, 2007.  This amendment also increased the amount due to Buyer for Buyer’s actual-out-of-pocket expenses incurred in connection with the negotiation of this Agreement to $100,000 in event the Seller terminates this agreement.

SCHEDULE II — CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

For the years ended December 31, 2006, 2005 and 2004

			Additions
	Balance at		charged to				Balance at
	Beginning		costs and				end of
	of period		expenses		Deductions		Period
Year ended December 31, 2006
Allowance for doubtful accounts	$	392,000	$	174,000	$	267,000	$	299,000
Inventory reserve	$	2,153,000	$	431,000	$	684,000	$	1,900,000
Income tax valuation allowance	$	18,387,000	$	9,444,000	$	—	$	27,831,000
Workers’ compensation self-insurance reserve	$	6,489,000	$	2,936,000	$	3,607,000	$	5,818,000
Warranty reserve	$	11,835,000	$	15,631,000	$	16,387,000	$	11,079,000
Year ended December 31, 2005
Allowance for doubtful accounts	$	137,000	$	270,000	$	15,000	$	392,000
Inventory reserve	$	1,793,000	$	812,000	$	452,000	$	2,153,000
Income tax valuation allowance	$	11,232,000	$	7,155,000	$	—	$	18,387,000
Workers’ compensation self-insurance reserve	$	8,871,000	$	6,665,000	$	9,047,000	$	6,489,000
Warranty reserve	$	8,505,000	$	18,437,000	$	15,107,000	$	11,835,000
Year ended December 31, 2004
Allowance for doubtful accounts	$	132,000	$	32,000	$	27,000	$	137,000
Inventory reserve	$	673,000	$	1,280,000	$	160,000	$	1,793,000
Income tax valuation allowance	$	—	$	11,232,000	$	—	$	11,232,000
Workers’ compensation self-insurance reserve	$	10,060,000	$	2,893,000	$	4,082,000	$	8,871,000
Warranty reserve	$	8,660,000	$	12,899,000	$	13,054,000	$	8,505,000

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EX-2.1

Exhibit 2.1

MERGER AND ASSET PURCHASE AGREEMENT

Dated as of February 16, 2007

By and Among

Country Coach Holdings LLC,

Country Coach Merger LLC,

Riley Investment Management, LLC

Country Coach, Inc.,

and

National R.V. Holdings, Inc.

TABLE OF CONTENTS

ARTICLE 1	GENERAL	1
1.1	The Merger	1
1.2	Merger Effective Time	2
1.3	Merger Consideration	2
1.4	Effect on Securities	2
1.5	Purchase of Additional Assets	2
1.6	Excluded and Additional Liabilities	3
ARTICLE 2	REPRESENTATIONS AND WARRANTIES OF SELLER	3
2.1	Organization	3
2.2	Authorization	3
2.3	No Conflict	4
2.4	Capitalization; No Subsidiaries; Articles, Bylaws and Minutes; Derivative Securities	5
2.5	Financial Statements	6
2.6	Absence of Certain Facts or Events	7
2.7	Property, Leases and Liens	8
2.8	Contracts and Commitments	9
2.9	Permits and Authorizations	10
2.10	No Violations	11
2.11	Proceedings	12
2.12	Insurance	12
2.13	Proprietary Information and Rights	12
2.14	Employee Benefits	13
2.15	Employment Laws	16
2.16	Environmental Laws	17
2.17	Taxes	18
2.18	No Unlawful Contributions	19
2.19	No Insider Transactions	19
2.20	Accounts Receivable; Vendors	19
2.21	Inventories	20
2.22	Bank Accounts	20
2.23	Warranties	20
2.24	Delivery of Documents	20
2.25	No Finders or Brokers	21
2.26	Product Warranties; Product Liability; Safety and Recalls	21
2.27	Dealer Network; Rebates and Refunds	22
2.28	Representations Complete	22

i

		Page
ARTICLE 3	REPRESENTATIONS AND WARRANTIES OF PURCHASER	23
3.1	Organization; Ownership	23
3.2	Authorization	23
3.3	No Conflict	23
3.4	No Finders or Brokers	24
3.5	Availability of Funds	24
ARTICLE 4	COVENANTS	24
4.1	Confidentiality	24
4.2	Fulfillment of Conditions	25
4.3	Purchaser’s Access to Records and Inspection Rights	25
4.4	Transfer of Additional Assets	25
4.5	Operation in Ordinary Course	26
4.6	Post-Closing Access	28
4.7	Delivery of Audited Financial Statements	28
4.8	No Solicitation of Other Transactions	29
4.9	Termination of Affiliate Relationships	29
4.10	Removal of Liens; Release	29
4.11	Bank Accounts	30
4.12	Indebtedness of Seller to Company	30
4.13	No Solicitation of Employees	30
4.14	Country Coach Leases	30
4.15	Standstill	31
4.16	Transferred Employees	31
4.17	Benefit Plans	31
4.18	Income Taxes; Allocation; Income Tax Returns	32
ARTICLE 5	CONDITIONS OF CLOSING	34
5.1	Conditions of Obligations of Purchaser	34
5.2	Conditions of Obligations of Seller	35
ARTICLE 6	CLOSING DATE AND TERMINATION OF AGREEMENT	36
6.1	Closing Date	36
6.2	Termination of Agreement	36
6.3	Effect of Termination	36

ii

		Page
ARTICLE 7	INDEMNIFICATION	37
7.1	Indemnification by Seller	37
7.2	Indemnification by Purchaser and Merger Sub	39
7.3	Survival of Representations and Warranties; Reliance	40
7.4	No Duplication; Exclusive Remedy	40
7.5	Determination of Losses	40
ARTICLE 8	MISCELLANEOUS	40
8.1	Further Actions	40
8.2	Expenses	41
8.3	Entire Agreement	41
8.4	Descriptive Headings	41
8.5	Notices	41
8.6	Governing Law	42
8.7	Assignability	42
8.8	Waivers and Amendments	42
8.9	Third Party Rights	42
8.10	Public Announcements	42
8.11	Counterparts	43
8.12	Guaranty by Riley	43

iii

MERGER AND ASSET PURCHASE AGREEMENT

THIS MERGER AND ASSET PURCHASE AGREEMENT is dated as of February 16, 2007 (this “Agreement”) by and among Country Coach Holdings LLC, a Delaware limited liability company (“Purchaser”), Country Coach Merger LLC, a Delaware limited liability company (“Merger Sub”), Riley Investment Management, LLC, a Delaware limited liability company (“Riley”), on one hand, and National R.V. Holdings, Inc., a Delaware corporation (the “Seller”), and Country Coach, Inc., an Oregon corporation (“Company”), on the other.  Capitalized terms not otherwise defined in this Agreement are used as defined in Appendix A hereto.

W I T N E S S E T H :

WHEREAS, Seller is the record and beneficial owner of all issued and outstanding shares of Common Stock,  no par value per share (the “Company Common Stock”), of Company;

WHEREAS, the boards of directors of each of Purchaser, Merger Sub, Seller and Company have determined that it is in the best interests of each corporation and its respective stockholders that Purchaser acquire Company through the statutory merger of Company with and into Merger Sub, with Merger Sub as the surviving corporation (the “Merger”);

WHEREAS, the boards of directors or managers of each of Purchaser, Merger Sub and Seller have determined that it is in the best interests of each such entity and its respective stockholders or members that Purchaser acquire from Seller all assets used primarily in Company’s business that are not presently owned by Company and assume certain of Seller’s liabilities related to Company’s business; and

WHEREAS, Company expects to benefit from the consummation of the transactions contemplated hereby and, to induce Purchaser to enter into this Agreement, agrees to be bound by the terms and provisions in this Agreement.

NOW, THEREFORE, in consideration of the mutual benefits to be derived and the representations and warranties, conditions and promises herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE 1

GENERAL

1.1The Merger.  At the Closing, on and subject to the terms and conditions of this Agreement, Company and Merger Sub will consummate the Merger by a merger of the Company with and into Merger Sub, pursuant to which Merger Sub shall be the entity surviving the Merger.

1

1.2Merger Effective Time.  On the Closing Date, Purchaser shall file an Agreement of Merger (the “Agreement of Merger”) as contemplated by Chapter 60 of the Oregon Revised Statutes with the Secretary of State of the State of Oregon in accordance with the applicable provisions of Chapter 60 of the Oregon Revised Statutes and the Secretary of State of the State of Delaware in accordance with the applicable provisions of the Delaware Limited Liability Company Act (the “DLLCA”); together with all other filings or recordings required under applicable Oregon and Delaware law.  Subject to the making of each such filing, the Merger shall become effective at the time (the “Effective Time”) Purchaser files the Agreement of Merger with the Secretary of State of the State of Oregon and the Secretary of State of the State of Delaware.  The Merger shall have the effects set forth in this Agreement, the Agreement of Merger, the Oregon Corporation Law and the DLLCA.

1.3Consideration.  At the Closing, Purchaser shall deliver Thirty-One Million Fifty Thousand Dollars ($31,050,000) (the “Merger Consideration”) as merger consideration, plus Seven Million Seven Hundred Thousand Dollars ($7,700,000), the amount to be paid by Purchaser or Merger Sub for Additional Assets pursuant to Section 1.5 below (collectively, the “Purchase Price”).  Purchaser will pay or cause to be paid the Purchase Price at Closing to Wells Fargo Bank National Association for the benefit of Seller pursuant to the Funds Flow Agreement.

1.4Effect on Securities.

(a)Except as provided in this Section 1.5 with respect to the Company Common Stock, at and as of the Effective Time, each outstanding share of capital stock, option, warrant, purchase right, subscription right, conversion right, exchange right, and other contract or commitment that could require Company to issue, sell or otherwise cause to become outstanding any capital stock or other equity interest of Company shall be deemed to be cancelled or otherwise terminated in exchange for the Merger Consideration.  Neither Purchaser nor Company shall have any obligation to the holders of any such interest.  All ownership in interests in Merger Sub shall remain outstanding.

(b)The Merger will not affect the ownership interests in Merger Sub, all of which shall remain outstanding after the Closing.

1.5Purchase of Additional Assets.  Seller and Purchaser intend that Seller will transfer all assets used primarily in Company’s business and agree that the assets described on Schedule 1.5 are used primarily  in Company’s business but are not presently owned by Company.  Seller agrees to convey, or cause to be conveyed, to Merger Sub all assets described on Schedule 1.5 (the “Additional Assets”), at the Closing, for consideration of Seven Million Seven Hundred Thousand Dollars ($7,700,000) (the “Additional Asset Consideration”).  The Additional Asset Consideration will be paid at the Closing by Purchaser or Merger Sub to Wells Fargo Bank National Association for the benefit of Seller pursuant to the Funds Flow Agreement.  To the extent that any assets used primarily in the business of Company but owned by Seller or an Affiliate are identified after the Closing, Seller shall, to the extent it agrees with such determination in its reasonable discretion, treat such assets as Additional Assets and convey them or cause them to be conveyed to Merger Sub.

2

1.6Excluded and Additional Liabilities.

(a)Purchaser and Seller agree that any liability of Company for amounts due under the Credit Agreement dated as of August 12, 2005 among Seller, National R.V. Inc., Company, and UPS Capital Corporation (such corporation and the lenders for which it serves as agent, and referred to herein as “UPS”) as agent, as amended (the “UPS Agreement”), shall not remain a liability of Company following the Closing (as provided in Section 4.10).  The parties also agree that any liability of Company for federal, state, or local income taxes relating to any period or partial period ending on or before the Closing Date shall be the sole responsibility of Seller (as provided in Sections 4.18 and 7.2(d)).  Such income tax liability, all liability for amounts due UPS, and all liability in connection with Seller’s employment of Transferred Employees who do not accept employment with Merger Sub pursuant to Section 4.16 shall be the “Excluded Liabilities.”

(b)Purchaser shall cause Merger Sub to assume, as the same shall exist on and as of the Closing, and to the extent not discharged at the Closing, the liabilities and obligations of Seller described on Schedule 1.6 (the “Additional Liabilities”), all of which relate to the business of Company.  To the extent that any liabilities of Seller related primarily to the business of Company are identified after the Closing, Purchaser shall, to the extent it agrees with such determination in its reasonable discretion, treat such liabilities as Additional Liabilities and cause them to be assumed by the Merger Sub.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF SELLER

The Seller hereby represents and warrants to Purchaser as follows:

2.1Organization.  Company is a duly organized corporation, validly existing and in good standing under the laws of the State of Oregon and has the corporate power and authority to conduct its business as it is presently being conducted and to own and lease its properties and assets.  Seller is a duly organized corporation, validly existing and in good standing under the laws of the State of Delaware, and has the corporate power and authority to conduct its business as it is presently being conducted and to execute, deliver and perform its obligations under this Agreement.  Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction listed on Schedule 2.1, which constitute all jurisdictions in which such qualification is necessary under the applicable law as a result of the conduct of Company’s business, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect.

2.2Authorization.  The execution and delivery of this Agreement by Company and Seller and the performance of their respective obligations hereunder have been duly authorized by the directors of Seller and the directors and the stockholder of Company, and no other corporate action or approval on the part of Seller or Company (including any approval by the Seller’s stockholders) is necessary for the execution, delivery or performance of this Agreement by Seller or Company.  This Agreement has been duly executed and delivered by Company and Seller and is a valid and binding obligation of Company and Seller, enforceable against each of

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them in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium, or other similar laws, now or hereafter in effect, relating to or limiting creditors’ rights generally and (b) general principles of equity (whether considered in an action in equity or at law).

2.3No Conflict.  Neither the execution and delivery of this Agreement by Company or Seller, nor the consummation of the transactions contemplated hereunder, nor the fulfillment by Company or Seller of any of its terms will:

(a)conflict with or result in a breach by Company or Seller of, or constitute a default under, or create an event that, with the giving of notice or the lapse of time, or both, would be a default under or breach of, or give a right to terminate or cancel under, any of the terms, conditions or provisions of (i) the Certificate of Incorporation or Bylaws of Company or Seller; (ii) any federal, state, foreign, or material local law, statute, ordinance, rule, regulation, order, judgment, arbitration award, or decree or Authorization (as hereinafter defined) in effect as of the date of this Agreement and applicable to Company or Seller or by which any of Company’s or Seller’s assets are bound or subject to; or (iii) any judgment, order, writ, injunction, decree, or demand of any Governmental Entity which materially affects Seller or Company, or is likely to materially adversely affect the surviving entity’s ability to conduct its business or own or convey its assets after the Closing;

(b)result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or require payment under, or result in the creation of any pledge, claim, obligation to repurchase, lien, charge, security interest, or Encumbrance, other than liens for Taxes not yet due and payable and restrictions imposed by applicable securities laws (collectively, “Liens”) on any of the properties or assets of Company or Seller pursuant to, any note, bond, mortgage, indenture, or other material contract, agreement, lease, license, permit, order, decree, franchise, or other instrument or obligation to which Company or Seller is a party or by which Company or Seller or any of their assets or properties is bound or is subject;

(c)cause a loss or adverse modification of any material permit, license, or other authorization granted by a Governmental Entity to or otherwise held or used by Company;  and

(d)require Company or Seller to obtain any material consent, approval, authorization or permit of, or to make any filing with or notification to, any governmental or regulatory authority (“Governmental Entities”), except for filing the Merger documents in Delaware and Oregon, the filing and recordation of appropriate real estate transfer documents as required by Oregon and California Law with respect to the Additional Assets and any required filings with the United States Securities and Exchange Commission and such other consents, approvals, authorizations, permits or filings, the absence of which would not reasonably be expected to have a Material Adverse Effect.

Except for this Agreement, neither Seller nor Company has any legal obligation, absolute or contingent, to any other Person to sell any capital stock or other ownership interest in Company,

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or the business or any material assets of Company or to effect any merger, consolidation or other reorganization of Company or to enter into any agreement with respect thereto.

2.4Capitalization; No Subsidiaries; Articles, Bylaws and Minutes; Derivative Securities.

(a)Company’s authorized capital stock consists of 1,000 shares of Company Common Stock, all of which are issued and outstanding.  All outstanding shares of Company Common Stock are duly authorized, validly issued, fully paid and non-assessable.  There are no outstanding options, warrants or other rights to acquire, or any securities or obligations convertible into or exchangeable for, any shares of the capital stock of Company which have been issued or granted by or are binding upon Seller or Company or other Person.  Except as set forth on Schedule 2.4, Seller is the record and beneficial owner of all shares of Company Common Stock, free and clear of all Encumbrances.  Following the Merger, Purchaser will have good, complete and marketable title to all of the legal and economic interests in the surviving entity of the Merger, free and clear of all restrictions or conditions to transfer or assignment (other than restrictions on transfer imposed by federal or state securities laws or restrictions resulting from acts of Purchaser) and free and clear of all defects of title or Encumbrances.

(b)Company does not have any direct or indirect subsidiaries.  For purposes of this Agreement, a direct or indirect subsidiary of Company means any corporation, trust, general or limited partnership, limited liability company, limited liability partnership, firm, company or other business enterprise which is controlled by Company through direct ownership of the stock or other proprietary interests of such business enterprise or indirectly through the ownership of stock or other proprietary interests in one (1) or more other business enterprises which are connected with Company by means of one (1) or more chains of business enterprises that are connected by ownership of stock or other proprietary interests.

(c)Company has provided or made available in the Data Room to Purchaser complete and correct copies of the Certificate of Incorporation, as amended, and Bylaws of Company, in each case as amended to the date of this Agreement.  The minute books of Company contain complete and accurate records of all meetings and other corporate actions of its stockholders and directors and committees of directors (if any).  True and complete copies of the minute books have been delivered or made available to Purchaser.

(d)There are no options, warrants or other rights (including registration rights), agreements, arrangements or commitments of any character to which Seller or Company is a party relating to the issued or unissued capital stock or other securities of Company, or obligating Company to grant, issue or sell any shares of the capital stock or other securities of Company, by sale, lease, license or otherwise.  There are no obligations, contingent or otherwise, of Company to (x) repurchase, redeem or otherwise acquire any shares of Company capital stock; or (y) provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise), or provide any guarantee with respect to the obligations of Company or any other Person.  Company neither owns nor has agreed to purchase or otherwise acquire, any capital stock of, or any interest convertible into or exchangeable or exercisable for, any capital stock of any corporation, partnership, joint venture or other business association or entity.  There are no agreements, arrangements or commitments of any character (contingent or otherwise) pursuant to

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which any Person is or may be entitled to receive any payment based on the revenues or earnings, or calculated in accordance therewith, of Company.

2.5Financial Statements.

(a)Company has delivered to Purchaser the unaudited balance sheets of Company as of December 31, 2006, December 31, 2005 and December 31, 2004, and the related statements of income, retained earnings and cash flows for the fiscal years then ended and the estimated balance sheet and estimated cash flow forecast prepared in good faith for the one-month period ended January 31, 2007 (collectively, the “Financial Statements”).  Except as set forth in Schedule 2.5, the Financial Statements (i) are prepared in accordance with GAAP consistently applied as at the dates and for the periods covered thereby (except that the January 31, 2007 statements are subject to normal year-end adjustments and Financial Statements are not accompanied by footnote disclosures); (ii) present fairly in all material respects the financial position and results of operations and cash flows of Company as of the dates and for the periods then ended; (iii) are in agreement with the books and records of Company in all material respects; and (iv) contain and reflect adequate reserves, in accordance with GAAP, for all reasonably anticipated losses, costs and expenses.

(b)The Financial Statements do not contain any items of special or nonrecurring income or any other income not earned or otherwise realized in the ordinary course of business except as expressly specified therein, and such Financial Statements include all material adjustments, which consist only of normal recurring accruals, necessary for such fair presentation.

(c)Except as set forth in Schedule 2.5 hereto or as identified on the Financial Statements, Company has no direct or indirect liabilities or obligations, either accrued, contingent or otherwise, which, individually or in the aggregate with respect to any related items, are material to Company or involve a risk of loss in excess of $25,000, and which have not been reflected in the December 31, 2006 balance sheet.  Except as set forth in the Financial Statements or Schedule 2.5 hereto, there are no facts known to Company or to Seller or any other reasonable legal basis which Company or Seller has recognized as reasonably likely to give rise to any claims which involve a risk of loss in excess of $25,000 against, or liabilities or obligations of, Company.

(d)Company has, in accordance with good business practices, maintained complete and accurate books and records, including financial records which fairly present its financial condition in all material respects and records of all its material corporate transactions or proceedings.

(e)Company and Seller maintain a system of internal accounting controls sufficient to provide assurances that (i) Company’s transactions are executed in accordance with management’s general or specific authorizations; (ii) Company’s transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to Company’s assets is permitted only in accordance with management’s general or specific authorizations; (iv) appropriate accruals, including for employee bonuses and vacation time, have been taken;

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and (v) the recorded accountability for Company’s assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

2.6Absence of Certain Facts or Events.  Except as listed on Schedule 2.6, since December 31, 2006, Company has operated only in the ordinary course of business and there has not been:

(a)any material adverse change in (i) the financial condition of Company from that shown on the December 31, 2006 balance sheet; or (ii)  the results of operations of Company from that shown in the statements of operations and cash flows of Company for the year ended December 31, 2006;

(b)any damage, destruction or loss to the assets or business of Company, whether covered by insurance or not, involving individually or in the aggregate losses or assets in excess of $25,000;

(c)any amendment to or entering into of any employment agreements or any increase in the compensation payable or to become payable by Seller or Company to any employee, officer or director of Company or in the coverage or benefits under any bonus, insurance, pension or other Benefit Plan (excluding annual length-of-service and similar adjustments to the benefits of individual participants);

(d)any issuance of capital stock of Company or options or rights to acquire capital stock of Company, any redemption or repurchase of outstanding shares of capital stock of Company, any declaration, setting aside or payment of any dividend or distribution thereon, any stock split or reverse stock split, any merger of Company with any Person, any purchase or other acquisition by Company of capital stock or other interest in any other Person, any purchase or other acquisition by Company of all or substantially all of the business or assets of any other Person, any transfer or sale of a substantial portion of Company’s business or assets to any Person, any transaction between Company and Seller other than in the ordinary course of business or as disclosed in Seller’s filings with the Securities and Exchange Commission, or any agreement to take any such actions;

(e)any sale, assignment, modification or transfer of any contractual rights, claims or other assets of Company valued at more than $25,000 individually, or more than $75,000 in the aggregate, other than in the ordinary course of business consistent with past practice;

(f)any mortgage, pledge, or other Lien placed on Company assets to secure debt, or any other Encumbrance placed on assets of Company which would prevent or materially limit the use, modification or sale of assets valued (individually or in the aggregate) at $25,000 or more;

(g)the incurrence of any obligation or liability of Company as a result of borrowed money (except pursuant to existing credit agreements) or any capital expenditure in either case, in excess of $25,000 for any expenditure or series of related expenditures and not described on Schedule 2.6, or, any commitment to borrow money entered into by Company, or any increase in any loans made or agreed to be made by Company;

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(h)any failure to pay or perform any obligation of Company as, when and to the extent due other than pursuant to a good faith defense or right of setoff;

(i)any intentional or, to the Knowledge of Seller, other waiver of any rights of substantial value to Company or any amendment or termination of the Certificate of Incorporation or Bylaws of Company or of any agreement to which Company is a party which materially adversely affects, or is reasonably likely to materially adversely affect, Company’s results of operations or its financial condition;

(j)any material transaction entered into or consummated by Company, except in the ordinary course of business consistent with past practice;

(k)any material addition to or modification of the Benefit Plans of Company or other arrangements or practices affecting personnel of Company (other than extensions of coverage thereunder to employees of Company who became eligible after September 30, 2006 in accordance with the terms of such Benefit Plans);

(l)any Tax election or the settlement or compromise of any Tax claims; or

(m)any change by Company or Seller in their accounting methods, principles or practices.

2.7Property, Leases and Liens.

(a)Schedule 2.7 hereto accurately sets forth as of December 31, 2006 all owned or leased real properties and all items of equipment and other personal property of Company having an individual book value in excess of $5,000 which are owned by Company or used in or necessary for the conduct of Company’s business in accordance with past practice and as currently conducted (the “Properties”).  Schedule 2.7 also contains, with respect to each of the Properties, a list of (i) all leases, franchises and similar agreements creating, or materially modifying or altering, Company’s rights to such Property; and (ii) all Indebtedness secured by any Lien on any such Property, specifying the nature thereof and the holder of such Indebtedness.  The agreements, contracts and commitments listed in Schedule 2.7 are in full force and effect without any material default, waiver or indulgence thereunder by Company or by any other party thereto.  Except as noted on Schedule 2.7, Company has good and marketable title to all assets of Company, in each case, free and clear of all Liens of any nature whatsoever, other than Permitted Liens.

(b)Except as set forth on Schedule 2.7, to Seller’s Knowledge, neither Company nor Seller is a party to any lease, assignment or similar arrangement in respect of Company’s business under which Seller or Company is a lessor, assignor or otherwise makes available for use by any third party any portion of Company’s owned or leased real property.

(c)The facilities, property and material equipment owned, leased or otherwise used by Company are in a good state of maintenance and repair, free from material defects and in good operating condition (subject only to normal wear and tear) and suitable for the purposes for which they are presently used.  No material properties or assets necessary for the conduct of

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Company’s business as conducted require replacement or repair, or maintenance, other than maintenance in the ordinary course of business consistent with past practices.

(d)All tangible assets which are leased by Company have been maintained in accordance with the manufacturers’ and lessors’ standards in such a manner that, at the termination of each such lease, such leased assets can be returned to their owner without any further material liability on the part of Company with respect thereto.

(e)Each parcel of real property owned or leased by Company and all improvements located thereon (i) complies in all material respects with all covenants, conditions and restrictions affecting such property, either recorded or of which Seller has Knowledge; and (ii) is not presently occupied or used by any party other than Company.  All building, plants and structures that are located on the real property owned by Company lie wholly within the boundaries of such property.  Except as disclosed on Schedule 2.7, there are no unpaid taxes or assessments currently levied against the real property owned or leased by Company for which the Company is liable.  The Seller has delivered or made available in the Data Room to Purchaser accurate and complete copies of all title insurance policies, surveys and other documents and records relating to the real property owned or leased by Company.

(f)Upon consummation of the transactions contemplated by this Agreement, the surviving entity in the merger will, free and clear of all Liens, other than Permitted Liens, own or lease all of the assets and properties, tangible or intangible, now held or employed by Company in connection with Company’s business and all Additional Assets.  Such assets and properties constitute all of the assets and properties, tangible and intangible, of any nature whatsoever, (1) necessary to operate the business as currently conducted by Company; or (2) used in the business by Company in the past twelve (12) months, other than Inventory sold, obsolete or unnecessary equipment disposed of, and equipment replaced with like or upgraded equipment, in each case in the normal course of business consistent with past practices.

2.8Contracts and Commitments.

(a)Except as set forth in Schedule 2.8, Company has no (i) collective bargaining agreements, or any agreements or policies that contain or include any severance pay liabilities or obligations; (ii) employment, consulting or similar agreement, contract or commitment which is not terminable without penalty or cost by Company on notice of thirty (30) days or less or contains an obligation of Company to pay and/or accrue more than $10,000 per year; (iii) lease of personal property having a term in excess of one year or remaining payments of $25,000 or more (as lessor or lessee); (iv) note or other evidence of Indebtedness for borrowed money or the deferred purchase price of property or services which involves a liability of more than $25,000; (v) agreement of guaranty or indemnification; (vi) agreement, contract or commitment limiting the freedom of Company to engage in any line of business or compete with any Person; (vii) agreement, contract or commitment relating to expenditures in excess of $25,000; (viii) agreement, contract or commitment relating to the acquisition of assets of, or any interest in, any business enterprise involving individual or aggregate payments in excess of $10,000; (ix) joint ventures, joint marketing arrangements or joint distribution arrangements; or (x) other agreement, contract or commitment, including purchase orders (with customers or other Persons) which involves $25,000 or more and is not

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cancelable without penalty or cost within sixty (60) days.  Company has delivered or made available to Purchaser in the Data Room true, correct and complete copies of all documents required to be listed on Schedule 2.8 (except for purchase orders entered into in the ordinary course of business).

(b)Except as set forth in Schedule 2.8: (i) Company is not in violation of, nor has Company received any claim that it has breached, any of the material terms or conditions of any agreement, contract or commitment set forth or required to be set forth in any of the Schedules to this Agreement (collectively the “Contracts”); (ii) each Contract is in full force and effect in the form delivered to Purchaser and, to the Seller’s Knowledge, there is no material breach or default by any party thereto; (iii) to the Seller’s Knowledge, there are no facts or conditions which have occurred or are, based on facts presently known to exist, anticipated which, through the passage of time or the giving of notice, or both, would constitute a default under any Contract; and (iv) the Contracts comply with all applicable laws.

2.9Permits and Authorizations.

(a)Schedule 2.9 lists each material consent, license, permit, grant or other authorization of any Governmental Entity held by Company or pursuant to which Seller or Company conducts the Company’s business or owns, leases or operates its assets (herein collectively called “Authorizations”).  All Authorizations are in full force and effect and constitute all material authorizations of any Governmental Entity required to permit Seller or Company to own or operate the assets of Company and to permit Merger Sub to conduct the business of Company following the Closing Date as such assets and business are presently operated and conducted.  The consummation of the transactions contemplated by this Agreement will not require any transfer, renewal or notice with respect to any Authorizations except as shown on Schedule 2.9.  There are no proposed or pending applications for Authorizations, applications for variances from compliance with Authorizations, or postponement of the dates for compliance with Authorizations.

(b)Schedule 2.9 identifies all Authorizations which materially restrict the present operation of Company, which limits the term of possession or operation of any material assets of Company or which pertain to environmental discharge.

(c)Except as shown on Schedule 2.9, neither Seller nor Company has been notified or presently has reason to believe any of the Authorizations will not in the ordinary course be renewed upon its expiration.

(d)Except as shown on Schedule 2.9, Company has not received in writing, or to the Knowledge of Seller, otherwise, any claim or assertion that it has breached any of the terms or conditions of any Authorization in such manner (i) as would permit any other Person to cancel, terminate or materially amend any Authorization necessary to permit the continued operation of Company as presently conducted; or (ii) that is reasonably likely to result in a penalty or fee of more than $5,000.

(e)There is no action, proceeding or investigation pending or, to the Seller’s Knowledge, threatened regarding suspension or cancellation of any Authorization, except where

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the failure to possess, or the suspension or cancellation of, such Authorization would not have a Material Adverse Effect on Company’s business.

2.10No Violations.

(a)Company is not in violation of any applicable law, statute, order, rule or regulation promulgated or judgment entered (or, with respect to rules and regulations of administrative agencies, known by Company or Seller to be proposed) by any Governmental Entity in a manner which is reasonably likely to have a Material Adverse Effect.

(b)Except for those filings listed on Schedule 2.10 hereto, no material consent, approval or authorization of, or declaration, filing or registration with, any Governmental Entity is required to be made or obtained by Seller or Company in connection with the execution, delivery and performance by Seller and Company of this Agreement and the consummation of the transactions contemplated hereby, or the continued operation of Company’s business.

(c)Except as disclosed on Schedule 2.10 hereto, Company is not in conflict with, or in default or violation of any law or any requirement, guideline, promulgation or rule of the Recreational Vehicle Industry Association, in any material respect, and is not aware of any fact or circumstance reasonably likely to lead to such a violation.  Company and its conduct of its business complies, and at all relevant times since 2000 has complied, in all material respects, with the requirements of the Transportation Recall Enhancement, Accountability and Documentation Act and implementing regulations of the National Highway Traffic Safety Administration (“NHTSA”), including but not limited to the Reporting of Early Warning Information Regulation (49 CFR Part 579, subpart C), and Reporting of Safety Recalls and Other Safety Campaigns in Foreign Countries Regulation (49 CFR Part 579, subpart B).

(d)Except as disclosed on Schedule 2.10 hereto, neither Seller nor Company has received any written notices or other written correspondence from the NHTSA relating to Company or its products within the twenty-four (24) months preceding the date of the Agreement.  Company has complied with all material NHTSA requirements, including but not limited to Federal Motor Vehicle Safety Standards, in effect from time to time in connection with the conduct of its business.  Other than as set forth on Schedule 2.10, Company does not ship its products to, or distribute its products in, any country other than the United States and Canada.  All of Company’s products, except for any products subject to a prior Recall disclosed to Purchaser, are and have been, at the time of sale:  (i) free from any “defect related to motor vehicle safety” within the meaning of the National Traffic and Motor Vehicle Safety Act and NHTSA regulations, and (ii) in compliance with all other safety laws and standards, including, but not limited to, all standards of the Recreational Vehicle Industry Association and, with respect to products the Company has shipped to Canada, the Canadian Standards Association, and all standards imposed on Company’s business by statute, rule or regulation of any Governmental Entity or industry association, and Company has not received written notice of any infractions of such standards or been required to undertake any remedial measures in response thereto, except such defects or noncompliance which would not reasonably be expected to have a Material Adverse Effect.

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2.11Proceedings.

(a)Schedule 2.11 lists all suits, actions, and other legal proceedings and all other controversies, and, to Seller’s Knowledge, governmental investigations and other legal proceedings, pending or threatened against Company or as to which either Seller or Company has received any claim or assertion, other than actions, investigations and proceedings disclosed on Schedule 2.10 or Schedule 2.26(b).  Except as set forth on Schedule 2.10, Schedule 2.11 or Schedule 2.26(b) hereto, there are no facts which Seller has recognized are reasonably likely to lead to any additional investigation being conducted or to any other suit, action or legal proceeding, governmental investigations and other legal proceedings except for such pending or threatened suits, actions, investigations and proceedings which Seller has determined would not reasonably be expected to have a Material Adverse Effect.

(b)Except as set forth on Schedule 2.11, there is no suit, action or proceeding or investigation pending, or, to Seller’s Knowledge, threatened against or affecting Company or Seller that is likely to prevent or materially delay the ability of Company or Seller to consummate the transactions contemplated by this Agreement or for entity surviving the Merger to continue to carry on Company’s business as now conducted following the Closing.  There is no judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Company having, or which in the future is reasonably likely to have, any such effect.

(c)Schedule 2.11 also includes a list of all disputes, controversies and claims (including dealer disputes) asserted against Company which were settled or resolved by a payment credit or adjustment of $25,000 or more since January 1, 2006.

2.12Insurance.  Schedule 2.12 lists all insurance policies under which Company is an insured or a beneficiary or for which it is liable to pay premiums and further sets forth the name of the insurer, type of coverage, policy limits and deductibles and additional insureds, if any, and the annual premium for each such policy.  Seller and Company have furnished or made available in the Data Room to Purchaser copies of all such policies and a history, as of November 30, 2006, of all claimed losses under all of Seller and Company’s insurance policies in the past five (5) years.  Except as noted on Schedule 2.12, all premiums with respect to such policies have been paid, and no notice of cancellation, non-renewal or change in terms has been received by Company or Seller, or to Seller’s Knowledge has been contemplated.

2.13Proprietary Information and Rights.

(a)Intellectual Property Rights. Attached hereto as Schedule 2.13 is a true and complete list of all registered Intellectual Property Rights (as defined below) used or held for use by Company since January 1, 2003, other than computer software programs which are generally available to consumers or businesses.  Company shall disclose any patent application in which Company has any interest to Purchaser on a separate confidential list.  Company owns or is validly licensed or otherwise has the right to use, all Intellectual Property Rights used or held for use by Company and all goodwill associated therewith in the same manner in which any such Intellectual Property Right have been or are now being used.  Company has not infringed upon, misappropriated or otherwise violated any Intellectual Property Right or other proprietary

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information of any other Person.  There is no claim, demand or proceeding pending or, to the Knowledge of Company, threatened, that pertains to or challenges the right of Company to use any of the Intellectual Property Rights identified on Schedule 2.13 (including any claim that Company must license or refrain from using any Intellectual Property Rights or other proprietary information of any other Person).  Company has not granted any license or other right and has no obligation to grant any license or other right with respect thereto.  To the Seller’s Knowledge, no other Person has infringed upon, misappropriated or otherwise violated any Intellectual Property Right of Company.  Without limiting the generality of the foregoing, Company is the licensee under fully paid, enforceable licenses that govern its use of all software in which any third party has Intellectual Property Rights.  Each such license remains in full force and effect.  Company has not breached any such license in any material respect, Company has paid all amounts that have heretofore become due and payable in respect of such licenses and, to Seller’s Knowledge, there are no facts or circumstances in existence or reasonably anticipated by Company which would entitle any licensor to terminate any license for Intellectual Property Rights with Company.  As used in this Agreement, “Intellectual Property Rights” means, collectively, with respect to the U.S. and all other countries and territories worldwide, any and all now known or hereafter known tangible and intangible: (i) rights associated with works of authorship including copyrights, moral rights and mask-works; (ii) trademark and trade name rights and similar rights; (iii) trade secret rights; (iv) patent rights, designs, algorithms, computer programs, methods of doing business, other proprietary ideas, designs, concepts, techniques, inventions, discoveries and improvements, whether or not patentable and other industrial property rights, (v) all other intellectual and industrial property rights of every kind and nature and however designated, whether arising by operation of law, contract, license or otherwise; (vi) all registrations, initial applications, renewals, extensions, continuations, continuations-in-part, divisions or reissues thereof now or hereafter existing, made or in force (including any rights in any of the foregoing); (vii) Internet websites, rights in domain names, computer programs and software; and (viii) any other service mark, design, logo, trade secret, know-how, customer list or financial, business, marketing or other information, material or industrial property of a party or any of its affiliates.

(b)Company does not use or own any registered Intellectual Property Rights related to its business, except those which are set forth in Schedule 2.13, which, along with its unregistered Intellectual Property Rights, constitute all of the Intellectual Property Rights necessary for the operation of Company’s business as presently conducted.

(c)Company is not a party in any capacity to any franchise, license, or royalty agreement respecting any Intellectual Property Rights except as set forth on Schedule 2.13 and there is no conflict with the rights of other Persons in respect to Intellectual Property Rights used in the conduct of Company’s business.

(d)Seller and Company have taken commercially reasonable measures to protect the proprietary nature of the Intellectual Property Rights and to maintain in confidence all trade secrets and confidential information owned or used by Company.

2.14Employee Benefits.

(a)Schedule 2.14 sets forth a list of all “employee benefit plans” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended,

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(“ERISA”)) and all other profit-sharing, deferred compensation, bonus, stock option, stock purchase, vacation pay, holiday pay, pension, retirement plans, medical and other compensation or benefit arrangements maintained or contributed to or required to be contributed to by Seller or Company for the benefit of Company employees (or former employees or service providers) and/or their beneficiaries; including a complete listing of all plans with respect to which Seller or Company has either (i) made contributions or payments or incurred any contingent liability within six (6) years prior to Closing or (ii) is required to make payments, transfers or contributions for the benefit of Company employees (or former employees) and/or their beneficiaries (collectively, “Benefit Plans”).  No Benefit Plan is a “defined benefit plan” as defined in ERISA or subject to Title IV of ERISA.

(b)Seller or Company has delivered or made available in the Data Room to Purchaser true and complete copies of:

(1)Each Benefit Plan and any related funding agreements (e.g., insurance contracts or trusts), including all amendments;

(2)The current draft of the Summary Plan Description pertaining to each Benefit Plan for which a Summary Plan Description is required by ERISA or by the terms of such Benefit Plan;

(3)The three (3) most recent annual reports for each Benefit Plan (including all relevant schedules) for which such annual reports are required;

(4)The most recently filed PBGC Form 1 (if applicable); and

(5)The Internal Revenue Service determination letter (if any) for each Benefit Plan and each amendment thereto.

(c)Each Benefit Plan has been established, maintained and administered in all material respects in accordance with its terms and any related agreements, and with all applicable laws, and, if intended to qualify under Code Section 401(a), is so qualified:

(1)Neither Company nor any Affiliate of Company has ever contributed or been obligated to contribute to any “multi-employer plan” (as defined in Section 3(37) of ERISA) or a “multiple employer welfare arrangement” (as defined in Section 3(41)(A) of ERISA);

(2)No such Benefit Plan subject to a funding requirement has been terminated at a time when such Benefit Plan was not sufficiently funded; and

(3)Except as otherwise provided on Schedule 2.14, the value, determined on a termination basis, of all accrued benefits (whether or not vested) under each such Benefit Plan did not exceed, as of the most recent valuation date, and will not exceed as of the time of filing, the then current fair market value of the assets of such Benefit Plan.

(d)All contributions and other payments to be made to each Benefit Plan under the terms of that Benefit Plan, ERISA, the Internal Revenue Code (the “Code”) or any

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other applicable law have been timely made and all contributions made have been fully deductible under the Code.  The books of Company properly reflect all amounts required to be accrued as liabilities under each Benefit Plan.

(e)In the case of each Benefit Plan, there is no lien relating to its liabilities or obligations, and no accumulated funding deficiency (within the meaning of Section 4971 of the Code), whether or not such deficiency has been waived, or any other unfunded liability.

(f)Each Benefit Plan complies currently, and in all material respects, in form and operation, with all applicable law including ERISA, the Code, and the continuation coverage rules of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), Code § 4980B or part 6 of Title I of ERISA.

(g)Except as set forth on Schedule 2.14, no “prohibited transactions” (as defined in Section 4975(c)(1) of the Code) or breaches of fiduciary duty involving Company, Seller, or a director or officer of Seller or Company, have occurred with respect to any of the Benefit Plans.

(h)All trusts maintained in connection with a Benefit Plan, including trusts that are intended to comply with the provisions of Code § 501(c)(9) or § 501(c)(17), are exempt from federal income taxation under Code § 501(a) and there has been no written or, to Seller’s and Seller’s Knowledge, other claims, of noncompliance or failure to properly maintain, operate or administer any Benefit Plan (or a related trust) which has rendered or is reasonably likely to render such Benefit Plan or trust, or Company, subject to or liable for any taxes, penalties or liabilities to any person.

(i)There is no contract, agreement, or benefit arrangement covering any employee of Company which, individually or collectively, could give rise to the payment of any amount which would constitute an “excess parachute payment” (within the meaning of Section 280G of the Code).

(j)Neither Company nor any of its Affiliates maintains any Benefit Plan that provides severance pay or medical benefits to one or more former employees (including retirees), or provides for post-retirement benefits to present or former employees, other than benefits that are required to be provided pursuant to COBRA or state law conversion rights.

(k)There are no investigations, proceedings, or lawsuits, either currently in progress, or, on the basis of facts or circumstances recognized by Company or Seller, expected to be instituted in the future, against (i) any Benefit Plan; or (ii) any fiduciary of such plan (within the meaning of Section 3(21)(A) of ERISA) brought on behalf of any participant, beneficiary or fiduciary thereunder, or by any Governmental Entity.

(l)With respect to each Benefit Plan that is an employee welfare benefit plan (within the meaning of Section 3(1) of ERISA), all claims that are or could be attributable to such Benefit Plan are (i) insured pursuant to a contract of insurance whereby the insurance company bears any risk of loss with respect to such claims, (ii) covered under a contract with a health maintenance organization (an “HMO”) pursuant to which the HMO bears the liability for

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claims or (iii) reflected as a liability or accrued for on the financial statements of Company or Seller.

(m)Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Benefit Plan that will or may result (either alone or in connection with any other circumstance or event) in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Benefit Plan, including, without limitation, any “excess parachute payment” as defined under Code Section 280G.

2.15Employment Laws.  Except as shown on Schedule 2.15:

(a)Company is in compliance in all material respects with all federal, state or other applicable laws, respecting employment and employment practices, terms and conditions of employment, wages and hours, affirmative action and occupational safety (except for violations or failures to comply which are not reasonably likely to result in penalties in excess of $10,000, individually, or $50,000 in the aggregate with respect to related items), and has not received notice of, and is not engaged in, any unfair labor practice.

(b)No unfair labor practice complaint against Company is pending before the National Labor Relations Board.

(c)There is no labor strike, dispute, slowdown or stoppage actually pending or against or affecting Company.

(d)Except to the extent expressly provided in Schedule 2.15, there are not, and in the past three years there have not been, any material claims, grievances or arbitration proceedings, workers’ compensation proceedings, labor disputes (including charges of violations of any federal, state or local laws or regulations relating to current or former employees (including retirees) or current or former applicants for employment), governmental investigations, or administrative proceedings of any kind pending or, to the Knowledge of Seller, threatened against or relating to Company, its employees or employment practices, or operations as they pertain to conditions of employment; nor is Company or Seller subject to any order, judgment, decree, award, or administrative ruling arising from any such matter.  Schedule 2.15 or Schedule 2.16 lists all claims, charges or notices of correction received under laws and regulations pertaining to workplace safety since January 1, 2004.

(e)No collective bargaining agreement is currently in existence or is being negotiated by Company and as of the date of this Agreement no labor organization has been certified or recognized as the representative of any employees of Company or is actively seeking such certification or recognition.  To Seller’s Knowledge, Company’s relations with its employees are satisfactory.

(f)Company’s contracts, if any, with temporary personnel agencies represent bona fide, arms-length agreements and the personnel provided by such agencies are not Company’s employees for purposes of any federal, state or local laws, including laws pertaining

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to tax withholding, provision of benefits or union representation, except as disclosed on Schedule 2.15.

(g)No officer, executive, key employee or group of key employees (“Key Persons”) has notified Company or Seller of an intent to cease providing services to Company or materially alter the terms on which services are provided to Company, and to Seller’s Knowledge, no Key Person is planning to cease providing services or to seek to materially alter the terms on which such Key Person’s services are provided to Company.

2.16Environmental Laws.

(a)Except as disclosed on Schedule 2.16, since 1996 (i) the assets and the business of Company have been operated in compliance in all material respects with all applicable Environmental Laws including the holding of all Authorizations held by Company or required to be held pursuant to Environmental Laws; (ii) there has been no production, storage, Release, or disposal of any hazardous materials in any material quantity at, in, on under, about or from any of the Properties by or on behalf of Company or to Seller’s Knowledge by any previous owner or tenant of the Properties; (iii) there has been no production, storage, release or disposal of any hazardous materials in any material quantity by or on behalf of Company at any other site; (iv) there are no underground storage tanks or electrical equipment containing PCB’s on the Properties, or any asbestos-containing materials on the Properties that could reasonably be expected to result in a material liability to Company; and (v) no Governmental Entity or any other Person has issued to Company or commenced any notice of violation, notice to comply, compliance schedule, administrative or judicial complaint, enforcement action or lien with respect to alleged violations of Environmental Laws by or on behalf of Company or relating to the Properties, or any proceeding or inquiry with respect to any actual or alleged violation of any Environmental Law or any release or alleged release of a Hazardous Material by or on behalf of Company or relating to the Properties.

(b)“Environmental Law” shall mean all laws, federal, state or local, including statutes, regulations, rules, ordinances and orders which purport to regulate the release of hazardous materials to the environment, or impose requirements relating to environmental protection or public or employee health and safety, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et seq., the Emergency Planning and Community Right-to-Know Act, as amended, 42 U.S.C. Section 11001 et seq., the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq., the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq., the Safe Drinking Water Act, as amended, 42 U.S.C. Section 300f et seq., the Federal Insecticide, Fungicide & Rodenticide Act, as amended, 7 U.S.C. Section 136 et seq., the Federal Food, Drug and Cosmetic Act, as amended, 21 U.S.C. Section 301 et seq., and the Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651 et seq.

(c)“Hazardous Material(s)” shall mean any substance which is (i) defined as a hazardous substance, hazardous material, hazardous waste, pollutant, contaminant or words of similar import under any Environmental Law; (ii) a petroleum hydrocarbon, including crude

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oil or any fraction thereof; (iii) hazardous, toxic, corrosive, flammable, explosive, infectious, radioactive, carcinogenic or a reproductive toxicant; or (iv) regulated pursuant to any Environmental Law.

(d)“Release” shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment (including the abandonment or discarding of barrels, containers, and other receptacles containing any hazardous materials).

(e)No modification, revocation, reissuance, alteration, transfer or amendment of any environmental permits, or any review by, or approval of, any third party under any environmental permits is required in connection with the execution or delivery of this Agreement or the consummation of the transactions contemplated hereby or the continuation of the business of Company as currently conducted.

(f)Company has not assumed, contractually or by operation of law, any liabilities or obligations under any Environmental Laws except, in the case of those assumed by operation of law, those assumed which in and of themselves (and irrespective of any contribution or indemnification rights) could not reasonably be expected to expose Company to liability in excess of $25,000.

(g)Seller and Company have delivered or made available in the Data Room to Purchaser all environmental surveys and reports (including any “Phase 1” or “Phase 2” reports) in their possession or available to them.

2.17Taxes.  Except as set forth in Schedule 2.17 hereto, (i) all federal, state, foreign and local Tax returns and Tax reports (including information returns) required to be filed by Company have been filed with the appropriate Governmental Entities in all jurisdictions in which such returns and reports are required to be filed, and all such returns and reports are, in all material respects, complete, accurate and in accordance with all legal requirements applicable thereto; (ii) all federal, state, foreign and material local income, profits, franchise, sales, use, occupation, property, excise, withholding and other Taxes, duties, charges and assessments (including interest and penalties) due from Company, (A) have been fully paid or adequately provided for on the books and financial statements of Company in accordance with GAAP or (B) are disclosed on Schedule 2.17 and are being contested in good faith by appropriate proceedings; (iii) Company has not received any written notice or inquiry from the Internal Revenue Service or any other taxing authority in connection with any of the returns and reports referred to in the foregoing clause (i) of any pending or threatened examination or audit which, individually or in the aggregate, if adversely decided against Company would reasonably be likely to result in adjustments or penalties in excess of $10,000, individually or in the aggregate; (iv) no extensions or waivers of statutes of limitation that have not expired have been given or requested with respect to Company; (v) the federal and state Tax returns of Company have been examined (or are no longer subject to examination) by the appropriate agency except for all periods after the dates set forth on Schedule 2.17 for each category of Tax return; (vi) deficiencies asserted or assessments made as a result of examination by any taxing authorities have been fully paid or fully reflected on the books of Company; (vii) Company has no liability for Taxes of any third party under Treasury Regulation Section 1.1502-6 (or any

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similar provision of any other applicable law) as a transferee or successor by contract or otherwise, and (viii) there are no tax sharing, allocation, indemnification or similar agreements in effect as between the Company and Seller or any of Seller’s Affiliates under which Purchaser or Merger Sub could be liable for any Taxes or other claims of any Person.  Company has not made an election under Section 341(f) of the Code.

2.18No Unlawful Contributions.  Neither Company nor any director, officer, agent, employee or other Person associated with or acting on behalf of Company, has made or used any corporate funds to make any unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, made any direct or indirect unlawful payments to officials or employees of any Governmental Entity from corporate funds; failed to file any reports required with respect to lawful contributions; established or maintained any unlawful or unrecorded fund of corporate monies or other assets; made any intentionally false or fictitious entries on the books or records of Company; or made or received any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

2.19No Insider Transactions.  Except as disclosed in Schedule 2.19, neither Seller nor any Affiliate of Seller, or any trust, partnership or corporation in which any of such Persons has an interest, has, directly or indirectly, (a) any interest (other than as a holder of not more than 3% of the issued and outstanding securities of a corporation whose securities are traded on a national securities exchange) in any Person which furnishes or sells, services or products which Company furnishes or sells; (b) any interest (other than as a holder of not more than 3% of the issued and outstanding securities of a corporation whose securities are traded on a national securities exchange) in any Person which purchases from or sells or furnishes to Company any goods or services; (c) a beneficial interest in any contract, commitment, agreement or understanding to which Company is a party or by which it may be bound or affected (except for written employment contracts listed on a Schedule to this Agreement); or (d) any interest or claim against Company or any of its assets which could result in a claim against Company or could materially and adversely affect Company’s assets, Company’s title to or its right to use its assets, or Company’s right to conduct its business following the Closing.  Except as disclosed on Schedule 2.19, none of the assets of Company include any receivables from any officer, director, shareholder or employee of Company or Seller.  Schedule 2.19 discloses all services provided to or obtained on behalf of Company by Seller, a list of the name and job position of each person employed by Seller or any of its Affiliates who is not employed by Company but who performs substantial services for Company or whose duties relate primarily to the business of Company.

2.20Accounts Receivable; Vendors.

(a)The accounts receivable reflected on the Financial Statements, or thereafter acquired by Company through the Closing Date were earned by sales actually made or services actually performed in the ordinary course of business and, except as set forth on Schedule 2.20, are not subject to any dispute, set-off or counterclaim.  The accounts receivable set forth on Schedule 2.20 do not represent obligations for goods sold on consignment, on approval or on a sale-or-return basis, or subject to any other repurchase or return arrangement other than as set forth on Schedule 2.20.  The Seller has no knowledge of any facts or circumstances (other than general economic conditions) which would result in any material increase in the uncollectability of the accounts receivable of the Company in excess of the

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reserves therefor set forth in the Financial Statements or, for receivables arising subsequent to the most recent Financial Statements, as reflected on the books and records of Company (which receivables are recorded in accordance with GAAP).  Schedule 2.20 discloses all accounts receivable which have remained unpaid more than 45 days from the date of the applicable invoice as of January 31, 2007.

(b)Schedule 2.20 sets forth the identity of each of Company’s fifteen (15) largest vendors for the fiscal year ended December 31, 2006, and the amounts payable to each such vendor at such date, and also discloses, as of December 31, 2006, the fiscal year-to-date purchases from each vendor identified on Schedule 2.20 and the amount paid to such vendor as of December 31, 2006.  Except as disclosed on Schedule 2.20, no vendor or supplier listed thereon has informed Company or Seller in writing of plans to terminate its business relationship with Company or curtail or modify adversely to Company the terms on which such vendor provides goods or services to Company, and to Seller’s Knowledge no such actions are planned or anticipated.

2.21Inventories.  The inventories reflected on the Financial Statements, and thereafter acquired by Company through the Closing Date, taken as a whole, are in all material respects of a quality and quantity usable and salable in the normal course of the business of Company.  The values at which such inventories are carried on the Financial Statements reflect the historical inventory valuation policy of Company stating inventories at the lower of cost (on a first-in, first-out basis) or market as of the date of the Financial Statements.  Schedule 2.21 lists all inventories of raw materials, finished goods, packaging supplies or ingredients owned or in the custody of Company (“Inventory”) and, with respect to Inventory owned by or held for the account of a customer, identifies such customer and Inventory in reasonable detail, and specifies the location of such Inventory.  Schedule 2.21 further specifically identifies all items of Inventory for which Company holds more than four months of the applicable customer’s needs, based on past practice and all write-downs or impairment charges incurred or recognized since January 1, 2004 which exceeded $50,000 for any item or which were not incurred or recognized in the ordinary course of business.

2.22Bank Accounts.  Schedule 2.22 lists all bank accounts, safe deposit boxes, money market funds, certificates of deposit, stocks, bonds, notes and other securities owned directly or indirectly, beneficially or of record, by Company and identifies all persons authorized to sign on such accounts.

2.23Warranties.  Schedule 2.23 contains a copy of Company’s written warranty terms to its customers.  Except as set forth on Schedule 2.23, Company has not given or made any other written or, to the Knowledge of Seller, oral warranties to any Person with respect to any products sold or services performed.  Except for warranty obligations and returns in the ordinary course of business consistent with past practice for which appropriate reserves have been reflected in the Financial Statements, there are no outstanding or threatened warranty claims against Company relating to express or implied warranties.

2.24Delivery of Documents.  Seller and Company have delivered or made available in the Data Room to Purchaser true and correct copies of all documents, and any and all

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amendments to any such documents, referred to in this Agreement or in any Schedule delivered to Purchaser pursuant to this Agreement.

2.25No Finders or Brokers.  Neither Seller nor Company nor any of their Affiliates has entered into any agreement, arrangement or understanding with any Person which could result in the obligation to pay any finder’s fee, brokerage commission, advisory fee or similar payment in connection with the transactions contemplated hereby except as disclosed on Schedule 2.25.  No such arrangement or understanding imposes any obligation or liability on Purchaser.

2.26Product Warranties; Product Liability; Safety and Recalls.

(a)Company provides, and has provided for the past five years, only the express written limited product warranties attached as Schedule 2.26(a).

(b)Except as set forth on Schedule 2.26(b), (i) there is no claim by or before any court or governmental or other regulatory or administrative agency, commission or other Governmental Entity, including the NHTSA, against Company or Seller alleging any product manufactured, shipped, sold or delivered by or on behalf of Company which is pending or, to the Knowledge of Company, threatened, nor, to Seller’s Knowledge, does there exist any basis therefor, relating to or resulting from an alleged defect in design, manufacture, materials or workmanship of any product manufactured, shipped, sold or delivered by or on behalf of Company or any alleged failure to warn, or any alleged breach of implied warranties or representations.

(c)As used in this Section 2.26, the term “product(s)” shall mean any product designed, manufactured, shipped, sold, marketed, distributed and/or otherwise introduced into the stream of commerce by or on behalf of Company, including, without limitation, any product sold in the United States by Company as the distributor, agent, or pursuant to any other contractual relationship with a manufacturer, and the term “defect” shall mean a defect or impurity of any kind, whether in design, manufacture, processing, or otherwise, including, without limitation, any dangerous propensity associated with any reasonably foreseeable use of a product, or the failure to warn of the existence of any defect, impurity, or dangerous propensity.

(d)Except as set forth on Schedule 2.26(b), to Seller’s Knowledge, (i) there has not been any Occurrence (as defined in Section 2.26(e) below); (ii) since January 1, 2004 there has not been any product recall, rework or post-sale warning or similar action (collectively “Recalls”) conducted by Seller or Company with respect to any product manufactured, shipped, sold or delivered by or on behalf of Company, or, any investigation or consideration of or decision made by any person or entity concerning whether to undertake or not undertake, any Recalls; (iii) there are no pending or to Seller’s Knowledge, threatened claims against Company under any state “lemon” law or other consumer protection law, regulation or rule nor, to Seller’s Knowledge, does there exist any basis therefor; and (iv) there are no material defects in design, manufacturing, materials or workmanship including, without limitation, any failure to warn, or any breach of express or implied warranties or representations, which involve any product manufactured, shipped, sold or delivered by or on behalf of Company.

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(e)For purposes of Section 2.26, the term “Occurrence” means any accident, happening or event which occurs or has occurred after January 1, 2004 or January 1, 2005 at any time prior to the Closing Date which is caused or allegedly caused by any hazard or defect in manufacture, design, materials or workmanship including, without limitation, any failure or alleged failure to warn or any breach or alleged breach of express or implied warranties or representations with respect to a product manufactured, shipped, sold or delivered by or on behalf of Company which results or is alleged to have resulted in injury or death to any person or damage to or destruction of property (including damage to or destruction of the product itself) or other consequential damages, at any time.

(f)All manufacturing standards applied, testing procedures used and product specifications disclosed to customers by Company comply in all material respects with all requirements established by any applicable law.

(g)Seller has provided or made available in the Data Room to Purchasers all written correspondence and communications between Company or Seller and NHTSA since January 1, 2004.

(h)Except as disclosed on Schedule 2.26(f), there is not, and there has not been for the past five years, any pending or, to the Knowledge of Seller, threatened recall, rework, post-sale warning or investigation of any product shipped, sold, delivered, manufactured or designed by Company.

2.27Dealer Network; Rebates and Refunds.

(a)Schedule 2.27 sets forth a true and complete list of Company’s top twenty (20) dealers in terms of Company’s sales, together with the sales made thereto, for each annual period from January 1, 2004, through December 31, 2006, and the accounts receivable for each such dealer as of December 31, 2006.  A true and complete copy of all the Company’s standard form of dealer agreement has been delivered to Purchaser and except as set forth on Schedule 2.27, there are no material deviations from the Company’s standard form in the Company’s dealer agreements with its top twenty (20) dealers (by revenue).  Except as shown on Schedule 2.27, since January 1, 2006, none of the Company’s top twenty (20) dealers (by revenue), has indicated to Company in writing, or to Seller’s Knowledge otherwise, that it does not intend to continue to carry Company’s products.

(b)Schedule 2.27 discloses (i) all significant refunds, rebates, discounts and return policies or practices that Company has engaged in with respect to persons supplying goods and services to Company; and (ii) all annual programs relating to refunds, rebates, discounts and return policies or practices that Company has engaged in with respect to furnishing its products to others in connection with Company’s business; and

(c)no creditor which provides financing to Company dealers supported by Company repurchase obligations (a “Creditor”) has notified Seller or Company, either orally or in writing, that such Creditor intends to discontinue financing dealer purchases of Company products.

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2.28Representations Complete.  None of the representations or warranties made by Seller in this Agreement (taken together with the Disclosure Schedules), and none of the statements made by Seller in any schedule or certificate furnished by Seller pursuant to this Agreement contains or will contain any untrue statement of a material fact, or omit to state any material fact necessary in order to make the statements contained herein or therein (to the extent such statements are of, by or regarding Seller or Company) not misleading.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser and Merger Sub hereby represent and warrant to Seller as follows:

3.1Organization; Ownership.  Each of Purchaser and Merger Sub is a duly organized limited liability company, validly existing and in good standing under the laws of the State of Delaware and has the power and authority to perform this Agreement.

3.2Authorization.  The execution and delivery of this Agreement by Purchaser and Merger Sub and the performance of their respective obligations hereunder have been duly authorized by their respective directors, and no other limited liability company action or approval by Purchaser or Merger Sub is necessary for their execution, delivery or performance of this Agreement.  This Agreement has been duly executed and delivered by Purchaser and Merger Sub, respectively, and is a valid and binding obligation of Purchaser and Merger Sub, respectively, enforceable against each in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, relating to or limiting creditors’ rights generally; and (b) general principles of equity (whether considered in an action in equity or at law).

3.3No Conflict.  Neither the execution and delivery of this Agreement by Purchaser nor the consummation of the transactions contemplated hereunder nor the fulfillment by Purchaser of any of its terms will, except as described in Schedule 3.3:

(a)conflict with or result in a breach by Purchaser or Merger Sub of, or constitute a default by it under, or create an event that, with the giving of notice or the lapse of time, or both, would be a default under or breach of, any of the terms, conditions or provisions of (i) any indenture, mortgage, lease, deed of trust, pledge, loan or credit agreement or any other material contract, arrangement or agreement to which Purchaser or Merger Sub is a party or to which a material portion of their respective assets are subject; (ii) the respective certificates of formation or operating agreements of Purchaser or Merger Sub; or (iii) any judgment, order, writ, injunction, decree or demand of any Governmental Entity which materially affects Purchaser or Merger Sub or which materially affects the Purchaser’s or Merger Sub’s respective ability to conduct its business;

(b)result in the creation or imposition of any lien, charge or Encumbrance of any nature whatsoever upon any material portion of the respective assets of Purchaser or Merger Sub or which materially affects the Purchaser’s or Merger Sub’s respective ability to conduct its business as conducted prior to the date of this Agreement; or

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(c)cause a loss or adverse modification of any permit, license, or other authorization granted by any Governmental Entity to or otherwise necessary or materially useful to Purchaser’s or Merger Sub’s respective business.

3.4No Finders or Brokers.  Neither Purchaser nor Merger Sub nor any of their respective Affiliates entered into any agreement, arrangement or understanding with any Person which could result in any obligation of Seller to pay any finder’s fee, brokerage commission, advisory fee or similar payment in connection with this Agreement or the transactions contemplated hereby.

3.5Availability of Funds.  Purchaser and Merger Sub currently have access to sufficient immediately available funds in cash or cash equivalents, and will at the Closing have sufficient immediately available funds, in cash, to pay the Purchase Price and to pay any other amounts payable pursuant to this Agreement and to effect the transactions contemplated by this Agreement.

ARTICLE 4

COVENANTS

4.1Confidentiality.

(a)Until the Closing, Purchaser shall treat in confidence all non-public documents, materials and other information which Purchaser shall have obtained regarding Company during the course of the negotiations leading to the transactions contemplated hereby, the investigation of Company and the preparation of this Agreement, and in the event the sale and purchase hereunder shall not be consummated, Purchaser shall return all copies of non-public documents and materials which have been furnished in connection therewith.  However, nothing contained herein shall prohibit Purchaser hereto from:

(1)using such documents, materials and other information in connection with any action or proceeding brought or any claim asserted by Company hereto in respect of any breach of any representation, warranty or covenant made in or pursuant to this Agreement, or

(2)supplying or filing such documents, materials or other information to or with any Governmental Entity or other Person which Purchaser and Seller deem reasonably necessary in connection with the obtaining of any consent, waiver, amendment, modification, approval, authorization, permit or license which may be necessary to effectuate this Agreement and to consummate the transactions contemplated hereby.

(b)From and after the date hereof, Seller shall treat, and shall cause its Affiliates to treat, in confidence all documents, materials and other information regarding Purchaser or its Affiliates which are in Seller’s possession or control.  The restrictions of the preceding sentence shall not apply to information that (i) was publicly known at the time of disclosure to Seller; (ii) becomes publicly known through no action or fault of Seller; (iii) was in Seller’s possession or received by Seller from a source other than the Company or its prior owners free of any obligation of confidence at the time of such source’s communication thereof;

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or (iv) is rightfully obtained from third parties authorized to make such disclosure without restriction.  Following Closing, Seller shall treat, and shall cause its Affiliates to treat, in confidence all documents, materials and other information regarding Company which are in their possession or control subject to the foregoing limitations and shall not use such confidential information in connection with the operation of its business.

(c)The confidentiality agreement dated January 22, 2007, between National R.V. Holdings, Inc. and Riley Investment Management, LLC (the “Confidentiality Agreement”) shall remain in effect following the Closing in accordance with its terms and shall apply to Seller, Purchaser, and their controlled Affiliates.

4.2Fulfillment of Conditions.

(a)Seller will use all reasonable efforts, and Seller will cause Company to use all reasonable efforts, to perform, comply with and fulfill all obligations, covenants and conditions required by this Agreement to be performed, complied with or fulfilled by Seller or Company prior to or as of the Closing Date.  Purchaser will use all reasonable efforts to perform, comply with and fulfill all obligations, covenants and conditions required by this Agreement to be performed, complied with or fulfilled by Purchaser or Merger Sub prior to or as of the Closing Date.

(b)Seller will use all reasonable efforts, and will cause Company to use all reasonable efforts, to secure all necessary consents, waivers, permits, approvals, licenses and authorizations and will make, and will cause Company to make, all necessary filings in order to enable Seller or Company to consummate the transactions contemplated hereby.  Purchaser will use all reasonable efforts to secure all necessary consents, waivers, permits, approvals, licenses and authorizations and will make all necessary filings in order to enable Purchaser and Merger Sub to consummate the transactions contemplated hereby.

4.3Purchaser’s Access to Records and Inspection Rights.  Seller and Company will permit, and will cause Company to allow Purchaser and its lenders and other representatives, through their officers, employees, counsel, accountants and other authorized representatives, to inspect the properties and records of Company and of Seller, as they relate to Company and to discuss the affairs and accounts of Company and of Seller, as they relate to Company with such officers, employees, counsel, accountants and other agents of Company and Seller as shall have been approved (including the procedures in respect of such inspection and discussions) in advance by Company, which approval will not be unreasonably withheld.  Purchaser shall conduct any inspection or discussion in a manner that does not unreasonably interfere with the normal business of Company or Seller.

4.4Transfer of Additional Assets.

(a)At the Closing, the Seller shall assign and transfer or cause to be assigned and transferred all Additional Assets to Merger Sub free and clear of all Liens and other Encumbrances, other than Permitted Liens, for aggregate consideration of Seven Million Seven Hundred Thousand Dollars ($7,700,000); provided, however, that if Seller is unable to so assign or transfer all Additional Assets at the Closing, Seller will cause all remaining Additional Assets

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to be assigned and transferred to Merger Sub or its successor in interest free and clear of all Liens and other Encumbrances, other than Permitted Liens, for no additional consideration, as soon as possible following the Closing.

(b)If any further action is necessary or desirable at any time after the Closing Date to carry out the purposes and intent of this Agreement and to vest in Merger Sub all rights, title and interests in and to the Additional Assets, Seller or the officers or directors of Seller are fully authorized in the name of Seller to take, and Seller shall cause such Persons to take, all such necessary or desirable actions.  Without limiting the foregoing, Seller agrees to assist Purchaser and Merger Sub in asserting or enforcing any claim, right or title of any kind in or to the Additional Assets, and to do all such acts and things in relation thereto as Purchaser and Merger Sub deem advisable.

(c)Seller hereby constitutes and appoints Purchaser the true and lawful attorney of Seller, with full power of substitution, in the name of Seller, Purchaser, or Merger Sub, as applicable, but for the benefit of Purchaser and Merger Sub and at the expense of Purchaser and Merger Sub (provided, however, that Seller’s obligations will not in any way be limited as a result of Purchaser undertaking such expense) to collect, assert or enforce any claim, right or title of any kind in or to the Additional Assets, institute and prosecute all actions, suits and proceedings which Purchaser or Merger Sub may deem proper in order to collect, assert or enforce any such claim, right or title, defend and compromise all actions, suits and proceedings in respect of any Additional Asset, and do all such acts and things in relation thereto as Purchaser shall deem advisable.  Seller acknowledges that such powers are coupled with an interest and shall not be revocable by it in any manner or for any reason, including its dissolution, and that Merger Sub shall be entitled to retain for its own account any amounts collected pursuant to such powers, including any amounts payable as interest in respect thereof.  Such powers shall be granted by such powers of attorney and other instruments as shall be reasonably requested by counsel for Purchaser.

4.5Operation in Ordinary Course.  From the execution of this Agreement until the Closing, Seller shall cause Company to, and Company shall, operate its business only in a manner consistent with its present and historical practice, and, in particular, to assure that, except as required by this Agreement, unless Purchaser otherwise consents in writing, no action or event within the control of Company or Seller occurs which, had it occurred prior to the execution of this Agreement, would have been required to be disclosed on Schedule 2.6.  Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Closing Date, Company shall not, without the prior written consent of Purchaser, which consent shall not be unreasonably withheld:

(a)declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock;

(b)split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock;

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(c)purchase, redeem or otherwise acquire any shares of capital stock of Company or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities;

(d)authorize for issuance, issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities or any other securities or equity equivalents (including without limitation stock appreciation rights);

(e)amend its articles of incorporation, bylaws or other comparable charter or organizational documents;

(f)acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the stock or assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization;

(g)mortgage or otherwise encumber or subject to any Encumbrance or otherwise dispose of, sell, lease or license any of its properties or assets, other than sales of inventory in the ordinary course of business consistent with past practice;

(h)incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of Company, guarantee any debt securities of another Person,  enter into any “keep well” or other agreement to maintain any financial statement condition of another Person or enter into any arrangement having the economic effect of any of the foregoing, except for  borrowings under current credit facilities and for lease obligations, in each case in the ordinary course of business consistent with past practice;

(i)make any loans, advances or capital contributions to, or investments in, any other Person, other than to Company;

(j)pay, discharge or satisfy any claims (including claims of shareholders), liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), except for the payment, discharge or satisfaction (i) of liabilities or obligations in the ordinary course of business consistent with past practice or in accordance with their terms as in effect on the date hereof; or (ii) claims settled or compromised to the extent permitted by Section 4.5(n), or waive, release, grant, or transfer any rights of material value or modify or change in any material respect any existing license, lease, permit, contract or other document, other than in the ordinary course of business consistent with past practice;

(k)adopt resolutions providing for or authorizing a liquidation or a dissolution;

(l)enter into any collective bargaining agreement or materially alter any employment or work policy;

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(m)change any material accounting principle used by it, except to the extent required by generally accepted accounting principles;

(n)settle or compromise any litigation (whether or not commenced prior to the date of this Agreement) other than settlements or compromises of litigation where the amount paid (after giving effect to insurance proceeds actually received) in settlement or compromise is not greater than $50,000;

(o)make any new capital expenditure or expenditures, other than capital expenditures not to exceed $25,000, in the aggregate;

(p)except in the ordinary course of business or otherwise permitted by this Agreement, modify, or amend or terminate any Contract or agreement set forth on any Schedule to this Agreement, waive, release or assign any material rights or claims;

(q)enter into any employment, severance  or other agreement with any officer, director or key employee of Company or any of its Subsidiaries or hire or agree to hire any new or additional key employees with annual compensation of $50,000 or more or any officer;

(r)make any Tax election or settle or compromise any material Tax liability;

(s)voluntarily take, or voluntarily agree to commit to take, any action that would make any representation or warranty of Company contained herein inaccurate in any material respect at, or as of any time prior to, the Closing; or

(t)authorize any of, or commit or agree to take any of, the foregoing actions.

4.6Post-Closing Access.  After the Closing, each party will cooperate with the other party to the extent reasonably requested to carry out the purposes of this Agreement, and to make available all financial, insurance, Tax and other information (including reasonable access to books and records) of Company or Seller, as applicable, to the extent reasonably required by any party in connection with (a) any audit or other investigation by any taxing authority; (b) the prosecution or defense of any civil or administrative claims, Tax claims, claims in respect of Intellectual Property Rights,  or related litigation; (c) the preparation of financial statements and related data; (d) the preparation of Tax returns or any other reports or submissions to any Governmental Entity required to be made by any party with respect to Company or the transactions contemplated by this Agreement; or (e) administration of and renegotiation of contracts and financing activities; provided that such cooperation and availability of information do not unreasonably interfere with normal business of any party and provided, further, that the requesting party reimburses the other party for any out-of-pocket and third-party expenses incurred to provide such information.  Purchaser shall cause Company to preserve all such information, including without limitation, the books and records of Company, for at least six (6) years after the Closing Date.

4.7Delivery of Audited Financial Statements.  Following the Closing, the Seller shall use commercially reasonable best efforts to assist Company, Purchaser, and Company’s independent public accountants to produce audited copies of the Financial Statements of

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Company for the years ended December 31, 2004, 2005, and 2006, accompanied by the opinion of Seller’s independent certified public accountants.  Purchaser shall bear the fees and expenses of Company’s independent public accountants in connection with such audit.

4.8No Solicitation of Other Transactions.  Until the earlier of the Closing Date and the date this Agreement is terminated pursuant to Article 6 hereof, Seller and Company will not, nor will Seller permit any of its officers, members, agents, representatives or Affiliates (any of the foregoing, a “Seller Representative”) to directly or indirectly take any of the following actions:

(a)solicit, initiate, entertain, or encourage any proposals or offers from, or conduct discussions with, provide information to, or engage in negotiations with, any Person other than Purchaser or its representatives relating to any possible acquisition of (i) Company (whether by way of merger, purchase of equity securities, purchase of assets or otherwise); (ii) any material assets of Company; (iii) any material portion of Company’s equity securities or any rights to acquire the same; or (iv) any other material interest in or in control of Company (any of the foregoing, a “Competing Transaction”);

(b)provide information with respect to Company, its business or its assets to any Person, other than Purchaser and its designees, relating to, or otherwise cooperate with, facilitate or encourage any effort or attempt by any such person with regard to, any Competing Transaction;

(c)enter into an agreement with any person, other than Purchaser and its designees, providing for any Competing Transaction; or

(d)make or authorize any statement, recommendation or solicitation in support of any Competing Transaction.

The taking of any action described in clauses (a) through (d) above by Seller or Company shall be deemed a material breach of this Agreement by Seller or Company, as applicable.  Seller and Company shall immediately cease and cause to be terminated or cause Seller or Company to cease and cause to be terminated any such contacts or negotiations with third parties relating to any Competing Transaction.  In addition to the foregoing, if the Seller or Company receives prior to the Closing Date or the termination of this Agreement any offer or proposal relating to any Competing Transaction, Seller immediately shall notify Purchaser thereof, including information as to the identity of the offer or the party making any such offer or proposal and the specific terms of such offer or proposal, as the case may be, and such other information related thereto as Purchaser may request.

4.9Termination of Affiliate Relationships.  Prior to the Closing, Seller will cause any and all obligations of Company to or for the benefit of Seller or any Affiliate of Seller to be discharged or terminated prior to the Closing.

4.10Removal of Liens; Release.  Prior to the Closing Date, Seller and Company will cause all Liens and Encumbrances to be removed from (i) all property and assets of Company; (ii) the capital stock of Company; and (iii) all Additional Assets, except for any Liens for Taxes which are not yet due and payable and mechanics’, materialmen’s, or similar liens arising by

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operation of law in respect of obligations which are not yet due and payable as of the Closing Date (“Permitted Liens”).  Seller and Company will provide Purchaser with evidence satisfactory to Purchaser and Purchaser’s counsel of the removal of all such Liens and Encumbrances and a release by UPS of any liability of Company under the UPS Agreement.

4.11Bank Accounts.  Seller shall, on or prior to the Closing Date cause Company to cancel the authority of each Person listed in Schedule 2.22 who is specified by Purchaser in a written notice delivered to Seller on or prior to the Closing Date, to draw checks on any of the bank accounts maintained by Company and Seller shall submit evidence satisfactory to Purchaser of such cancellation.

4.12Indebtedness Between Company and Seller or Affiliate.  On or before the Closing Date, Seller and Company will take any appropriate action (including a contribution to capital or dividend) that has the effect of canceling in full all principal and accrued interest outstanding immediately prior to the Closing under any Indebtedness between Company on one hand and Seller or any Affiliate on the other hand without the transfer of any cash or property other than such Indebtedness.  Notwithstanding any other provision of this Agreement, such action shall not constitute a breach of any representation or warranty of Seller in Article 2 or of any covenant of Seller in any other provision of this Article 4.

4.13No Solicitation of Employees.

(a)For a period of two (2) years following the Closing Date, Seller will not solicit for employment or service as a consultant any employees of Company, so long as they are employed by Company; provided, however, this will not preclude Seller or a recruiting firm acting on Seller’s behalf from making solicitations through general advertising of job opportunities that are not specifically addressed or targeted to employees of Company or hiring any such persons who respond to such solicitations.  Any such solicitation shall be conducted only in the local area in which Seller operates its business or be advertised only in national publications or other means of similar breadth, and shall not be advertised solely or primarily in the local area in which Company operates its business.

(b)For a period of two (2) years following the Closing Date, the Company and Purchaser will not solicit for employment or service as a consultant any employees of Seller or its controlled Affiliates, so long as they are employed by Seller or such Affiliates; provided, however, this will not preclude the Company or Purchaser or a recruiting firm acting on their behalf from making solicitations through general advertising of job opportunities that are not specifically addressed or targeted to employees of Seller or such Affiliates or hiring any such persons who respond to such solicitations.  Any such solicitation shall be conducted only in the local area in which the Company or Purchaser operate their businesses or be advertised only in national publications or other means of similar breadth, and shall not be advertised solely or primarily in the local area in which Seller or any such Affiliate operates its business.

(c)The restrictions contained in this Section 4.13 shall not apply with respect to Kris Dean.

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4.14Country Coach Leases.  Following the Closing, Purchaser shall use its best efforts to have the two real property leases between Seller and Lee Joint Venture relating to property used in the Company’s business (the “LJV Leases”) to be novated or assigned from Seller to the Merger Sub as the entity surviving the Merger without any further liability to Seller or any of its Affiliates.  Pending such novation or assignment following Closing, the Merger Sub as the entity surviving the Merger shall be responsible for all lease and other payments payable under the LJV Leases and Purchaser shall indemnify Seller and Seller’s Affiliates to the extent provided in Section 7.2 hereof from all liability which Seller may thereafter be subject to under such LJV leases.

4.15Standstill.  Riley and Purchaser agree that, for a period of one year from the Closing Date, neither they nor any of their controlled “affiliates” (as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”), but excluding any companies in which Riley holds less than 25% of the outstanding equity or 25% of the board seats) will, or will assist or encourage others to, without the prior written consent of Seller:  (i) acquire or agree, offer, seek or propose to acquire, or cause to be acquired, directly or indirectly, by purchase or otherwise, ownership (including, without limitation, beneficial ownership as defined in Rule 13d-3 of the Securities Exchange Act of 1934 of any voting securities or direct or indirect rights or options to acquire any voting securities of Seller or any subsidiary thereof, or of any successor to or person in control of Seller, any of the assets or businesses of Seller or any subsidiary or division thereof or of any such successor or controlling person or any bank debt, claims or other obligations of Seller or any rights or options to acquire (other than those currently owned) such ownership (including from a third party) provided that the foregoing will not prohibit B. Riley & Co. Inc. from effecting unsolicited client transactions in securities of Seller; (ii) seek or propose to influence or control the management or policies of Seller or to obtain representation on Seller’s Board of Directors, or solicit, or participate in the solicitation of, any proxies or consents with respect to any securities of Seller, or make any public announcement with respect to any of the foregoing or request permission to do any of the foregoing; (iii) make any public announcement with respect to, or submit a proposal for, or offer of (with or without conditions) any extraordinary transaction involving Seller or its securities or assets; (iv) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing, or otherwise form, join or in any way participate in a “group” (as defined in Section 13(d)(3) of the Exchange Act) in connection with any of the foregoing; (v) publicly seek or request permission or participate in any effort to do any of the foregoing or make or seek permission to make any public announcement with respect to the foregoing; or (vi) publicly request Seller or any of its representatives, directly or indirectly, to amend or waive any provision of this Section 4.15.

4.16Transferred Employees.  At the Closing, Purchaser shall cause Merger Sub to offer at-will employment to the persons employed by Seller listed on Schedule 4.16 (the “Transferred Employees”) at substantially their current compensation and in positions providing substantially the same services as their present services to Company.  If any Transferred Employees do not accept employment with Merger Sub following the Merger, all expenses, claims, taxes and other liabilities in connection with Seller’s employment of such Transferred Employees will be the sole responsibility of Seller and will be an Excluded Liability and a (downward) adjustment to the Merger Consideration.

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4.17Benefit Plans; Wage Reporting.  As of the Closing, Seller and Company shall transfer sponsorship of all Benefit Plans to Purchaser and Purchaser shall assume or cause Merger Sub as the entity surviving the Merger to assume sponsorship of such Benefit Plans.  All Transferred Employees shall be eligible to participate in the Benefit Plans of the Merger Sub on substantially the same terms as Company Employees participated prior to the Closing.  All Benefit Plans that are medical, dental and prescription drug benefit plans shall credit the Transferred Employees and their dependents with any waiting periods and limitations for pre-existing conditions that would be satisfied as Company Employees prior to the Closing.  In addition, the Transferred Employees and their dependents shall be credited with any deductibles, co-pays and out-of-pocket limits under the welfare benefit plans that they met during the year in which the Closing occurs.  Purchaser and Seller agree to utilize, or cause Merger Sub and Company, respectively, to utilize the alternate procedure set forth in Revenue Procedure 2004-53 with respect to wage reporting for all Transferred Employees and all employees of Company as of the Closing Date.

4.18Income Taxes; Allocation; Income Tax Returns.

(a)Income Taxes.  Seller and Purchaser acknowledge and agree that for federal, state and local income tax purposes, and only for such purposes, (i) the Merger will be treated as a sale by Company and a purchase by Purchaser of all of the assets of Company as of the Closing (the “Assets”), followed by a distribution of the Merger Consideration by Company to Seller in complete liquidation of Company, (ii) the aggregate sales price and purchase price of the Assets will be equal to the sum of (A) the Merger Consideration, as adjusted pursuant to any provision of this Agreement which provides that it is an adjustment to the Merger Consideration, (B) the Additional Liabilities, and (C) the liabilities of Company as of the Closing, as determined in accordance with Section 1001 of the Code and the Treasury Regulations promulgated thereunder, (D) decreased or increased by certain costs of Seller or Purchaser, respectively, as determined in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder, (iii) the aggregate sales price and purchase price of the Additional Assets will be equal to (A) the Additional Asset Consideration, (B) decreased or increased by certain costs of Seller or Purchaser, respectively, as determined in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder, and (iv) the Merger and the sale of the Additional Assets will constitute one “applicable asset acquisition” pursuant to Section 1060 of the Code.

(b)Allocation.

(i)Accordingly, within 120 days after the Closing Date, Purchaser shall prepare and provide to Seller, in accordance with Section 1060 of the Code and subject to Seller’s reasonable consent (which shall be deemed given in the absence of any objection within 30 days after Purchaser’s receipt thereof), a schedule (the “Allocation Schedule”) setting forth the agreed fair market values of the various Assets and Additional Assets as of the Closing Date, as follows:

First, the value of each Class I asset (for purposes of this Section 4.18(b)(i), “Class I assets,” “Class II assets,” “Class III assets,” “Class IV assets,” “Class V assets,” “Class VI assets” and “Class VII assets” shall have the meanings assigned to such

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terms in Section 1.338-6(b) of the Treasury Regulations), if any, included in the Assets or Additional Assets shall be the amount thereof as of the Closing;

Second, the value of each Class II asset, if any, included in the Assets or Additional Assets shall be the adjusted tax basis thereof for federal income tax purposes as of the Closing;

Third, the value of each Class III asset, if any, included in the Assets or Additional Assets shall be the adjusted tax basis thereof for federal income tax purposes as of the Closing;

Fourth, the value of each Class IV asset, if any, included in the Assets or Additional Assets shall be the adjusted tax basis thereof for federal income tax purposes as of the Closing;

Fifth, the value of each Class V asset, if any, included in the Assets or Additional Assets shall be the adjusted tax basis thereof for federal income tax purposes as of the Closing; provided, however, that the value of Seller’s Oregon land included in the Additional Assets shall instead be the excess of the Additional Asset Consideration over the aggregate value of all Class I - Class V assets (other than such land) included in the Additional Assets, as determined pursuant to this Section 4.18(b)(i).

Sixth, the value of each Class VI asset, if any, included in the Assets shall be the adjusted tax basis thereof for federal income tax purposes as of the Closing; and

Seventh, the value of goodwill (a Class VII asset), if any, included in the Assets shall be, with respect to Company and Purchaser, the excess of (A) the aggregate sales price or purchase price, respectively, of the Assets, as determined pursuant to subsection (a)(ii) of this Section 4.18, over (B) the aggregate value of all Class I - Class VI assets included in the Assets, as determined pursuant to this Section 4.18(b)(i).

(ii)If the aggregate sales price and purchase price of the Assets and the Additional Assets changes at any time after the Allocation Schedule or a Revised Allocation Schedule (as defined below) is prepared by Purchaser and provided to Seller, Purchaser, within 60 days after the change, shall prepare and provide to Seller, in accordance with Section 4.18(b)(i) and Section 1060 of the Code and subject to Seller’s reasonable consent (which shall be deemed given in the absence of any objection within 30 days after Seller’s receipt thereof), a schedule that reflects the change (a “Revised Allocation Schedule”).

(iii)Purchaser and Seller further acknowledge and agree that (i) the foregoing allocation provision will reflect, to the best of their knowledge and belief, the fair market values of the various Assets and Additional Assets as of the Closing Date, (ii) after the Closing Date, they shall report, act and file Tax returns (including initial and in the event of a Revised Allocation Schedule amended Internal Revenue Service Forms 8594) in all respects and for all purposes consistent with the Allocation Schedule or the most recent Revised Allocation Schedule, as the case may be, (iii) neither of them shall take any position (whether in audits, Tax returns or otherwise) which is inconsistent with the Allocation Schedule or the most recent

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Revised Allocation Schedule, as the case may be, unless required to do so pursuant to a “determination” within the meaning of Section 1313(a) of the Code, and (iv) upon written request by Purchaser or Seller, the other party shall deliver to the requesting party a copy of the most recent Internal Revenue Service Form 8594 that it has filed or prepared for filing with the Internal Revenue Service in connection with the Merger and the purchase and sale of the Additional Assets.

(c)Income Tax Returns.  All income of Company through the day of the Closing, inclusive of income from the deemed sale of Company’s assets by reason of the Merger, shall be reflected on Seller’s 2007 consolidated federal income Tax return, and on Seller’s 2007 consolidated or combined state and local income Tax returns in all jurisdictions in which Seller and Company report on a consolidated or combined return basis, and shall be Seller’s responsibility.  Seller shall prepare or cause to be prepared and shall timely file all separate company state and local income Tax returns of Company for all taxable periods ending on or before the Closing Date in all jurisdictions requiring separate reporting from Seller, together with payment for any amount shown as due thereon.  Purchaser shall be responsible for the preparation and filing of all income Tax returns for Purchaser and Merger Sub and for the payment of all Taxes of Purchaser and Merger Sub.  On or before the Closing Date, Seller and Company will take any appropriate action (including a contribution to capital or dividend) that has the effect of (i) having Seller assume, immediately prior to the Closing, any liability of Company for any income Taxes for which Seller is responsible pursuant to this Section 4.18(c), or for any other Taxes of Company for any period ending on or before the Closing Date, and (ii) having Company transfer to Seller, immediately prior to the Closing, all of Company’s rights to any future refund of any Taxes for any taxable period ending on or before the Closing Date.  Notwithstanding any other provision of this Agreement, such action shall not constitute a breach of any representation or warranty of Seller in Article 2 or of any covenant of Seller in any other provision of this Article 4.  For the avoidance of doubt, Purchaser shall not file, or permit Merger Sub to file, an amended Tax return or a claim for refund for Company, or take, or permit Merger Sub to take, any other action with any Tax agency concerning any Tax matter related to Company, for any taxable period ending on or before the Closing Date without the written consent of Seller.

ARTICLE 5

CONDITIONS OF CLOSING

5.1Conditions of Obligations of Purchaser.  The obligation of Purchaser to consummate the purchase of Company Common Stock pursuant to this Agreement is subject to the satisfaction of the following conditions, any of which may be waived by Purchaser:

(a)Representations and Warranties; Performance of Obligations.  The representations and warranties of Seller and Company set forth in Article 2 hereof and in all agreements, documents and instruments executed and delivered pursuant hereto or in connection with the Closing shall have been and be true and correct in all material respects (other than representations and warranties that are qualified as to materiality or Material Adverse Effect, which representations shall be true in all respects) as of the date hereof and as of the Closing Date as though made on and as of the Closing Date, , except to the extent that such

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representations and warranties are made as of a specified date, in which case such representations and warranties shall be true and correct (to the extent set forth above) as of such specified date.  Seller and Company shall have performed in all material respects the agreements and obligations necessary to be performed by them under this Agreement prior to the Closing Date.

(b)Certificate and Deliveries by Seller.  Purchaser shall have received a certificate, dated the Closing Date, signed by Seller and Company, certifying that the conditions specified in Section 5.1(a) have been fulfilled.

(c)No Injunction.  No preliminary or permanent injunction or order that would prohibit or restrain the consummation of the transactions contemplated hereunder shall be in effect and no Governmental Entity or other Person shall have commenced or threatened to commence an action or proceeding seeking to enjoin the consummation of such transactions or to impose liability on the parties hereto in connection therewith.

(d)Other Consents.  Purchaser, Company and Seller shall have received all consents set forth on Schedule 5.1(d) required to be obtained in connection with the consummation of the transactions contemplated hereunder.

(e)Certificates and Instruments of Transfer.  Seller shall have delivered to Purchaser certificates representing Company Common Stock, accompanied by duly executed stock powers, with all required stock transfer tax stamps affixed.  All certificates, instruments and documents delivered by Seller in connection with the transactions contemplated hereby and necessary to evidence such transactions shall be in form and substance reasonably satisfactory to Purchaser and its counsel.

(f)Opinions of Counsel to Seller and Company.  Purchaser shall have received (i) the opinion of Heller Ehrman LLP, counsel to Seller and Company in substantially the form of Exhibit 5.1A hereto, (ii) the opinion of Morris Nichols LLP regarding certain Delaware corporate law matters in substantially the form of Exhibit 5.1B hereto, and (iii) the opinion of Hershner, Hunter, Andrews, Neil & Smith LLP, regarding certain Oregon corporate law matters in substantially the form of Exhibit 5.1C hereto, each dated the Closing Date.

(g)Removal of Liens.  Seller and Company shall have provided Purchaser with evidence satisfactory to Purchaser and Purchaser’s counsel of the removal of all of the Liens and Encumbrances, other than Permitted Liens, on the property and assets of Company, the Capital Stock of Company and the Additional Assets and a release by UPS of any liability of Company under the UPS Agreement.

(h)Additional Assets.  Seller shall have assigned and contributed, or caused to be assigned and contributed, all Additional Assets to Merger Sub free and clear of all Liens and other Encumbrances, other than Permitted Liens.

(i)Opinion of Financial Advisor.  Seller shall have received, and Purchaser and its advisors shall have been provided with a copy of, a fairness opinion of The Spartan Group LLC, financial advisor to Seller, stating that consideration to be received by Seller in

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connection with the sale of Company and of the Additional Assets pursuant to the transactions contemplated hereby is fair, from a financial point of view, to Seller.

(j)UPS Lockbox.  Purchaser and Merger Sub shall have received the written agreement of UPS to return and release to Merger Sub certain funds held or controlled in a lockbox account for the benefit of UPS immediately upon the effectiveness of the Merger, in form and substance satisfactory to Purchaser and its counsel.

5.2Conditions of Obligations of Seller.  The obligations of Seller to consummate the sale and purchase under this Agreement are subject to the satisfaction of the following conditions, each of which may be waived by Seller:

(a)Representations and Warranties; Performance of Obligations.  The representations and warranties of Purchaser set forth in Article 3 hereof and in all agreements, documents and instruments executed and delivered pursuant hereto or in connection with the Closing shall have been and be true and correct in all material respects as of the date hereof and as of the Closing Date as though made on and as of the Closing Date.  Purchaser shall have performed in all material respects the agreements and obligations necessary to be performed by it under this Agreement prior to the Closing Date.

(b)Certification by Purchaser.  Seller shall have received a certificate, dated the Closing Date, signed by an officer of Purchaser, certifying that the conditions specified in Section 5.2(a) have been fulfilled.

(c)No Injunction.  No preliminary or permanent injunction or order that would prohibit or restrain the consummation of the transactions contemplated hereunder shall be in effect and no Governmental Entity or other Person shall have commenced or threatened to commence an action or proceeding seeking to enjoin the consummation of such transactions or to impose liability on the parties hereto in connection therewith.

(d)Purchase Price.  Seller shall have received the Purchase Price payment payable on the Closing Date as provided in Section 1.3.

(e)Opinion of Financial Advisor.  Seller shall have received a fairness opinion of The Spartan Group LLC, financial advisor to Seller, stating that the consideration to be received by Seller in connection with the sale of Company and the Additional Assets pursuant to the transactions contemplated hereby is fair, from a financial point of view, to Seller.

ARTICLE 6

CLOSING DATE AND TERMINATION OF AGREEMENT

6.1Closing Date.  The closing for the consummation of the purchase and sale contemplated by this Agreement (the “Closing”) shall, unless another date or place is agreed to in writing by Seller and Purchaser, take place at the offices of Paul, Hastings, Janofsky & Walker LLP, at 695 Town Center Drive, Seventeenth Floor, Costa Mesa, California, on the date (the “Closing Date”) on which each condition set forth in Article 5 is satisfied or waived.

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6.2Termination of Agreement.  This Agreement may be terminated and abandoned at any time prior to the Closing Date:

(a)By mutual consent of Purchaser, on the one hand, and Seller, on the other hand; or

(b)By Purchaser or Seller if, without fault of such terminating party, the Closing shall not have been consummated on or before February 23, 2007.

6.3Effect of Termination.  In the event of termination of this Agreement as provided in Section 6.2, notice thereof shall be promptly given by the terminating party to the other parties and thereafter this Agreement shall forthwith become void, and there shall be no liability or obligation on the part of Purchaser or Seller or any of their respective Affiliates (a) except that Section 4.1 shall remain in full force and effect; and (b) except that nothing herein will relieve any party from liability for any breach of any agreement or covenant herein or Seller from liability for breach of its representations in Sections 2.2 and 2.4 herein as they pertain to such Seller and the shares such Seller purports to own.  If this Agreement is terminated, or the transactions contemplated by this Agreement fail to close by reason of either (i) a material default by Seller or Company in the performance of its obligations under this Agreement or (ii) a material breach of Seller’s representations and warranties, then Seller shall pay to Purchaser a termination fee of One Million Dollars ($1,000,000) plus Purchaser’s documented reasonable out-of-pocket expenses up to a maximum of Two Hundred Fifty-Thousand Dollars ($250,000), which shall be Purchaser’s sole and exclusive remedy for any such termination or failure to close.  If this Agreement is terminated, or the transactions contemplated by this Agreement fail to close by reason of either (i) a material default by either Purchaser or Merger Sub in the performance of its obligations under this Agreement or (ii) a material breach of Purchaser or Merger Sub’s representations and warranties, then Purchaser shall pay to Seller a termination fee of One Million Dollars ($1,000,000) (the “Purchaser Break-Up Fee”) plus Seller’s documented reasonable out-of-pocket expenses up to a maximum of Two Hundred Fifty Thousand Dollars ($250,000), which shall be Seller’s sole and exclusive remedy for any such termination or failure to close.

ARTICLE 7

INDEMNIFICATION

7.1Indemnification by Seller.

(a)Subject to the provisions of Sections 7.1(b) and 7.4 below, Seller, shall indemnify Purchaser and its Affiliates including, without limitation, after the Closing, Company, and each of their respective stockholders, officers, directors, employees and representatives (each a “Purchaser Indemnitee”) against, and hold each Purchaser Indemnitee harmless from, any and all loss, damage, liability, payment, and obligation, and all expenses, including without limitation reasonable legal fees (collectively “Losses”), incurred, suffered, sustained or required to be paid, directly or indirectly, by, or sought to be imposed upon, such Purchaser Indemnitee after the Closing Date resulting from, related to or arising out of any (i) Excluded Liabilities; or (ii) inaccuracy in or breach of any of the representations, warranties or covenants made by Seller

37

or Company in or pursuant to this Agreement or in any agreement, document or instrument executed and delivered pursuant hereto or in connection with the Closing of the transactions contemplated hereunder.  For purposes of the calculation of Losses with respect to indemnification hereunder, any inaccuracy in or breach of a representation or warranty shall be deemed to constitute a breach of such representation or warranty, notwithstanding any limitation or qualification as to materiality or Material Adverse Effect set forth in such representation or warranty as to the scope, accuracy or completeness thereof, it being the intention of the parties that Purchaser and its Affiliates be indemnified and held harmless from and against any and all Losses arising out of or based upon or with respect to the failure of any such representation or warranty to be true, correct and complete in any respect.  For the avoidance of doubt, the foregoing sentence shall not defeat the purpose of any qualification as to materiality as it relates to determining whether a breach of a representation or warranty has occurred.

(b)No Purchaser Indemnitee shall be entitled to indemnification pursuant to this Section 7.1 in respect of an inaccuracy in or breach of any representation or warranty until such time as the Losses of all Purchaser Indemnitees exceed Four Hundred Thousand Dollars ($400,000) (“Seller’s Basket”) in the aggregate; provided that all claims by Purchaser Indemnitees for indemnification shall accrue in the aggregate until the Losses of all Purchaser Indemnitees exceed the Seller’s Basket, and thereupon Seller shall become obligated to indemnify the Purchaser Indemnitees for the amount by which all such Losses exceed Seller’s Basket.  In no event shall the Seller’s indemnification obligations in this Section 7.1 exceed an aggregate of Four Million Dollars ($4,000,000) (“Seller’s Cap”); provided that neither the Seller’s Basket nor the Seller’s Cap shall apply to inaccuracies or breaches of Sections 1.5 (Purchase of Additional Assets), 1.6(a) (Excluded and Additional Liabilities), 2.1 (Organization), 2.2 (Authorization), 2.4 (Capitalization; No Subsidiaries) and 2.17 (Taxes), and provided further that the limit on Seller’s indemnification with respect to Taxes or obligations for defects in such Seller’s title to the shares of Company Common Stock or Seller’s ability to convey marketable title thereto or of breaches of any covenants of Seller under this Agreement shall be equal to the lesser of (i) the Purchase Price or (ii) actual loss, net of insurance proceeds.  The Losses or right of indemnification under Section 7.1(a) for which Purchaser Indemnitees are entitled to recovery shall be reduced by (i) the amount of any insurance proceeds the Purchaser Indemnitees receive with respect to such Losses or right of indemnification and (ii) any indemnity, contribution or other similar payment that Purchaser Indemnitees received from any third party with respect to such Losses or right of indemnification.  If Purchaser received any payment from Seller in respect of any Losses pursuant to this Section 7.1 and Purchaser could have recovered all or part of such Losses from a non-affiliated third party (a “Potential Contributor”) based on the underlying claim, Purchaser shall, to the extent permitted by applicable law and any contractual provision, assign such of its rights to proceed against the Potential Contributor as are necessary to permit Seller to make a claim for recovery from the Potential Contributor the amount of such payment.

(c)Each Purchaser Indemnitee shall promptly give written notice to Seller of the assertion by any Person of any claim, action, suit or proceeding with respect to which Seller are obligated to provide indemnification hereunder; provided, however, that the rights of a Purchaser Indemnitee to be indemnified hereunder shall only be affected by the failure to give such notice if and to the extent such failure prejudices Seller in the defense of such third party claim.  Amounts due with respect to Losses covered by this Section 7.1 shall be paid promptly

38

after delivery of reasonably documented written notice of the amount of Losses incurred.  Seller shall have the right, but not the obligation, to contest, defend or litigate, and to retain counsel of their choice in connection with, any claim, action, suit or proceeding by any third party alleged or asserted against a Purchaser Indemnitee that is subject to indemnification by Seller hereunder, and the cost and expense thereof shall be subject to the indemnification obligations of Seller hereunder; provided, that each Purchaser Indemnitee shall have the right and option to participate in, but not control, the defense of such action at its own expense, unless the amount of the claim exceeds the remaining available amounts of the amount of the Seller’s Cap, in which case Purchaser will be entitled to control the defense of such action at Seller’s expense; and provided, further, that, (i) if Seller elects not to defend any such action; or (ii) if a Purchaser Indemnitee shall have defenses not available to Seller and if counsel to Purchaser shall advise that common representation is not appropriate, then such Purchaser Indemnitee shall be entitled, at its option through counsel of its choice, but at Seller’s expense, to assume and control the defense of such action.  Neither Seller, on the one hand, nor any Purchaser Indemnitee, on the other hand, shall be entitled to settle or compromise any such claim, action, suit or proceeding without the prior written consent of such Purchaser Indemnitee or the Seller as the case may be, which consent shall not be unreasonably withheld.

7.2Indemnification by Purchaser and Merger Sub.

(a)Subject to the provisions of Sections 7.2(b) and 7.4 below, Purchaser and Merger Sub shall jointly and severally indemnify Seller against, and hold Seller harmless from, any and all Losses incurred, suffered, sustained or required to be paid, directly or indirectly, by or sought to be imposed upon, Seller resulting from, related to or arising out of (i) any inaccuracy in or breach of any of the representations, warranties or covenants made by Purchaser in or pursuant to this Agreement or in any agreement, document or instrument executed and delivered pursuant hereto or in connection with the Closing of the transactions contemplated hereunder, (ii) the operations of the Company’s business following the Closing Date and (iii) the Additional Liabilities.

(b)Seller shall not be entitled to indemnification pursuant to this Section 7.2 in respect of an inaccuracy in or breach of any representation or warranty, until such time as the Losses of Seller exceed Four Hundred Thousand Dollars ($400,000) (“Purchaser’s Basket”) in the aggregate; provided that all claims by Seller for indemnification shall accrue in the aggregate until the Losses of Seller exceed the Purchaser’s Basket, and thereupon Purchaser shall become obligated to indemnify the Seller’s Indemnitees for the amount by which Seller’s Losses exceed the Purchaser’s Basket.  In no event shall Purchaser’s indemnification obligations under this Section 7.2 exceed in the aggregate Four Million Dollars ($4,000,000) (“Buyer’s Cap”); provided that neither the Buyer’s Basket nor the Buyer’s Cap shall apply to inaccuracies or breaches of Section 1.6(b) (Excluded and Additional Liabilities).

(c)Seller shall promptly give written notice to Purchaser of the assertion by any Person of any claim, action, suit or proceeding with respect to which Purchaser is obligated to provide indemnification hereunder; provided, however, that the rights of Seller to be indemnified hereunder shall only be affected by the failure to give such notice if and to the extent such failure prejudices Purchaser in the defense of such third party claim.  Amounts due with respect to Losses covered by this Section 7.2 shall be paid promptly after delivery of

39

reasonably documented written notice of the amount of Losses incurred.  Purchaser shall have the right, but not the obligation, to contest, defend or litigate, and to retain counsel of its choice in connection with, any claim, action, suit or proceeding by any third party alleged or asserted against Seller that is subject to indemnification by Purchaser hereunder, and the cost and expense thereof shall be subject to the indemnification obligations of Purchaser hereunder; provided, that Seller shall have the right and option to participate in, but not control, the defense of such action at their own expense; and provided, further, that (d) if Purchaser elects not to defend any such action or (e) if Seller shall have defenses not available to Purchaser and if counsel to Seller shall in a written opinion advise that common representation is not appropriate, then Seller shall be entitled, at its option through counsel of its choice, but at Purchaser’s expense, to assume and control the defense of such action.  Neither Seller, on one hand, nor Purchaser, on the other hand, shall be entitled to settle or compromise any such claim, action, suit or proceeding without the prior written consent of Seller or Purchaser, as the case may be, which consent shall not be unreasonably withheld.

(d)Indemnity for Taxes.  As noted in Section 7.1, there shall be no minimum amount, and no maximum liability except the Purchase Price, with respect to indemnification for Taxes.  Seller shall indemnify the Purchaser Indemnitees from and against any liability for income Taxes for which Seller is responsible pursuant to Section 4.18(c), and for other Taxes for any period ending on or before the Closing Date, except, in each case, for matters specifically disclosed on Schedule 2.17 as not subject to Seller’s indemnity obligations.  Purchaser and Merger Sub shall indemnify Seller from and against any liability for income Taxes for which Purchaser is responsible pursuant to Section 4.18(c), and for other Taxes for any period ending after the Closing Date.

7.3Survival of Representations and Warranties; Reliance.

(a)All representations and warranties contained herein or made pursuant hereto shall survive the Closing hereunder until the earlier of (i) eighteen months following the Effective Time, or (ii) three months following Merger Sub’s receipt of audited financial statements for the fiscal year ending December 31, 2007; except that the representations and warranties in Section 2.2 (Due Authorization) and Section 2.4 (Capitalization; No Subsidiaries) shall survive without limit, and those in Sections 2.14 (Employee Benefits), 2.16 (Environmental Laws), and 2.17 (Taxes), and all covenants in this Agreement, shall survive the Closing until the expiration of the applicable statute of limitations.  The expiration of any representation and warranty shall not affect any claim for indemnification made prior to the date of such expiration.  All covenants and agreements that by their terms are to be performed after the Closing shall expire upon the completion of performance or waiver thereof.

(b)The representations and warranties made by any party in this Agreement or in any agreement, certificate, schedule or exhibit delivered in connection with this Agreement may be fully and completely relied upon by each other party unless the party seeking to avoid such representation or warranty can demonstrate that the investigation made by or on behalf of such other party actually revealed or disclosed the inaccuracy in question.

7.4No Duplication; Exclusive Remedy.  Any liability for indemnification hereunder shall be determined without duplication of recovery by reason of the state of facts giving rise to

40

such liability constituting a breach of more than one representation or warranty.  Seller and Purchaser agree that, after the Closing, their sole remedy with respect to any and all claims arising in connection with the transactions contemplated by this Agreement (other than with respect to fraud or willful breach) shall be pursuant to the indemnification provisions set forth in this Article 7.

7.5Determination of Losses.  All indemnification payments under this Article 7 shall be paid by the Seller or Purchaser, as the case may be, net of any insurance proceeds actually received by the party entitled to indemnification.  All indemnification payments under this Article 7 shall constitute adjustments to the Merger Consideration.

ARTICLE 8

MISCELLANEOUS

8.1Further Actions.  From time to time, as and when requested by Purchaser, Seller shall execute and deliver, or cause to be executed and delivered, such documents and instruments and shall take, or cause to be taken, such further or other actions as Purchaser may reasonably deem necessary or desirable to carry out the intent and purposes of this Agreement, to transfer, assign and deliver to Purchaser effective as of the Closing, and its successors and assigns, Company Common Stock (or to evidence the foregoing) and to consummate and give effect to the other transactions, covenants and agreements contemplated hereby.

8.2Expenses.  Except as otherwise specifically provided herein, Seller and Purchaser shall each bear their own legal fees and other costs and expenses with respect to the negotiation, execution and delivery of this Agreement and the consummation of the transactions hereunder.  Seller shall pay all sales, transfer and documentary taxes and other expenses incident to the transfer of Company Common Stock or any sales or transfer taxes (but not income taxes) imposed as a result of the Election.

8.3Entire Agreement.  This Agreement, which includes the Appendix, the Schedules and the Exhibits hereto and the other documents, agreements and instruments executed and delivered pursuant to this Agreement, contain the entire agreement between the parties hereto with respect to the transactions contemplated by this Agreement and supersede all prior arrangements or understandings with respect thereto.

8.4Descriptive Headings.  The descriptive headings of this Agreement are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement.

8.5Notices.  All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if (a) delivered personally; or (b) sent by registered or certified mail, postage prepaid; or (c) sent by overnight courier with a nationally recognized courier; or (d) via facsimile confirmed in writing in any of the foregoing manners, as follows:

41

If to Seller or the Company:	National RV Holdings, Inc.
	3411 N. Perris Blvd.
	Perris, California 92571
	Attention:	Bradley C. Albrechtsen
	Facsimile:	(909) 943-8498
with a copy to:	Heller Ehrman LLP
	7 Times Square
	New York, New York 10036
	Attention:	Stephen M. Davis
	Facsimile:	(212) 763-7600
If to Purchaser,	c/o Riley Investment Management LLC
Merger Sub, or Riley:	1100 Santa Monica Blvd., Suite 800
	Los Angeles, CA 90025
	Facsimile:	(310) 966-1448
with a copy to:	Peter J. Tennyson
	Paul, Hastings, Janofsky & Walker LLP
	695 Town Center Drive, 17th Floor
	Costa Mesa, CA 92626-1924
	Facsimile:	(714) 949-1921

If sent by mail, notice shall be considered delivered five (5) business days after the date of mailing, and if sent by any other means set forth above, notice shall be considered delivered upon receipt thereof.  Any party may by notice to the other parties change the address to which notice or other communications to it are to be delivered or mailed.

8.6Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of California (other than the choice of law principles thereof).  Any action, suit or other proceeding initiated by Seller or Purchaser against any other party under or in connection with this Agreement may be brought in any Federal or state court in the State of California, as the party bringing such action, suit or proceeding shall elect, having jurisdiction over the subject matter thereof.  Seller and Purchaser hereby submit themselves to the jurisdiction of any such court and agree that service of process on them in any such action, suit or proceeding may be effected by the means by which notices are to be given to it under this Agreement.

8.7Assignability.  This Agreement shall not be assignable by any party without the written consent of the other parties and any such purported assignment by any party without such consent shall be void, except that:

(a)any or all rights of Purchaser to receive the performance of the obligations of Seller hereunder (but not the obligations of Purchaser to Seller hereunder) and rights to assert claims against Seller in respect of any inaccuracy in or breach of any representations, warranties or covenants of Seller hereunder, may be assigned by Purchaser to a direct or indirect subsidiary of Purchaser; and

42

(b)Purchaser may assign to any bank, insurance company or other financial institution providing financing or extending credit to Purchaser or Company any or all of its rights to assert claims against Seller in respect of any inaccuracy in or breach of representations, warranties or covenants under this Agreement, but any assignee of such rights under clause (a) or clause (b) shall take such rights subject to any defenses, counterclaims and rights of set-off to which Seller might be entitled under this Agreement.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

8.8Waivers and Amendments.  Any waiver of any term or condition of this Agreement, or any amendment or supplementation of this Agreement, shall be effective only if in writing.  A waiver of any breach or failure to enforce any of the terms or conditions of this Agreement shall not in any way affect, limit or waive a party’s rights hereunder at any time to enforce strict compliance thereafter with every term or condition of this Agreement.

8.9Third Party Rights.  Notwithstanding any other provision of this Agreement, and except as expressly provided in Article 7 hereof or as permitted pursuant to Section 8.7 hereof, this Agreement shall not create benefits on behalf of any shareholder or employee of Purchaser or Company, or any other Person (including without limitation any broker or finder), and this Agreement shall be effective only as between the parties hereto, their successors and permitted assigns.

8.10Public Announcements.  Purchaser and Seller will consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by this Agreement and neither Purchaser nor Seller shall issue any such press release or make any such public statement without the prior approval of the other parties both as to the making of such release or statement and as to the form and content thereof, except to the extent that such party is advised by counsel, in good faith, that such release or statement is required as a matter of law.

8.11Counterparts.  This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement.  Facsimile signatures shall be treated as if they were originals.

8.12Guaranty by Riley.  Riley hereby unconditionally and irrevocably guarantees to Seller the prompt and complete payment of only:  (i) the Purchaser Break-Up Fee if it becomes payable pursuant to Section 6.3; and (ii) the payment of Merger Sub’s indemnity obligation in respect of the monthly rent obligations from November 1, 2008 through October 31, 2010 under the LJV Leases, as such leases have been amended by the Assignment of Lease to be entered into in connection with the transactions contemplated hereby (the “Guaranteed Obligations”).  The guaranty provided for in this Section 8.12 constitutes a guaranty of payment and not of collection.  Riley hereby waives notice of acceptance of this guaranty and notice of any Guaranteed Obligation to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or non-payment of any such guaranteed obligation, notice of any suit or the taking of other action by Seller against Purchaser.  Riley also waives any right to require Seller to pursue any other remedy available to Seller against Purchaser for a breach of the obligations to pay the Guaranteed Obligations.

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[SIGNATURE PAGE TO MERGER AND ASSET PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement as of the date first above written.

“Purchaser”
COUNTRY COACH HOLDINGS LLC
By:	\s\ Bryant R. Riley
Name:	Bryant R. Riley
Title:	Managing Member
“Merger Sub”
COUNTRY COACH MERGER LLC
By:	\s\ Bryant R. Riley
Name:	Bryant R. Riley
Title:	Managing Member
“Riley”
RILEY INVESTMENT MANAGEMENT, LLC
By:	\s\ Bryant R. Riley
Name:	Bryant R. Riley
Title:	Managing Member

44

[SIGNATURE PAGE TO MERGER AND ASSET PURCHASE AGREEMENT]

“Seller”
NATIONAL R.V. HOLDINGS, INC.
By:	\s\ Brad C. Albrechtsen
Name:	Bradley C. Albrechtsen
Title:	President and CEO
“Company”
COUNTRY COACH, INC.
By:	\s\ Thomas J. Martini
Name:	Thomas J. Martini
Title:	Treasurer

45

APPENDIX A

Definitions

Capitalized terms in this Agreement shall have the meanings ascribed to them in this Appendix A unless such terms are defined elsewhere in this Agreement:

Affiliate:  With respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.  For the purposes of this definition, “control” means the power to direct the management and policies of another Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

Data Room:  The Bowne Virtual Dataroom established and maintained by Seller’s financial advisor on behalf of Seller in connection with the transaction contemplated by this Agreement.  An item shall only be deemed to have been made available in the Data Room if it is clearly and specifically identified in the Data Room index as of February 20, 2007.

Encumbrance:  Any mortgage, pledge, security interest, charge, easement or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and, with respect to capital stock, any option or other right to purchase or any restriction on voting or other rights.

Funds Flow Agreement:  The Funds Flow Agreement by and among UPS, Wells Fargo Bank, National Association, Seller and Riley to be entered into in connection with the transactions contemplated hereby.

GAAP:  Generally accepted accounting principles as set forth in statements from Auditing Standards No. 69 entitled “The Meaning of ‘Present Fairly in Conformance with Generally Accepted Accounting Principles in the Independent Auditors Reports’” issued by the Auditing Standards Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board that are applicable to the circumstances as of the date of determination.

Governmental Entity:  Any U.S. state, commonwealth, territory, possession or tribe and any political subdivision, courts, departments, commissions, boards, bureaus, agencies or other instrumentalities of any of the foregoing.

Indebtedness:  With respect to any Person (a) all indebtedness for borrowed money; (b) that portion of obligations with respect to capital leases that is properly classified as a liability on a balance sheet in conformity with GAAP; (c) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (d) any obligation owed for all or any part of the deferred purchase price of property or services if the purchase price is due more than six months from the date the obligation is incurred or is evidenced by a note or similar written instrument; and (e) all indebtedness secured by any Encumbrance on any property or asset owned or held by that Person regardless of whether the

A-1

indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person.

Knowledge:  Knowledge of Company or statements about facts or circumstances recognized by Company shall refer to the actual knowledge, after such inquiry of Company personnel and review of Company records (but without independent inquiry) as they deem appropriate, of Bradley C. Albrechtsen, Jim Howard, Jay Howard, Mark Andersen, Thomas J. Martini and Jonathan C. Corn.

Material Adverse Effect:  An event or series of events or circumstances, that individually or in the aggregate, involve a change in or effect on Company that is materially adverse to the business, operations, assets, financial condition, or results of operations of the Company, or on the reasonable likelihood of the consummation of the transactions contemplated by this Agreement; provided that none of the following shall be deemed, either alone or in combination, to constitute a Material Adverse Effect:  (i) conditions generally affecting any of the industries in which the Company operates, or (ii) any disruption of customer relationships arising out of or resulting from actions contemplated by the parties in connection with, or which is directly attributable to, the transactions contemplated by this Agreement, or actions taken by Purchaser following the Closing.

Person:  An individual, corporation, partnership, joint venture, trust or unincorporated organization or association or other form of business enterprise or a Governmental Entity.

Subsidiary:  With respect to any Person, any other Person one half or more of whose voting securities or other ownership interests are directly or indirectly owned by such Person, or which such Person has a right to control.

Tax:  Any and all license and registration fees, taxes (including, without limitation, income, minimum or alternative minimum tax, gross receipts, ad valorem, value added, environmental tax, turnover, sales, use, personal property (tangible and intangible), stamp, leasing, lease, user, leasing use, excise, payroll, franchise, transfer, fuel, excess profits, occupational, interest equalization and other taxes), levies, imposts, duties, charges or withholdings of any nature whatsoever, imposed by any Governmental Entity, together with any and all penalties, fines, additions to tax and interest thereon, whether or not such Tax shall be existing or hereafter adopted.

Other Definitions:  The following terms have the meanings ascribed to them in the Sections noted:

	Section
Additional Asset Consideration	1.5
Additional Assets	1.5
Additional Liabilities	1.6(b)

A-2

	Section
Agreement	Recitals
Agreement of Merger	1.2
Allocation Schedule	4.18(b)(i)
Assets	4.18(a)
Authorizations	2.9(a)
Benefit Plans	2.14(a)
Closing	6.1
Closing Date	6.1
COBRA	2.14(f)
Code	2.14(d)
Company	Recitals
Company Common Stock	Recitals
Competing Transaction	4.8(a)
Confidentiality Agreement	4.1(c)
Contracts	2.8(b)
Creditor	2.27(c)
Defect	2.26(c)
Effective Time	1.2
Environmental Law	2.16(b)
ERISA	2.14(a)
Exchange Act	4.15
Excluded Liabilities	1.6(a)
Financial Statements	2.5(a)
Guaranteed Obligations	8.12

A-3

	Section
Governmental Entities	2.3(d)
Hazardous Materials	2.16(c)
HMO	2.14(l)
Intellectual Property Rights	2.13(a)
Inventory	2.21
Key Persons	2.15(g)
Liens	2.3(b)
LJV Leases	4.14
Losses	7.1(a)
Merger	Recitals
Merger Consideration	1.3
Merger Sub	Recitals
NHTSA	2.10(c)
Occurrence	2.26(e)
Permitted Liens	4.10
Potential Contributor	7.1(b)
products	2.26(c)
Properties	2.7(a)
Purchase Price	1.3
Purchaser	Recitals
Purchaser’s Basket	7.2(b)
Purchaser Break-Up Fee	6.3
Purchaser Indemnitee	7.1(a)
Recalls	2.26(d)

A-4

	Section
Release	2.16(d)
Revised Allocation Schedule	4.18(b)(ii)
Riley	Recitals
Seller	Recitals
Seller Representative	4.8
Seller’s Basket	7.1(b)
Seller’s Cap	7.1(b)
Transferred Employees	4.16
UPS	1.6(a)
UPS Agreement	1.6(a)

A-5

Exhibit 5.1A

[Opinion of Heller Ehrman LLP]

A-6

Exhibit 5.1B

[Opinion of Morris Nichols LLP]

A-7

Exhibit 5.1C

[Opinion of Hershner, Hunter, Andrews, Neil & Smith LLP]

A-8

EX-10.12

Exhibit 10.12

LOAN MODIFICATION AGREEMENT NO. 3

Preamble:  This Loan Modification Agreement (this “Agreement”), dated as of February 21, 2007 (the “Amendment Date”), is made by and among Wells Fargo Bank, National Association, acting through its Wells Fargo Business Credit operating division, as Agent; each Person identified as a “Lender” on the signature page hereof, as lenders; and each Person identified as a “Borrower” on the signature page hereof, as borrowers (each, a “Borrower”, and, collectively, the “Borrowers”), for the purpose of amending or otherwise modifying the terms of that certain Credit Agreement, dated as of August 12, 2005 (which, as it has been, or hereafter may be, modified or amended, the “Credit Agreement”), among Borrowers, the various lenders from time to time party thereto (the “Lenders”) and Wells Fargo Bank, National Association, acting through its Wells Fargo Business Credit operating division, as a Lender and as agent for the Lenders (in such capacity, the “Agent”).  Now, therefore, in consideration of the mutual promises contained herein and in the Credit Agreement, the receipt and sufficiency of which are hereby acknowledged, the Agent, the Lenders and the Borrowers, each intending to be legally bound, agree as follows:

1.             Definitions.  Capitalized terms used herein, but not expressly defined themselves herein, shall have the meanings given to such terms in the Credit Agreement.

2.             Successor Agent.  The Borrowers acknowledge that, contemporaneously with the consummation of this Agreement, Wells Fargo Bank, National Association, acting through its Wells Fargo Business Credit operating division (“Wells Fargo”), has become the Agent, replacing UPS Capital Corporation (“UPS”).  Each Borrower consents to such change and agrees to take such actions as Wells Fargo may reasonably request in connection with the transition of the role of the Agent from UPS to Wells Fargo.

3.             Consent to Sale of Stock of CCI.  Notwithstanding the definition of “Change in Control” set forth in Section 1.1 and the prohibitions set forth in Sections 6.2.9 and 6.2.10 of the Credit Agreement, the Agent and the Lenders hereby consent to Holdings’ sale of 100% of the outstanding capital stock of CCI (the “CCI Stock”) to the Riley Investment Management LLC and Country Coach Holdings LLC (collectively, “Purchaser”) in exchange for a purchase price, net of all expenses payable by the Borrowers, of not less than Thirty-five Million Dollars ($35,000,000) (such sale is hereafter referred to as the “CCI Stock Sale”); subject, however, to the following conditions: (a) prior to the consummation of the CCI Stock Sale, the Borrowers, the Lenders and the Agent shall have executed this Amendment and each of the conditions precedent to the effectiveness hereof set forth in Section 24 hereof shall have been satisfied; (b) the Borrowers shall have delivered to the Agent and the Lenders copies of the documents pertaining to the CCI Stock Sale, all of which shall be satisfactory in form and substance to Agent and Lenders; and (c) the net cash proceeds of the CCI Stock Sale shall be in the amount of at least Thirty-five Million Dollars ($35,000,000) and such amount shall have been paid to the Agent for application in payment of Working Capital Facility Loans and as otherwise described in that certain Funds Flow Agreement of even date herewith among the Agent, UPS, the Borrowers and Purchaser, and the balance of such net proceeds shall be used by the Borrowers for general working capital purposes.  Such consent is limited to the CCI Stock Sale and shall not

be deemed to be a consent to any other matter prohibited pursuant to the Credit Agreement or a waiver of any Default or Event of Default.  Such consent shall be void and of no further force or effect on February 23, 2007, unless on or prior to such date each of the conditions specified in the first sentence of this Section 3 has been satisfied and the CCI Stock Sale has been consummated.  The failure of the Borrowers to cause each of the conditions set forth in this Section 3 to be satisfied, and the CCI Stock Sale to be consummated, on or prior to February 23, 2007, shall constitute an Event of Default under the Credit Agreement.  The parties hereto agree that the CCI Stock Sale, if consummated in accordance with this paragraph, shall not constitute a Change in Control.

4.             No Further Loans to CCI.  From and after the consummation of the CCI Stock Sale, (a) CCI shall have no right to receive any Loans, Letters of Credit or other credit accommodations from the Agent or any Lender under the Credit Agreement and the other Loan Documents, (b) no assets of CCI shall be included in the Borrowing Base, and (c) CCI shall no longer constitute a “Borrower” under the Credit Agreement and the other Loan Documents.  CCI is entering into this Agreement to acknowledge this paragraph and to avoid any doubt that all Borrowers have agreed to the amendments contained herein, and CCI and the other Borrowers agree that CCI’s signature shall not be necessary for any further amendments to the Credit Agreement or any other Loan Document.

5.             Obligations.  The definition of “Obligations” set forth in Section 1.1 of the Credit Agreement shall be deemed to be amended to read as follows:

“Obligations” means all obligations of each and every Loan Party with respect to the payment or performance of any obligations (monetary or otherwise) of such Loan Parties arising under or in connection with this Agreement, the Notes or any other Loan Document.  “Obligations” shall also include, with respect to Wells Fargo Bank, National Association (“Wells Fargo”), any and all advances, debts, obligations and liabilities of any Loan Party to Wells Fargo, heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement at any time entered into by any Loan Party with Wells Fargo, and whether such Loan Party may be liable individually or jointly with others, or whether recovery upon such Obligations may be or hereafter becomes unenforceable.

6.             Reduction in Working Capital Facility Commitment Amount.  The Working Capital Facility Commitment Amount shall be permanently reduced from Forty Million Dollars ($40,000,000) to Fifteen Million Dollars ($15,000,000).

In furtherance of the foregoing:

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(a)The definition of “Working Capital Facility Commitment Amount” set forth in Section 1.1 of the Credit Agreement shall be deemed to be amended to read as follows:

“Working Capital Facility Commitment Amount” means Fifteen Million Dollars ($15,000,000).

(b)Section 2.3 of the Credit Agreement shall be deemed to be deleted in its entirety and replaced with the words “intentionally omitted”.

7.             Reduction in Inventory Sublimit.  The Inventory Sublimit shall be permanently reduced from Twenty-Four Million Dollars ($24,000,000) to Nine Million Dollars ($9,000,000).  In furtherance of the foregoing, the definition of “Inventory Sublimit” set forth in Section 1.1 of the Credit Agreement shall be deemed to be amended to read as follows:

“Inventory Sublimit” means Nine Million Dollars ($9,000,000).

8.             Reduction in Letter of Credit Sub-Facility Amount.  The Letter of Credit Sub-Facility limit shall be permanently reduced from Eight Million Dollars ($8,000,000) to Three Million Dollars ($3,000,000).  In furtherance of the foregoing, the definition of “Letter of Credit Sub-Facility Amount” set forth in Section 1.1 of the Credit Agreement shall be deemed to be amended to read as follows:

“Letter of Credit Sub-Facility Amount” means Three Million Dollars ($3,000,000).

9.             Borrowing Procedures.  The Credit  Agreement shall be deemed to be amended to replace the reference to “12:00 Noon, Atlanta, Georgia time” in Section 3.1(ii) with “11:00 a.m., Atlanta, Georgia time”.

10.           No Fee Letter.  Other than any amounts due to UPS on the Amendment Date pursuant to the Fee Letter, the Borrowers shall not have any further obligations under the Fee Letter.  In furtherance of the foregoing, Section 2.4(d) of the Credit Agreement shall be deemed to be deleted in its entirety and replaced with the words “intentionally omitted”.

11.           Interest Rate.  Each Borrower agrees that, commencing on the Amendment Date and continuing thereafter, (a) the Borrowers shall not be permitted to borrow LIBOR Loans, and (b) the Loans shall bear interest at the Prime Rate (as amended hereby) plus 1.50% per annum.

In furtherance of the foregoing:

(a)The definition of “Prime Rate” set forth in Section 1.1 of the Credit Agreement shall be deemed to be amended to read as follows:

“Prime Rate” means at any time the rate of interest most recently announced by Wells Fargo Bank, National Association (“Wells Fargo”) at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Wells Fargo’s base

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rates, and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof in such internal publication or publications as Wells Fargo may designate.  Each change in the rate of interest shall become effective on the date each Prime Rate change is announced by Wells Fargo.

(b)Section 3.4.1 and Section 3.4.2 shall be deemed to be amended to read as follows:

Section 3.4.1 Loan Rates. Subject to Section 3.4.3, each Borrowing of Working Capital Facility Loans shall accrue interest at a rate per annum equal to the Prime Rate as in effect from time to time plus one and one-half percent (1.50%).

Section 3.4.2 Intentionally Omitted.

12.           Borrowing Base Certificates.  With reference to Section 6.1.1(i) of the Credit Agreement, each Borrower agrees that, commencing on the Amendment Date and continuing thereafter, Borrowers’ Representative shall deliver to each Lender and the Agent Borrowing Base Certificates and all supporting schedules and documentation required pursuant to such Section 6.1.1(i) on a weekly basis by Wednesday of each week (or, if Wednesday is not a Business Day, on the next day which is a Business Day) prepared as of the last Business Day of the preceding week; provided, however, that nothing contained herein shall limit the right of the Agent to require more frequent delivery at any time as provided in Section 6.1.1(i).

13.           Field Audits.  With reference to the last sentence of Section 6.1.7 of the Credit Agreement, each Borrower agrees that commencing on the Amendment Date and continuing thereafter, the Borrowers shall be obliged to reimburse the Agent on demand (in the amounts specified in such sentence) for field audits conducted on a ninety (90) day audit cycle (rather than a one hundred twenty (120) day audit cycle as provided therein); provided, however, that nothing contained herein shall limit the right of the Agent to be reimbursed for more frequent field audits whenever an Event of Default exists as provided in such Section 6.1.7.  In addition to such field audits on a ninety (90) day audit cycle, the Borrower shall reimburse the Agent for a field audit to be conducted within thirty (30) days of the Amendment Date in the manner provided in Section 6.1.7.

14.           Waiver of Events of Default resulting from failure to comply with Financial Covenants.  The Lenders hereby (a) waive the Events of Default resulting from the Borrowers’ failure to comply with the requirements of Section 6.2.4 of the Credit Agreement for their Fiscal Months ending October 31, 2006, November 30, 2006 and December 31, 2006, such waiver being limited to such Events of Default and not to be deemed to be a waiver of any other Default or Event of Default presently or hereafter existing, and (b) agree that the covenant set forth in Section 6.2.4 with respect to Borrowers’ Fiscal Month ending January 31, 2007 shall not apply.

15.           Amendment of Financial Covenants.  Section 6.2.4 of the Credit Agreement shall be deemed to be amended to read as follows:

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Section 6.2.4 Financial Condition. The Borrowers hereby covenant and agree as set forth below:

(a)           EBITDA.  By March 31, 2007, the Borrowers will provide to the Agent updated financial projections in form and detail reasonably satisfactory to the Agent and the Required Lenders for the 2007 Fiscal Year, prepared with the assistance of Kibel Green Inc.  The Borrowers and the Required Lenders shall use such projections in order to establish financial covenants based on minimum EBITDA for April through December of 2007.  Any failure by the Borrowers to deliver such projections by such deadline shall constitute an Event of Default.  On or prior to April 15, 2007, the Borrowers and the Required Lenders shall agree among themselves as to minimum EBITDA requirements (including amounts, measurement dates and measurement periods) for April through December of 2007; provided, however, that if the Borrowers and the Required Lenders are unable to agree on such requirements in writing by such date, then such requirements shall be determined by the Required Lenders in their credit judgment.  Additionally, on or prior to December 31 of each year, the Borrowers and the Required Lenders shall agree among themselves as to minimum EBITDA requirements (including amounts, measurement dates and measurement periods) for the following Fiscal Year; provided, however, that if the Borrowers and the Required Lenders are unable to agree on such requirements in writing by such date, then such requirements shall be determined by the Required Lenders in their credit judgment.

(b)           Working Capital Facility Availability.  The Borrowers will not permit Working Capital Facility Availability to be less than $5,000,000 at any time.  The Lenders agree to consider decreasing this minimum Working Capital Facility Availability requirement upon the establishment of the minimum EBITDA requirements for April through December of 2007, but the Borrowers acknowledge and agree that the Lenders have no obligation to agree to any such decrease and that any such decrease shall be determined in the Lenders’ discretion.

16.           Commitment.  Schedule I of the Credit Agreement shall be deemed to be deleted and replaced with the revised Schedule I attached hereto.

17.           No Sale/Leaseback.  Without limiting the restrictions set forth in Sections 6.2.8 and 6.2.9 of the Credit Agreement, the Borrowers acknowledge and agree that the Borrowers shall not be permitted to enter into a sale/leaseback of their Perris, California real estate without the prior written consent of the Required Lenders in their sole discretion.

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18.           CCI Lockbox.  Borrowers acknowledge that, in order to induce UPS to consummate the Assignment, Wells Fargo has agreed to assume the indemnification liabilities of UPS (if any) under that certain Four Party Wholesale Lockbox Agreement dated February 17, 2006 among Wells Fargo Bank, N.A., in its respective capacities as depository bank and lockbox processor, CCI and UPS (the “CCI Lockbox Agreement”), and Borrowers consent to such assumption of liabilities.  Without limiting any provision of the Credit Agreement and the other Loan Documents that permits the Agent to charge the Borrowers’ loan account for any costs, fees or expenses incurred in connection with the Credit Agreement and the other Loan Documents, Borrowers hereby agree that the Agent may charge the Borrowers’ loan account by making Working Capital Facility Loans to reimburse the Agent and the Lenders for any costs, fees, expenses or other liabilities incurred by the Agent or any Lender in connection with the CCI Lockbox Agreement, regardless of whether such costs, fees, expenses or other liabilities are paid or incurred before or after CCI ceases to become a “Borrower” under the Credit Agreement.

19.           Notices to the Agent.  All notices to the Agent in connection with the Credit Agreement or any other Loan Document shall be sent in accordance with the following information:

	Wells Fargo Bank, National Association, acting through its Wells Fargo
	Business Credit operating division
	MAC N2642-060
	400 Northridge Road, Suite 600
	Atlanta, Georgia  30350
	Attention:  Portfolio Manager
	Telecopier:  770-992-4720
With a copy to:	Stephen D. Palmer, Esq.
	Greenberg Traurig, LLP
	3290 Northside Parkway, Suite 400
	Atlanta, Georgia  30327
	Telecopier:  678-553-2261

20.           Commercial Tort Claim.  Each Borrower hereby grants to the Agent, for itself and the Lenders, a security interest in all commercial tort claims that such Borrower has against Kemlite Company, Inc., Crane Co. or any of their Affiliates, including, without limitation, the claims arising in connection with Case No. RIC-452462, filed with the Superior Court of the State of California, County of Riverside, known as National R.V., Inc., a California Corporation v. Crane Co., a Delaware corporation, and Crane Composites, Inc., a Delaware corporation aka Kemlite Company, Inc.

21.           Arbitration.  The Borrowers, the Lenders and the Agent acknowledge and agree that the following arbitration provisions shall apply to this Agreement, the Credit Agreement and each other Loan Document, and the Credit Agreement and each other Loan Document shall be deemed to be amended to incorporate such provisions.

(a)           Arbitration.  The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their

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respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) the Obligations and related Loan Documents which are the subject of the Credit Agreement and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit.

(b)           Governing Rules.  Any arbitration proceeding will (i) proceed in a location in Georgia selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the “Rules”).  If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control.  Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute.  Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

(c)           No Waiver of Provisional Remedies, Self-Help and Foreclosure.  The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding.  This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

(d)           Arbitrator Qualifications and Powers.  Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00.  Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided, however, that all three arbitrators must actively participate in all hearings and deliberations.  The arbitrator will be a neutral attorney licensed in the State of Georgia or a neutral retired judge of the state or federal judiciary of Georgia, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated.  The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim.  In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication.  The arbitrator shall resolve all disputes in accordance with the substantive law of Georgia and may grant any remedy or relief

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that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award.  The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Georgia Civil Practice Act (O.C.G.A. § 9-11-1 et seq.) or other applicable law.  Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction.  The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(e)           Discovery.  In any arbitration proceeding discovery will be permitted in accordance with the Rules.  All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date and within 180 days of the filing of the dispute with the AAA.  Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party’s presentation and that no alternative means for obtaining information is available.

(f)            Class Proceedings and Consolidations.  The resolution of any dispute arising pursuant to the terms of this Agreement, the Credit Agreement or any other Loan Document shall be determined by a separate arbitration proceeding and such dispute shall not be consolidated with other disputes or included in any class proceeding.

(g)           Payment Of Arbitration Costs And Fees.  The arbitrator shall award all costs and expenses of the arbitration proceeding.

(h)           Real Property Collateral; Judicial Reference.  Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns Obligations secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, security interest or other Lien specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of Georgia, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, security interests and other Liens securing such Obligations shall remain fully valid and enforceable.

(i)            Miscellaneous.  To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA.  No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation.  If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the dispute shall control.  This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties.

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22.           Inducing Representations.  To induce the Agent and the Lenders to enter into this Agreement, each Borrower hereby represents and warrants that: (a) such Borrower is duly authorized to enter into this Agreement, and this Agreement, upon its execution by such Borrower, the Agent and each Lender, will constitute such Borrower’s legal, valid and binding obligations enforceable in accordance with its terms against such Borrower; (b) after giving effect to this Agreement and the consummation of the CCI Stock Sale, no Default or Event of Default exists; (c) no present right of setoff, counterclaim, recoupment claim or defense exists in such Borrower’s favor in respect of its payment or performance of any Obligations; and (d) except as modified by this Agreement, all terms of the Credit Agreement and each Loan Document shall remain in full force and effect.

23.           Amendment Fee.  The Borrowers agree to pay to the Agent on the Amendment Date an amendment fee in the amount of Two Hundred Thousand Dollars ($200,000), to be shared equally between Wells Fargo and UPS, which fee shall be fully earned and non-refundable on the Amendment Date.  The Agent and the Lenders may cause such fee to be paid by making Working Capital Facility Loans to the Borrowers in the amount thereof.

24.           Kibel Green Inc.  The Borrowers covenant and agree to continue to engage Kibel Green Inc. as a consultant on a basis reasonably satisfactory to the Agent but to include, in any event, assisting the Borrower in the preparation of projections for the 2007 fiscal year.

25.           Conditions Precedent.  Notwithstanding any provision herein the contrary, this Amendment shall not become effective, and no Lender shall have any liability hereunder, and no waiver of any Default or Event of Default set forth herein shall become effective, unless and until each of the following conditions precedent is satisfied in a manner and pursuant to documentation satisfactory to Wells Fargo in its sole discretion:

(a)           UPS shall have executed and delivered all documentation deemed necessary or appropriate in order to (i) cause Wells Fargo to become the “Agent” under the Credit Agreement and the other Loan Documents, and (ii) assign the Commitment of UPS to Wells Fargo, in each case subject only to the receipt and disbursement of funds in accordance with the Funds Flow Agreement described below;

(b)           the Borrowers shall have paid to the Agent the amendment fee described above;

(c)           the Borrowers, the Agent and the Lenders have executed this Amendment;

(d)           the Borrowers, the Agent, UPS and Purchaser shall have executed and delivered that certain Funds Flow Agreement dated on or about the date hereof (the “Funds Flow Agreement”);

(e)           the Agent shall have received a true, correct and complete copy of the stock purchase agreement and all related documentation in connection with the CCI Stock Sale, certified as such by an officer of Holdings, and the Agent shall have received evidence satisfactory to the Agent that the CCI Stock Sale has been consummated on terms and conditions satisfactory to the Agent;

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(f)            the Borrowers shall have delivered to Wells Fargo an amended and restated Working Capital Facility Note in the amount of $15,000,000;

(g)           the Borrowers shall have delivered to the Agent a Borrowing Base Certificate and such supporting documentation as the Agent may reasonably request (including a schedule of Accounts and a list of the names and addresses of all Account Debtors), in each case giving effect to the CCI Stock Sale and as of a date satisfactory to the Agent;

(h)           each Borrower shall have delivered to the Agent (i) a good standing certificate having a date within thirty (30) days of the Amendment Date with respect to each Loan Party from the appropriate Governmental Authority of its State of incorporation and of each other State where such Loan Party is required to qualify; (ii) a certificate of the Secretary or an Assistant Secretary of each Loan Party as to resolutions of its Board of Directors authorizing its execution, delivery and performance of this Amendment and the other Loan Documents to be executed in connection herewith, each in form and substance satisfactory to Agent and Lenders;

(i)            the Agent shall have established one or more lockbox arrangements acceptable to the Agent; and

(j)            such other documents, instruments and agreements as the Agent may request in its discretion.

Without limiting the foregoing, each Borrower acknowledges and agrees that this Amendment, the CCI Stock Sale, the assignment of the Commitment of UPS to Wells Fargo and the transfer of the role of the “Agent” from UPS to Wells Fargo are intended to be consummated simultaneously, and references herein to the “Agent” or any “Lender”, unless the context clearly requires otherwise, shall be deemed to refer to Wells Fargo, as the Agent, and to Wells Fargo, as the sole Lender, respectively.

26.           Miscellaneous.  Each existing Loan Document (including, particularly, any Note) shall be deemed modified hereby on the Amendment Date as necessary to conform its terms to the terms of the Credit Agreement, as modified hereby.  This Agreement constitutes a Loan Document, and shall be governed and construed accordingly.  This Agreement constitutes the entire agreement among the Agent, the Lenders and the Borrowers relative to the subject matter hereof, and supersedes and replaces any prior understandings and agreements, written or oral, in regard thereto.  This Agreement shall be binding on, and inure to the benefit of, the successors and assigns of the Borrower, the Agent and the Lenders.  The Borrowers shall reimburse the Agent for all costs which the Agent incurs, including reasonable attorneys fees, in the preparation, negotiation, execution and performance of this Agreement, and the recording of any Loan Documents in connection herewith.

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IN WITNESS WHEREOF, the Agent, the Lenders and the Borrowers have executed this Agreement, by and through their respective authorized officers, as of the Amendment Date.

“Borrowers”:
NATIONAL R.V. HOLDINGS, INC.
By:	\s\ Thomas J. Martini
Name:			Thomas J. Martini
Title:		CFO
NATIONAL R.V., INC.
By:	\s\ Thomas J. Martini
Name:			Thomas J. Martini
Title:		Treasurer
COUNTRY COACH, INC.
By:	\s\ Thomas J. Martini
Name:			Thomas J. Martini
Title:		Treasurer

“Agent” and sole “Lender”:
WELLS FARGO BANK, NATIONAL
ASSOCIATION, acting through its Wells
Fargo Business Credit operating division, as a Lender
By:	\s\ Charles F. Liles
	Charles F. Liles, Vice President

Schedule I

Commitments

Wells Fargo Bank National Association, acting through Wells Fargo Business Credit operating division $ 15,000,000

EX-10.13

Exhibit 10.13

LOAN MODIFICATION AGREEMENT NO. 4

Preamble:  This Loan Modification Agreement (this “Agreement”), dated as of March 13, 2007 (the “Amendment Date”), is made by and among Wells Fargo Bank, National Association, acting through its Wells Fargo Business Credit operating division, as Agent; each Person identified as a “Lender” on the signature page hereof, as lenders; and each Person identified as a “Borrower” on the signature page hereof, as borrowers (each, a “Borrower”, and, collectively, the “Borrowers”), for the purpose of amending or otherwise modifying the terms of that certain Credit Agreement, dated as of August 12, 2005 (which, as it has been, or hereafter may be, modified or amended, the “Credit Agreement”), among Borrowers, the various lenders from time to time party thereto (the “Lenders”) and Wells Fargo Bank, National Association, acting through its Wells Fargo Business Credit operating division, as a Lender and as agent for the Lenders (in such capacity, the “Agent”).  Now, therefore, in consideration of the mutual promises contained herein and in the Credit Agreement, the receipt and sufficiency of which are hereby acknowledged, the Agent, the Lenders and the Borrowers, each intending to be legally bound, agree as follows:

1.             Definitions.  Capitalized terms used herein, but not expressly defined themselves herein, shall have the meanings given to such terms in the Credit Agreement.

2.             Early Termination Fee.  Section 3.3.4(a) of the Credit Agreement shall be deemed to be amended to read as follows:

(a)           Upon any cancellation of the Commitments by the Borrowers subsequent to the Closing Date pursuant to Section 3.3.6, the Borrowers shall pay to the Lenders prior to or concurrently with such termination a Termination Fee in an amount equal to the amount of the Working Capital Facility Commitment at the time of such early termination times one percent (1%).  Notwithstanding the foregoing, if the Commitments are cancelled in connection with Borrowers’ prepayment in full of the Obligations from the proceeds of a replacement financing provided to Borrowers by the Wells Fargo Business Credit operating division of Wells Fargo Bank, National Association (“WFBC”), or by a group of lenders for whom WFBC acts as agent, the portion of the Termination Fee that would otherwise be payable to any Lender which participates in such replacement financing will not be payable, it being understood, however, that each Lender which is not participating in such replacement financing will be entitled to receive the portion of the Termination Fee payable to such Lender in such event.

3.             Field Audits.  With reference to the last sentence of Section 6.1.7 of the Credit Agreement, each Borrower agrees that commencing on the Amendment Date and continuing thereafter, the Borrowers shall be obliged to reimburse the Agent on demand (in the amounts specified in such sentence) for field audits conducted on a ninety (90) day audit cycle (rather than a one hundred twenty (120) day audit cycle as provided therein), which ninety (90) day audit cycle shall commence upon the completion of the field audit that shall be commenced no later than April 4, 2007; provided, however, that nothing contained herein shall limit the right of

the Agent to be reimbursed for more frequent field audits whenever an Event of Default exists as provided in such Section 6.1.7.  In addition to such field audits on a ninety (90) day audit cycle, the Borrowers shall reimburse the Agent for such field audit to be commenced by April 4, 2007 in the manner provided in Section 6.1.7.

4.             Monthly Financial Statements and Compliance Certificates.  The Agent and the Lenders hereby agree that (a) the deadline for the delivery by the Borrowers of the financial statements and compliance certificate required for the calendar month of January, 2007 pursuant to Section 6.1.1(b) and Section 6.1.1(c) of the Credit Agreement shall be extended to March 20, 2007, and (b) the deadline for the delivery by the Borrowers of the financial statements and compliance certificate required for the calendar month of February, 2007 pursuant to Section 6.1.1(b) and Section 6.1.1(c) of the Credit Agreement shall be extended to April 10, 2007.  Such extensions of time are limited to the periods set forth in this paragraph and shall not entitle the Borrowers to any future extensions or similar accommodations.

5.             Removal of Minimum Working Capital Facility Availability Requirement; Extension of Time for Projections.  Section 6.2.4 of the Credit Agreement shall be deemed to be amended to read in full as follows:

Section 6.2.4          EBITDA.  By April 15, 2007, the Borrowers shall provide to the Agent updated financial projections in form and detail reasonably satisfactory to the Agent and the Required Lenders for the 2007 Fiscal Year, prepared with the assistance of Kibel Green Inc.  The Borrowers and the Required Lenders shall use such projections in order to establish financial covenants based on minimum EBITDA for April through December of 2007.  Any failure by the Borrowers to deliver such projections by such deadline shall constitute an Event of Default.  On or prior to April 30, 2007, the Borrowers and the Required Lenders shall agree among themselves as to minimum EBITDA requirements (including amounts, measurement dates and measurement periods) for April through December of 2007; provided, however, that if the Borrowers and the Required Lenders are unable to agree on such requirements in writing by such date, then such requirements shall be determined by the Required Lenders in their credit judgment.  Additionally, on or prior to December 31 of each year, the Borrowers and the Required Lenders shall agree among themselves as to minimum EBITDA requirements (including amounts, measurement dates and measurement periods) for the following Fiscal Year; provided, however, that if the Borrowers and the Required Lenders are unable to agree on such requirements in writing by such date, then such requirements shall be determined by the Required Lenders in their credit judgment.

6.             Inducing Representations.  To induce the Agent and the Lenders to enter into this Agreement, each Borrower hereby represents and warrants that: (a) such Borrower is duly authorized to enter into this Agreement, and this Agreement, upon its execution by such Borrower, the Agent and each Lender, will constitute such Borrower’s legal, valid and binding obligations enforceable in accordance with its terms against such Borrower; (b) after giving effect to this Agreement, no Default or Event of Default exists; (c) no present right of setoff, counterclaim, recoupment claim or defense exists in such Borrower’s favor in respect of its

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payment or performance of any Obligations; and (d) except as modified by this Agreement, all terms of the Credit Agreement and each Loan Document shall remain in full force and effect.

7.             Amendment Fee.  The Borrowers agree to pay to the Agent an amendment fee in the amount of $15,000.  Such amendment fee shall be fully earned on the Amendment Date but shall be payable in three installments of $5,000 on each of (a) the Amendment Date, (b) April 13, 2007, and (c) May 13, 2007.  Any unpaid portion of such amendment fee which is outstanding on the Working Capital Facility Maturity Date shall be due and payable on the Working Capital Facility Maturity Date.  The Agent and the Lenders may cause each installment of such fee to be paid by making Working Capital Facility Loans to the Borrowers in the amount thereof on the due dates thereof.

8.             Conditions Precedent.  Notwithstanding any provision herein the contrary, this Amendment shall not become effective, and no Lender shall have any liability hereunder, and no waiver of any Default or Event of Default set forth herein shall become effective, unless and until each of the following conditions precedent is satisfied in a manner and pursuant to documentation satisfactory to the Agent in its sole discretion:

(a)           the Borrowers shall have paid to the Agent the amendment fee described above;

(b)           the Borrowers, the Agent and the Lenders have executed this Amendment; and

(c)           the Borrowers, the Agent and the Lenders shall have executed and delivered such other documents, instruments and agreements as the Agent may request in its discretion.

9.             Release.  Each Borrower hereby absolutely and unconditionally releases and forever discharges the Agent and each Lender, and any and all participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns of the Agent and each Lender, together with all of the present and former directors, officers, agents, attorneys and employees of any of the foregoing, from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which any Borrower has had, now has or has made claim to have against any such Person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this Amendment, whether such claims, demands and causes of action are matured or unmatured or known or unknown.

10.           Miscellaneous.  Each existing Loan Document shall be deemed modified hereby on the Amendment Date as necessary to conform its terms to the terms of the Credit Agreement, as modified hereby.  This Agreement constitutes a Loan Document, and shall be governed and construed accordingly.  This Agreement constitutes the entire agreement among the Agent, the Lenders and the Borrowers relative to the subject matter hereof, and supersedes and replaces any prior understandings and agreements, written or oral, in regard thereto.  This Agreement shall be binding on, and inure to the benefit of, the successors and assigns of the Borrower, the Agent and the Lenders.  The Borrowers shall reimburse the Agent for all costs which the Agent incurs, including reasonable attorneys fees, in the preparation, negotiation, execution and performance of this Agreement, and the recording of any Loan Documents in connection herewith.

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IN WITNESS WHEREOF, the Agent, the Lenders and the Borrowers have executed this Agreement, by and through their respective authorized officers, as of the Amendment Date.

	“Borrowers”:
	NATIONAL R.V. HOLDINGS, INC.
	By:	\s\ Thomas J. Martini
	Name:	Thomas J. Martini
	Title:	CFO
.	NATIONAL R.V., INC
	By:		\s\ Thomas J. Martini
	Name:		Thomas J. Martini
	Title:		Treasurer
	“Agent” and sole “Lender”:
	WELLS FARGO BANK, NATIONAL
	ASSOCIATION, acting through its Wells
	Fargo Business Credit operating division, as a Lender
	By:	\s\ Charles F. Liles
		Charles F. Liles, Vice President

EX-10.14

Exhibit 10.14

PURCHASE AND SALE AGREEMENT

for

3411 N. Perris Boulevard and 100 W. Sinclair Street

Perris, California

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made and entered into this 27th day of December, 2006, by and between NATIONAL RV HOLDINGS, INC., a Delaware corporation (“Seller”), and FIRST INDUSTRIAL ACQUISITIONS, INC., a Maryland corporation (“Buyer”).

1.             SALE.  Seller agrees to sell and convey to Buyer, and Buyer agrees to purchase from Seller, on the terms and conditions set forth in this Agreement, the Property (as hereinafter defined), including those certain five (5) buildings commonly known as 3411 N. Perris Boulevard and 100 W. Sinclair Street, Perris, California, containing approximately 595,940 square feet (collectively, the “Buildings”).  For purposes of this Agreement, the term, “Property” shall mean collectively:

1.1.         Land.  Those parcels of land described in Exhibit A attached hereto (collectively, the “Land”), together with all rights, easements and interests appurtenant thereto, including, but not limited to, any streets or other public ways adjacent to the Land and any water or mineral rights owned by, or leased to, Seller.

1.2.         Improvements.  All improvements located on the Land, including, but not limited to, the Buildings, and all other structures, systems, and utilities associated with, and utilized by Seller in, the ownership and operation of the Buildings (all such improvements being collectively referred to as the “Improvements”).

1.3.         Intangible Property.  All, if any, (i) trademarks, tradenames, development rights and entitlements and other intangible property associated with the Land or Improvements, owned by Seller and used in connection with the foregoing; (ii) guaranties and warranties issued to Seller and with respect to the Improvements; and (iii) any reports, studies, surveys and other comparable analysis, depictions or examinations of the Land and/or the Improvements (collectively, the “Intangibles”).

1.4.         Contracts.  Those certain operating contracts, service contracts, management agreements and other comparable agreements described on Exhibit B attached hereto (the “Contracts”) that Buyer expressly elect to assume pursuant to Section 8.2 hereof.

2.             PURCHASE PRICE.

2.1.         Purchase Price.  The total purchase price to be paid to Seller by Buyer for the Property shall be Thirty-One Million Seven Hundred Fifty Thousand and No/100 Dollars ($31,750,000.00) (the “Purchase Price”).  Provided that all conditions precedent to Buyer’s obligations to close as set forth in this Agreement (“Conditions Precedent”) have been satisfied and fulfilled, or waived in writing by Buyer, the Purchase Price shall be paid to Seller at Closing, plus or minus prorations and other adjustments hereunder, by federal wire transfer of immediately available funds.

2.2.         Earnest Money.  No later than two (2) business days after the complete execution and delivery of this Agreement (the date upon which this Agreement has been fully executed and delivered to both parties, the “Effective Date”), Buyer shall deposit the sum of $250,000.00 as its initial earnest money deposit (the “Initial Earnest Money”) in an escrow (the “Escrow”) with First American Title Insurance Company (“Escrow Holder”).  No later than

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two (2) business days after the Review Period Expiration Date (as hereinafter defined), Buyer shall deposit the sum of $750,000.00 in Escrow with the Escrow Holder as its additional earnest money deposit (the “Additional Earnest Money”).  The Initial Earnest Money and the Additional Earnest Money, together with all interest earned thereon, is hereinafter referred to as the “Deposit.”  The Deposit shall be held in a joint order escrow (the “Escrow Agreement”) between Buyer, Seller and Escrow Holder, which Escrow Agreement shall contain terms mutually and reasonably acceptable to Buyer and Seller.  The Deposit shall be applied against the Purchase Price at Closing.  Following the Review Period Expiration Date, the Deposit shall be non-refundable, except in the event of (a) a failure by Seller to have performed fully or tender performance of its obligations hereunder, (b) a failure of a condition to Buyer’s obligations set forth in Section 9 or (c) a circumstance entitling Buyer to the return of the Deposit under Section 14.

2.3.         Opening of Escrow.  For the purposes of this Agreement, the Escrow shall be deemed opened (“Opening of Escrow”) on the date Escrow Holder receives an original of this Agreement fully executed by Buyer and Seller, which shall occur no later than the Effective Date.  Escrow Holder shall promptly notify Buyer and Seller in writing of the Opening of Escrow.  Buyer and Seller agree to execute, deliver and be bound by any reasonable or customary supplemental escrow instructions or other instruments reasonably required by Escrow Holder to consummate the transaction contemplated by this Agreement; provided, however, that no such instruments shall be inconsistent or in conflict with, amend or supersede any portion of this Agreement.  If there is any conflict or inconsistency between the terms of such instruments and the terms of this Agreement, then the terms of this Agreement shall control.

3.             CLOSING.  The purchase and sale contemplated herein shall be consummated at a closing (“Closing”) to take place through an escrow with the Title Company (as hereinafter defined).  The Closing shall occur on February 15, 2007 (the “Closing Date”).  The Closing shall be effective as of 12:01 A.M. on the Closing Date.

4.             PROPERTY INSPECTION.

4.1.         Basic Property Inspection.  Not later than five (5) days after the Effective Date, Seller shall deliver to Buyer all of the agreements, documents, contracts, information, records, reports and other items described in Exhibit C attached hereto (the “Documents”) that are in its possession or reasonable control.  At all times prior to Closing, including times following the “Review Period Expiration Date” (which Review Period Expiration Date is defined as February 9, 2007), Buyer, its agents and representatives shall be entitled to conduct a “Due Diligence Inspection,” which includes the rights to: (i) enter upon the Land and Improvements, on reasonable notice to and coordinate with Seller, to perform inspections and tests of the Land and the Improvements, including, but not limited to, inspection, evaluation and testing of the heating, ventilation and air-conditioning systems and all components thereof and environmental studies and investigations of the Land and the Improvements; (ii) examine and copy any and all books, records, correspondence, financial data, and all other documents and matters, public or private, maintained by Seller or its agents, and relating to receipts and expenditures pertaining to the Property for the three most recent full calendar years and the current calendar year; (iii) make investigations with regard to zoning, environmental, Buildings, code and other legal requirements; and (iv) make or obtain market

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studies and real estate tax analyses.  If, at any time prior to the Review Period Expiration Date, Buyer, in its sole and absolute discretion, determines that the results of any inspection, test or examination do not meet Buyer’s criteria for the purchase, financing or operation of the Property in the manner contemplated by Buyer, or if Buyer, in its sole discretion, otherwise determines that the Property is unsatisfactory to it, then Buyer may terminate this Agreement by written notice to Seller, with a copy to Escrow Holder, given not later than 5:00 P.M. (California Time) on the Review Period Expiration Date, whereupon the provisions of Section 21.8 governing a permitted termination by Buyer shall apply.

4.2.         Indemnification.  In the event that, as a result of Buyer’s Due Diligence Inspection, any damage occurs to the Property, then Buyer shall promptly repair such damage at Buyer’s sole cost and expense.  Buyer hereby indemnifies, protects, defends and holds Seller harmless from and against any and all losses, damages, claims, causes of action, judgments, damages, costs and expenses (including reasonable fees of attorneys) (collectively, “Losses”) that Seller actually suffers or incurs as a result of (i) a breach of Buyer’s agreements set forth in this Section 4 in connection with the Due Diligence Inspection, (ii) Buyer’s inspection or entry onto the Property or (iii) physical damage to the Property or bodily injury caused by any willful misconduct or negligent act of Buyer or its agents, employees or contractors in connection with the right of inspection granted under this Section 4.  Buyer and any of its agents and consultants performing the Due Diligence Inspection shall, upon the request of Seller, provide Seller with written evidence of insurance in an amount and containing coverage reasonably acceptable to Seller, naming Seller as an additional insured.  The terms of this Section 4.2 shall survive the termination of this Agreement.

4.3.         Buyer’s Reliance on Own Investigation; “AS-IS” Sale; Release.

4.3.1.      Buyer agrees and acknowledges that, as of the Closing Date, Buyer shall have made such feasibility studies, investigations, title searches, environmental studies, engineering studies, inquiries of governmental officials, and all other inquiries and investigations as Buyer shall deem necessary to satisfy itself as to the condition and quality of the Property.  By proceeding with Closing, Buyer acknowledges that it has been given ample opportunity to inspect the Property.

4.3.2.      Buyer further acknowledges and agrees that, at Closing, Buyer will buy and is buying the Property in its then condition, “AS IS, WHERE IS” and WITH ALL FAULTS, and solely in reliance on Buyer’s own investigation, examination, inspection, analysis and evaluation and the express representations and warranties of Seller set forth in this Agreement.  Except for the express representations and warranties of Seller set forth in this Agreement, Buyer is not relying on any statement or information made or given, directly or indirectly, orally or in writing, express or implied, by Seller, its agents or any other representative of Seller as to any aspect of the Property, including without limitation, the physical, environmental, economic or legal conditions and quality but, rather, is and will be relying on independent evaluations by its own personnel or consultants to make a determination as to the physical and economic nature, condition and prospects of the Property.  Buyer assumes the risk that adverse physical, environmental, economic or legal conditions may not be revealed by its investigation.

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4.3.3.      The agreements and acknowledgments contained in this Section constitute a conclusive admission that Buyer, as a sophisticated, knowledgeable investor in real property, shall acquire the Property solely in reliance upon its own judgment as to any matter germane to the Property or to Buyer’s contemplated use of the Property, and not upon any statement, representation, or warranty by Seller, its agents or any other representative of Seller, which is not expressly set forth in this Agreement.

4.3.4.      Except as otherwise expressly provided in Section 7 below, Seller disclaims the making of any representations or warranties, express or implied, regarding the Property or its value or matters affecting the Property, including, without limitation, the physical condition of the Property, title to or the boundaries of the Land, pest control matters, soil condition, hazardous waste, toxic substance or other environmental matters, compliance with the Americans With Disabilities Act of 1990, or other building, health, safety, land use and zoning laws, regulations and orders, structural and other engineering characteristics, traffic patterns and all other information pertaining to the Property.  Buyer, moreover, acknowledges (i) that Buyer has entered into this Agreement with the intention of relying upon its own investigation of the physical, environmental, economic and legal condition of the Property and (ii) that Buyer is not relying upon any representations and warranties, other than those specifically set forth in Section 7 below, made by Seller or anyone acting or claiming to act on Seller’s behalf concerning the Property or its value.  Buyer further acknowledges that it has not received and is not relying on any accounting, tax, legal, architectural, engineering, property management, leasing or other advice from Seller with respect to this transaction and is relying solely upon the advice of its own accounting, tax, legal, architectural, engineering, property management and other advisors.

4.3.5.      Except with respect to any claims arising out of any breach of covenants, representations or warranties set forth in Sections 7 or 8 below, Buyer, for itself and its agents, affiliates, successors and assigns, hereby releases and forever discharges Seller, its agents, partners, affiliates, successors and assigns from any and all rights, claims and demands at law or in equity, whether known or unknown at the time of this Agreement, which Buyer has or may have in the future, arising out of the physical, environmental, economic or legal condition of the Property.  As further consideration for, and as an inducement to Seller to enter into, this Agreement, Buyer hereby agrees that matters released herein are not limited to matters which are known to Buyer or disclosed, and Buyer waives any and all rights it may have under Section 1542 of the California Civil Code or any similar state, local or federal law, statute, rule, order or regulation.  Said Section 1542 provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF  EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

Buyer hereby specifically acknowledges that Buyer has carefully reviewed this subsection and discussed its import with legal counsel and that the provisions of this subsection are a material part of this Agreement.

Buyer’s Initials:            

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The provisions of this Section shall survive Closing.

5.             TITLE AND SURVEY MATTERS.

5.1.         Conveyance of Title.  At Closing, Seller agrees to deliver to Buyer a grant deed (the “Grant Deed”), in recordable form, conveying the Land and the Improvements to Buyer or Buyer’s assignee or designee, free and clear of all liens, claims and encumbrances except for the Permitted Exceptions (as hereinafter defined).  Buyer shall order a commitment (the “Title Commitment”), dated after the Effective Date, issued by First American Title Insurance Company (5 First American Title, Santa Ana, CA  92707; Attn: Leann Berry) (the “Title Company”), for an owner’s title insurance policy (the “Title Policy”), ALTA Policy Form B-1992, in the full amount of the Purchase Price.  The premium for the Title Policy shall be paid in accordance with the terms of Section 13 of this Agreement.  Provided that Buyer has confirmed with the Title Company, in writing, prior to the Review Period Expiration Date that the Title Company will issue the same, it shall be a Condition Precedent to Buyer’s obligation to proceed to Closing that, at Closing, the Title Company shall issue the Title Policy to Buyer insuring Buyer as the fee simple owner of the Property for the full amount of the Purchase Price with all standard and general printed exceptions deleted so as to afford full “extended form coverage,” and shall further include, to the extent that Buyer obtains the written commitment for the same from the Title Company prior to the Review Period Expiration Date, all of the following endorsements to the extent available in the State of California:  an Owner’s comprehensive endorsement; ALTA Zoning Endorsement No. 3.1 (including parking); a tax parcel endorsement; an access endorsement; a survey endorsement; and a contiguity endorsement (collectively, the “Endorsements”).

5.2.         Survey.  Buyer may order, at Buyer’s expense, an ALTA, as-built survey of the Land and the Improvements located thereon (the “Survey”).

5.3.         Defects and Cure.  If the Title Commitment, the Survey or any update to either of the foregoing, (“Title Evidence”) discloses unpermitted claims, liens, exceptions or conditions (the “Defects”), said Defects shall be cured and removed by Seller from the Title Evidence prior to Closing in accordance with this Section 5.3.

5.3.1.      Mandatory Cure Items.  On or prior to Closing, Seller shall be unconditionally obligated to cure or remove the following Defects (the “Liquidated Defects”), whether described in the Title Commitment, or first arising or first disclosed by the Title Company (or otherwise) to Buyer after the date of the Title Commitment, and whether or not raised in a Title Objection Notice (defined below):  (a) liens securing a mortgage, deed of trust or trust deed) evidencing an indebtedness of Seller; (b) judgment liens against any or all of Seller or its shareholders and the officers, directors, employees, agents or duly authorized managing agent of any or all of Seller or its shareholders (collectively “Seller Parties”); (c) tax liens; (d) broker’s liens based on the written agreement of Seller or any Seller Parties; and (e) any mechanics liens that are based upon a written  agreement between either (x) the claimant (a “Contract Claimant”) and any or all of Seller and the Seller Parties, or (y) the Contract Claimant and any other contractor, supplier or materialman with which any or all of Seller and the Seller Parties has a written agreement.  Notwithstanding anything to the contrary set forth herein, if, prior to Closing, Seller fails to so cure or remove (or insure over, in a form and substance reasonably acceptable to Buyer) all Liquidated Defects, then Buyer may either (1)

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terminate this Agreement by written notice to Seller, in which event the provisions of Section 21.8 governing a permitted termination by Buyer shall apply; or (2) proceed to close with title to the Property as it then is, with the right to deduct from the Purchase Price a sum equal to the aggregate amount necessary to cure or remove (by endorsement or otherwise, as reasonably determined by Buyer, acting in good faith) the Liquidated Defects in an amount not to exceed the sum of $500,000.

5.3.2.      Other Defects.  On or before the date that is five (5) days prior to the Review Period Expiration Date, Buyer may deliver one or more notices (each a “Title Objection Notice”) to Seller specifying any lien, claim, encumbrance, restriction, covenant, condition, exception to title or other matter disclosed by the Title Evidence, that is not a Liquidated Defect (“Other Defects”) that is evidenced by the Title Evidence and that renders title unacceptable to Buyer.  Moreover, Buyer may deliver a Title Objection Notice with respect to any Other Defect that first arises, or is first disclosed to Buyer, subsequent to the delivery of the applicable item of Title Evidence to Buyer, and that renders title unacceptable based upon commercially reasonable standards, provided that Buyer delivers such Title Objection Notice to Seller within five (5) days after Buyer obtains actual knowledge of such Other Defect.  Seller shall be obligated to advise Buyer in writing (“Seller’s Cure Notice”) within three (3) business days after Buyer delivers any Title Objection Notice, which (if any) of the Other Defects specified in the applicable Title Objection Notice Seller is willing to cure (the “Seller’s Cure Items”).  If Seller delivers a Seller’s Cure Notice, and identifies any Seller’s Cure Items, Seller shall be unconditionally obligated to cure or remove the Seller’s Cure Items prior to the Closing.  In the event that Seller fails to timely deliver a Seller’s Cure Notice, or in the event that Seller’s Cure Notice (specifying Seller’s Cure Items) does not include each and every Other Defect specified in each Title Objection Notice, then Buyer may either (A) elect to terminate this Agreement by written notice to Seller, in which event the provisions of Section 21.8 governing a permitted termination by Buyer shall apply, or (B) proceed to close, accepting title to the Property subject to those Other Defects not included in Seller’s Cure Notice.  For purposes of this Agreement, the term, “Permitted Exceptions,” shall mean both (i) all liens, claims, encumbrances, restrictions, covenants, conditions, matters or exceptions to title (other than Liquidated Defects) that are set forth in the Title Evidence, but not objected to by Buyer in a Title Objection Notice; and (ii) any Other Defects that Seller elects, or is deemed to have elected, not to cure, but despite which, pursuant to (B) above, Buyer nevertheless elects to close.

6.             LEASEBACK.  Concurrently with the consummation of the Closing, Buyer (as landlord) agrees to lease to National RV Inc. (“Tenant”), and Seller agrees to cause Tenant, its  wholly-owned subsidiary, to lease from Buyer, the Property, pursuant to a lease agreement (the “National RV Lease”) to be finalized and ready for execution on or prior to the Review Period Expiration Date.  The National RV Lease shall, among other things, (i) provide that Tenant, shall pay initial base rent to Buyer, as landlord, in the amount of $0.38 per square foot of the Buildings per month, which base rent amount shall increase by, on a compound basis, 3% during each year of the term; (ii) provide for an initial lease term of ten (10) years, with two (2) five (5) year renewal options, with base rent during the renewal periods being determined at then-fair market value (which base rent amount shall increase by, on a compound basis, 3% per annum); (iii) provide that Seller (a) execute a guaranty of the lease in a form mutually agreed to by Buyer and Seller (the “Guaranty”), and (b) deliver a letter of credit to Buyer, as landlord, as a security deposit in connection with the National RV Lease, in an amount and in a form mutually and

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reasonably agreed to by Buyer and Seller (“Letter of Credit”); (iv) be an absolute net lease wherein Tenant shall be responsible for the real estate taxes, ground maintenance, utilities, insurance costs and the repair and maintenance of the Buildings, including, but not limited to, the roof, HVAC equipment, plumbing lines and parking lots; (vi)  provide that Tenant may assign or sublet a portion of the Premises provided Seller obtains Buyer’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; and (v) provide that Tenant may freely sublet or assign its interest in the National RV Lease without obtaining Buyer’s prior written consent to an entity that acquires substantially all of the assets of Tenant as a result of a merger or consolidation or to an entity that has a controlling interest in Tenant provided that such transfer is for a bona fide purpose and not principally for the purpose of transferring Tenant’s leasehold estate; and (vi) provide that Seller may assign its obligations under the Guaranty and Letter of Credit, provided Seller obtains Buyer’s prior written consent, which consent shall not be unreasonably withheld, conditioned and delayed; it being agreed that it is unreasonable for Buyer to withhold its consent to such and assignment of obligations in the event Seller no longer owns a controlling interest in Tenant and the tangible net worth (as determined in accordance with generally accepted accounting principles (“GAAP”)) of the proposed replacement guarantor is not less than the tangible net worth (as determined in accordance with GAAP) of Seller as of the date of the Guaranty.  The National RV Lease shall be based on the most recent AIR Single Tenant Lease-Net form, containing revisions as mutually and reasonably agreed to by Buyer and Tenant.  Buyer and Seller shall negotiate the National RV Lease in good faith and shall use good faith, reasonable efforts to finalize the terms of the National RV Lease as soon as is reasonably possible.  As soon as Buyer and Seller agree upon the terms of National RV Lease, Buyer and Seller shall execute an amendment to the Agreement memorializing the terms of the National RV Lease and, at Closing, Buyer shall deliver its counterpart to the National RV Lease and Seller shall deliver Tenant’s counterpart to the National RV Lease into escrow.

7.             SELLER’S REPRESENTATIONS AND WARRANTIES.  Seller represents and warrants to Buyer that the following matters are true as of the Effective Date and shall be true as of the Closing Date:

7.1.         Seller’s Representations.

7.1.1.      Documents.  Seller has not intentionally modified, or intentionally withheld any portion of the Documents in its possession or reasonable control.

7.1.2.      Environmental Matters.  Seller has not received any written notice from any governmental authority, or from any tenant or adjacent property owner, of any pending or threatened claims, complaints, notices, correspondence or requests for information received by Seller with respect to any violation or alleged violation of any Environmental Law, any releases of Hazardous Substances (as hereinafter defined) or with respect to any corrective or remedial action for, or cleanup of, the Land, the Improvements or any portion thereof.  For purposes of this Agreement, “Environmental Laws” shall mean:  all past, present or future federal, state and local statutes, regulations, directives, ordinances, rules, policies, guidelines, court orders, decrees, arbitration awards and the common law, which pertain to environmental matters, contamination of any type whatsoever or health and safety matters, as such have been amended, modified or supplemented from time to time (including all present and future amendments thereto and re-authorizations thereof).  For purposes of this Agreement,

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“Hazardous Substances” shall mean: any chemical, pollutant, contaminant, pesticide, petroleum or petroleum product or by product, radioactive substance, solid waste (hazardous or extremely hazardous), special, dangerous or toxic waste, substance, chemical or material regulated, listed, limited or prohibited under any Environmental Law or any material or substance which is (i) defined as a “hazardous waste,” “extremely hazardous waste” or “restricted hazardous waste” under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 251.40, or the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a “hazardous substance” under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a “hazardous material,” “hazardous substance,” or “hazardous waste” under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Plans and Inventory), (iv) defined as a “hazardous substance” under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) listed under Article 9 or defined as hazardous or extremely hazardous pursuant to Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20.

7.1.3.      Compliance with Laws and Codes.  Seller has not received any written notice from any governmental authority advising or alleging that the entirety of the Property (including the Improvements), and the use and operation thereof, are not in compliance with all applicable municipal and other governmental laws, ordinances, rules, regulations, codes (including Environmental Laws), licenses, permits and authorizations, and there are presently and validly in effect all required licenses, permits and other authorizations.

7.1.4.      Litigation.  Seller has not been served, and, to Seller’s actual knowledge, there are no pending or threatened judicial, municipal or administrative proceedings affecting the Property, or in which Seller is or will be a party by reason of Seller’s ownership or operation of the Property or any portion thereof.  No attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings are pending, or, to Seller’s actual knowledge, threatened, against Seller, nor are any of such proceedings contemplated by Seller.

7.1.5.      Re-Zoning.  Seller is not a party to, nor does Seller have any actual knowledge of, any proceeding for the rezoning of the Property or any portion thereof.

7.1.6.      Authority.  The execution and delivery of this Agreement by Seller, and the performance of this Agreement by Seller, have been duly authorized by Seller, and this Agreement is binding on Seller and enforceable against Seller in accordance with its terms; provided, however, that Seller’s authority to consummate the transaction described herein is subject to the approval by Seller’s board of directors in accordance with Section 11 below.  No consent of any creditor, investor, judicial or administrative body, governmental authority, or other governmental body or agency, or other party to such execution, delivery and performance by Seller is required.  Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in a breach of, default under, or acceleration of, any agreement to which Seller is a party or by which Seller or the Property are bound; or (ii) violate any restric­tion, court order, agreement or other legal obligation to which Seller and/or the Property is subject.

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7.1.7.      No Lease.  Except for the National RV Lease and the Warrior Sublease, there shall be no leases, licenses or other occupancy agreements providing any party with a possessory right at the Property.

7.1.8.      Condemnation.  Seller has not received any written notice from any governmental authority advising it of any pending or threatened condemnation or other governmental taking proceedings affecting all or any part of the Property.

As used in this Section 7.1, “actual knowledge” and “Seller’s knowledge” means the knowledge of Jonathan Corn and [ADD PROPERTY MANAGER], and shall not include implied, imputed or constructive knowledge, or a duty to inquire or investigate any facts or information with respect to the Property or the warranties of Seller contained herein.

7.2.         Limitations.  The representations and warranties of Seller to Buyer contained in Section 7.1 hereof (the “Seller Representations”) shall survive the Closing Date and the delivery of the Deed for a period of nine (9) months.  No claim for a breach of any Seller Representation shall be actionable or payable unless (a) the breach in question results from, or is based on, a condition, state of facts or other matter which was not actually known by Buyer prior to Closing, and (b) written notice containing a description of the specific nature of such breach shall have been delivered by Buyer to Seller prior to the expiration of said nine (9) month survival period, and an action with respect to such breach(es) shall have been commenced by Buyer against Seller within twelve (12) months after Closing.  In addition, Seller’s liability for any such breach of Seller’s Representations shall not exceed $1,500,000.00 in the aggregate and Seller shall further have no liability for any such claim unless and until the amount of all such claims exceeds $100,000.00.

8.             COVENANTS OF SELLER.  Effective as of the Effective Date, Seller hereby covenants with Buyer as follows:

8.1.         Leasing Activities.  Notwithstanding anything contained herein to the contrary, except for the National RV Lease and permitted leasing activities under the Warrior Sublease, Seller shall not execute and enter into any new lease, license or occupancy agreement for all or some portion of the Land and the Improvements unless Seller obtains Buyer’s advance written consent, which consent, may be withheld in Buyer’s sole discretion.

8.2.         New Contracts.  Following the Review Period Expiration Date, Seller shall not amend any existing Contract or enter into any new contract with respect to the ownership and operation of the Property that will be assigned to Buyer at Closing, without Buyer’s prior written approval (which approval shall not be unreasonably withheld).  Prior to the Review Period Expiration Date, Seller shall, provide notice to Buyer of any such activities.

8.3.         Insurance.  Seller shall maintain its existing insurance policies with respect to the Buildings continuously in force through and including the Closing Date.

8.4.         Operation of Property.  From and after the Effective Date and through and including the Closing Date, Seller shall operate and manage the Property in the same manner in which it is being operated as of the Effective Date, and shall maintain the Property

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substantially in its same repair and working order, reasonable wear and tear and Casualty Damage, and Eminent Domain (as defined in Section 14 hereof) excepted.

8.5.         No Assignment.  After the Effective Date and prior to Closing, Seller shall not assign, alienate, lien, encumber or otherwise transfer all or any part of the Property or any interest therein.  Without limitation of the foregoing, Seller shall not grant any easement, right of way, restriction, covenant or other comparable right affecting the Land or the Improvements without obtaining Buyer’s prior written consent, which consent shall not be unreasonably withheld.  Seller shall not enter into any agreement, arrangement or understanding, formal or informal, for the sale of the Property, whether conditional or otherwise.  Notwithstanding the foregoing, Buyer agrees that the National RV Lease and permitted leasing activities under the Warrior Sublease shall not be deemed transfers in violation of this Section 8.5.

8.6.         Change in Conditions.  Seller shall, to the extent Seller obtains knowledge (as defined in Section 7) thereof, promptly notify Buyer of any material change in any condition with respect to the Property, or of the occurrence of any event or circumstance, that makes any representation or warranty of Seller to Buyer under this Agreement materially untrue or misleading, or any covenant of Seller under this Agreement incapable of being, materially performed, or any Condition Precedent incapable of being satisfied.

9.             CONDITIONS PRECEDENT TO CLOSING BENEFITING BUYER.  The following shall be additional Conditions Precedent to Buyer’s obligation to close hereunder:

9.1.         Representations and Warranties.  As of the Closing Date, the representations and warranties made by Seller to Buyer as of the Effective Date shall be true, accurate and correct as if specifically remade at that time.

9.2.         National RV Lease/Guaranty and Letter of Credit.  At Closing, Buyer receives (i) an original of the Seller Lease, executed in counterpart by Tenant; (ii) an original of the Guaranty and (iii) the Letter of Credit.

9.3.         Warrior Sublease.  Reference is hereby made to the Warrior Sublease (as defined in Exhibit B-1).  At Closing, Buyer, Tenant and Warrior (as defined in Exhibit B-1) shall enter into a Consent to Sublease (the “Consent to Sublease”) containing terms acceptable to Buyer, Tenant and Warrior.

9.4.         Seller Performance.  Seller shall have performed and complied with all the agreements and conditions required in this Agreement to be performed and complied with by Seller prior to Closing; and Escrow Holder may deem all such items to have been performed and complied with when Seller has deposited all items in Escrow as required hereunder.

9.5.         Title Policy.  Title Company will issue its ALTA Extended Coverage Owner’s Policy of Title Insurance (rev’d 10/17/70) in the amount of the Purchase Price showing title vested in Buyer subject only to the Permitted Exceptions and the usual exceptions found in said policy, together with such endorsements as the Title Company shall have committed to issue prior to the Review Period Expiration Date; provided, Buyer shall confirm with Title Company prior to the Review Period Expiration Date, that it can issue the policy form described above.

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9.6.         No Termination.  This Agreement shall not have been terminated pursuant to any other provision hereof.

10.          CLOSING DELIVERIES.  At Closing, Seller shall deliver or cause to be delivered to Buyer the following and Buyer shall deliver to Seller, or cause to be delivered to Seller, Buyer’s signatures on the applicable documents as follows:

10.1.       Deed.  The Grant Deed for the Land, in the form of Exhibit D, executed by Seller, in recordable form conveying the Land and the Improvements to Buyer free and clear of all liens, claims and encumbrances except for the Permitted Exceptions.

10.2.       General Assignment.  An assignment, in the form of Exhibit E, executed by Seller and Buyer, of all right, title and interest of Seller and its agents in and to the Intangibles (including, but not limited to, the governmental approvals all guarantees and warranties given to Seller that have not expired (either on a “claims made” or “occurrences” basis), in connection with the operation, construction, improvement, alteration or repair of the Property).

10.3.       Assignment of Contracts.  Two (2) duly executed counterparts of an assignment, in the form of Exhibit F, executed by Seller and Buyer, whereby Seller assigns, and Buyer assumes, those of the Contracts that Buyer may elect (in its sole discretion) in writing to assume on or prior to the Review Period Expiration Date (the “Contract Assignment”).

10.4.       National RV Lease.  An original of the National RV Lease, executed in counterpart by Tenant and Buyer.

10.5.       Guaranty.  An original of the Guaranty, executed by Seller.

10.6.       Letter of Credit.  Seller shall deliver to Buyer the letter of credit required to be deposited by Seller under the National RV Lease.

10.7.       Consent to Sublease.  An original of the Consent to Sublease, executed by Buyer, Warrior and Tenant.

10.8.       Keys.  Keys to all locks located in the Property, to the extent in Seller’s possession or control.  However, due to Security and Exchange Commission regulations and other laws related to the security of public company documents and information, Seller shall be permitted to retain the right to exclude Buyer from certain designated areas.  Buyer shall be permitted supervised access to such designated areas upon reasonable notice during normal business hours.  Such rights shall be documented in the National RV Lease.

10.9.       ALTA Statement.  If required by the Title Company, an ALTA (or comparable) Statement, in the form of Exhibit G, executed by Seller.

10.10.     Original Documents.  To the extent not previously delivered to Buyer, originals of the assigned Contracts, permits or approvals.

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10.11.     Closing Statement.  A closing statement conforming to the proration and other relevant provisions of this Agreement shall be provided by the Escrow Holder, duly executed by Buyer and Seller.

10.12.     Plans and Specifications.  All plans and specifications related to the Property in Seller’s possession and control or otherwise available to Seller.

10.13.     Entity Transfer Certificate.  Entity Transfer Certification, in the form of Exhibit H, confirming that Seller is a “United States Person” within the meaning of Section 1445 of the Internal Revenue Code of 1986, as amended and the California equivalent thereto, Form 593-C.

10.14.     Closing Certificates.  Certificates, signed by each of Seller and Buyer, in the form of Exhibit I, certifying to the Buyer and Seller, respectively, that the representations and warranties of such party contained in this Agreement are true and correct as of the Closing Date, in all material respects.

10.15.     Other.  Such other documents and instruments as may reasonably be required by Buyer or the Title Company and that may be reasonably necessary or appropriate to consummate this transaction and to otherwise effect the agreements of the parties hereto.

11.          CONDITIONS PRECEDENT TO CLOSING BENEFITING SELLER.  The following shall be additional Conditions Precedent to Seller’s obligation to close hereunder:

11.1.       Purchase Price.  The Purchase Price, plus or minus prorations, shall be delivered to the Title Company in escrow for disbursement to Seller.

11.2.       National RV Lease.  At Closing, Buyer authorizes escrow to release to Seller its executed counterpart to the National RV Lease.

11.3.       Representations and Warranties.  As of the Closing Date, the representations and warranties made by Buyer to Seller as of the Effective Date shall be true, accurate and correct in all respects as if specifically remade at that time.

11.4.       Buyer Performance.  Buyer shall have performed and complied with all the agreements and conditions required in this Agreement to be performed and complied with by Buyer prior to Closing; and Escrow Holder may deem all such items to have been performed and complied with when Buyer has deposited all items in Escrow as required hereunder.

11.5.       Board Approval.  Seller shall have obtained the approval of its board of directors with respect to the sale of the Property hereunder on or before January 24, 2007.

11.6.       No Termination.  This Agreement shall not have been terminated pursuant to any other provision hereof.

In the event Seller terminates this Agreement pursuant to Section 11.5, then in addition to causing Escrow Holder to immediately return the Deposit to Buyer, Seller shall also pay to Buyer, within thirty (30) days after receipt a written invoice from Buyer, Buyer’s actual out-of-

13

pocket expenses incurred in connection with the negotiation of this Agreement and Buyer’s performance of its Due Diligence Inspection (not to exceed, in the aggregate, $50,000).  The terms of this Section 11 shall survive the termination of this Agreement.

12.          PRORATIONS AND ADJUSTMENTS.  The following shall be prorated and adjusted between Seller and Buyer as of the Closing Date, except as otherwise specified:

12.1.       Taxes.  Buyer and Seller shall not prorate real estate taxes and assessments at Closing as the payment of such real estate taxes and assessments shall be the sole responsibility of Tenant under the National RV Lease.

12.2.       Base Rent.  Buyer shall receive a credit at Closing for the base rent owing from Tenant pursuant to the National RV Lease, for the portion of the month in which the Closing occurs that Tenant is a tenant under the National RV Lease.

12.3.       Utilities Contracts.  The parties shall not prorate water, electricity, sewer, gas, telephone and other utility charges (collectively, “Utilities”) as well as amounts due pursuant to any Contracts, since under the terms of the National RV Lease, Tenant shall be responsible for the timely payment of all such Utilities and Contracts.

12.4.       Other.  Such other items as are customarily prorated in transactions of this nature shall be ratably prorated.

For purposes of calculating prorations, Buyer shall be deemed to be in title to the Property, and therefore entitled to the income therefrom and responsible for the expenses thereof, for the entire day upon which the Closing occurs.  All such prorations shall be made on the basis of the actual number of days of the year and month that shall have elapsed as of the Closing Date.  The amount of such prorations shall be adjusted in cash after Closing, as and when complete and accurate information becomes available.  Seller and Buyer agree to cooperate and use their good faith and diligent efforts to make such adjustments as soon as is reasonably practicable after the Closing, but in no event later than December 31, 2007.  Items of income and expense for the period prior to the Closing Date will be for the account of Seller and items of income and expense for the period on and after the Closing Date will be for the account of Buyer, all as determined by the accrual method of accounting.  Bills received after Closing that relate to expenses incurred, services performed or other amounts allocable to the period prior to the Closing Date shall be paid by Seller.  Any amounts not so paid by Seller may be set off against amounts (if any) otherwise due Seller hereunder.  The obligations of the parties pursuant to this Section 12 shall survive the Closing and shall not merge into any documents of conveyance delivered at Closing.

13.          CLOSING EXPENSES.  Buyer will pay the premium for the Title Policy allocable to the “extended coverage” thereunder, the cost of any Endorsements, the cost of the Survey, one half the costs of any escrows hereunder and the cost of recording the Grant Deed.  Seller shall pay all documentary, county and municipal transfer taxes, premium for the Title Policy allocable to the CLTA “standard coverage” thereunder, any pre-payment penalties associated with the payment of any Seller indebtedness encumbering the Land or the

14

Improvements as contemplated under Section 5 above, and one-half of the cost of any escrows hereunder.  Any and all other costs shall be allocated in accordance with local custom.

14.          DESTRUCTION, LOSS OR DIMINUTION OF PROJECT.  If, prior to Closing, all or any portion of the Land or the Improvements are damaged by fire or other natural casualty (collectively “Casualty Damage”), or are taken or made subject to condemnation, eminent domain or other governmental acquisition proceedings (collectively “Eminent Domain”), then the following procedures shall apply:

(a)If the aggregate cost of repair or replacement of the Casualty Damage (collectively, “repair and/or replacement”) is $1,000,000 or less, in the opinion of Buyer’s and Seller’s respective engineering consultants, Buyer shall close and take the Property as diminished by such events, subject to an assignment of Seller’s casualty insurance proceeds (plus the amount of any unpaid deductible) or an assignment of any condemnation award, as applicable.

(b)If the aggregate cost of repair and/or replacement of the Casualty Damage is greater than $1,000,000, in the opinion of Buyer’s and Seller’s respective engineering consultants, or in the event of an Eminent Domain, then Buyer, at its sole option, may elect either to (i) terminate this Agreement by written notice to Seller in which event the provisions of Section 21.8 governing a permitted termination by Buyer shall apply; or (ii) proceed to close subject to an assignment of the proceeds of Seller’s casualty insurance for all Casualty Damage plus the amount of any unpaid deductible (or condemnation awards for any Eminent Domain).  In such event, Seller shall fully cooperate with Buyer in the adjustment and settlement of the insurance claim.  The proceeds and benefits under any rent loss or business interruption policies attributable to the period following the Closing shall likewise be transferred and paid over (and, if applicable, likewise credited on an interim basis) to Buyer.

15.          DEFAULT.

15.1.       Default by Seller.  In the event that the sale is not consummated as a result of the fact that any of Seller’s Representations contained herein are not true and correct on the Effective Date and continuing thereafter through and including the Closing Date, or if Seller fails to perform any of the covenants and agreements contained herein to be performed by Seller within the time for performance as specified herein (including Seller’s obligation to close), Buyer may elect either to (i) terminate Buyer’s obligations under this Agreement by written notice to Seller with a copy to Escrow Holder, in which event the Deposit shall be returned immediately to Buyer; or (ii) file an action for specific performance.  Seller agrees that in the event Buyer elects (ii) above, Buyer shall not be required to post a bond or any other collateral with the court or any other party as a condition to Buyer’s pursuit of an action.  Seller hereby covenants and agrees that in the event that a default on the part of Seller hereunder is willful in nature, Buyer may (in addition to any and all other remedies of Buyer hereunder) file an action for damages actually suffered by Buyer by reason of Seller’s defaults hereunder (including, but

15

not limited to, attorneys’ fees, engineering fees, fees of environmental consultants, appraisers’ fees, and accountants’ fees incurred by Buyer in connection with this Agreement and any action hereunder).  The provisions of the immediately preceding sentence shall survive any termination of this Agreement.  Nothing in this Section 15.1 shall be deemed to in any way limit or prevent Buyer from exercising any right of termination provided to Buyer elsewhere in this Agreement.

15.1.1.    Default by Buyer.  BUYER AND SELLER AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH SELLER MAY SUFFER IN THE EVENT BUYER DEFAULTS HEREUNDER AND FAILS TO COMPLETE THE PURCHASE OF THE PROPERTY AS HEREIN PROVIDED.  BUYER AND SELLER THEREFORE AGREE THAT A REASONABLE PRESENT ESTIMATE OF THE NET DETRIMENT THAT SELLER WOULD SUFFER IN THE EVENT OF BUYER’S DEFAULT OR BREACH HEREUNDER IS AN AMOUNT OF MONEY EQUAL TO THE DEPOSIT WHICH SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677 AND SHALL NOT CONSTITUTE FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE 3275 OR 3369.  THE FOREGOING SHALL BE SELLER’S SOLE AND EXCLUSIVE REMEDY HEREUNDER.

SELLERS INITIALS BUYERS INITIALS

16.          SUCCESSORS AND ASSIGNS; TAX-DEFERRED EXCHANGE; NATURAL HAZARDS DISCLOSURE.

16.1.       Assignment.  The terms, conditions and covenants of this Agreement shall be binding upon, and shall inure to the benefit of, the parties and their respective nominees, successors, beneficiaries and assigns; provided, however, no conveyance, assignment or transfer of any interest whatsoever of, in or to the Property or of this Agreement shall be made by Seller during the term of this Agreement (except for the National RV Lease and permitted leasing activities under the Warrior Sublease).  Buyer may assign all or any of its right, title and interest under this Agreement to (i) any third party intermediary (an “Intermediary”) in connection with a tax-deferred exchange pursuant to Section 1031 of the Internal Revenue Code (an “Exchange”); (ii) any affiliate of Buyer or First Industrial, L.P. (a “Buyer Affiliate”); and (iii) any joint venture, limited liability company or partnership in which Buyer or any Buyer Affiliate has a direct or indirect interest.  In the event of an assignment of this Agreement by Buyer, its assignee shall be deemed to be the Buyer hereunder for all purposes hereof, and shall have all rights of Buyer hereunder (including, but not limited to, the right of further assignment), but the assignor shall not be released from liability hereunder.  Buyer shall inform Seller, in writing, not later than three (3) business days prior to the Closing Date, of the name of the Grantee to be inserted into the Grant Deed.

16.2.       Tax-Deferred Exchange.  In the event Buyer elects to assign this Agreement to an Intermediary, Seller shall reasonably cooperate with Buyer (without incurring any additional liability or any additional third party expenses) in connection with such election and the consummation of the Exchange, including without limitation, by executing an

16

acknowledgment of Buyer’s assignment of this Agreement to the Intermediary in a form reasonably satisfactory to Seller.

16.3.       Natural Hazards Disclosure.  Buyer and Seller acknowledge that Seller is required to disclose if any portion of the Land and Improvements lies within the following natural hazard areas or zones:  (i) a special flood hazard area designed by the Federal Emergency Management Agency (California Civil Code Section 1102.17); (ii) an area of potential flooding (California Government Code Section 8589.4); (iii) a very high fire hazard severity zone (California Governmental Code Section 51183.5); (iv) a wild land area that may contain substantial forest fire risks and hazards (Public Resources Code Section 4136); (v) an earthquake fault or special studies zone (Public Resources Code Section 2621 et seq.) or (vi)  a seismic hazard zone (Public Resources Code Section 2694).  Before the Closing Date, Seller shall provide Buyer with a Natural Hazard Disclosure Statement (“Disclosure Statement”).

17.          NOTICES.  Any notice, demand or request which may be permitted, required or desired to be given in connection therewith shall be given in writing and directed to Seller and Buyer as follows:

Seller:	Bradley Albrechtsen, CEO
	National RV Holdings, Inc.
	100 West Sinclair
	Perris, California 92571
	Fax:	(951) 943-6117
With a copy to
its attorneys:	Jonathan Corn
	Vice President/General Counsel
	National RV Holdings, Inc.
	100 West Sinclair
	Perris, California 92571
	Fax:	(951) 436-3811
Buyer:	First Industrial Acquisitions, Inc.
	114 Pacifica Court, Suite 220
	Irvine, California 92618
	Attn:	Bob O’Neill
	Fax:	(949) 486-1971
With a copy to
its attorneys:	Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP
	333 West Wacker Drive, #2700
	Chicago, Illinois 60606
	Attn:	Brett Feinberg
	Fax:	(312) 984-3150

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Notices shall be deemed properly delivered and received: (i) the same day when personally delivered; or (ii) one day after deposit with Federal Express or other comparable commercial overnight courier; or (iii) the same day when sent by confirmed facsimile.

18.          BENEFIT.  This Agreement is for the benefit only of the parties hereto and their nominees, successors, beneficiaries and assignees as permitted in Section 16 and no other person or entity shall be entitled to rely hereon, receive any benefit herefrom or enforce against any party hereto any provision hereof.

19.          LIMITATION OF LIABILITY.  Neither the shareholders, members or partners, nor the officers, employees or agents of Seller or Buyer, as the case may be, shall be liable under this Agreement and all parties hereto shall look solely to the assets of Seller or Buyer, as the case may be, for the payment of any claim or the performance of any obligation of Seller or Buyer, as the case may be.

20.          BROKERAGE.  Each party hereto represents and warrants to the other that it has dealt with no brokers or finders in connection with this transaction, except for Grubb & Ellis Company (“Broker”).  Seller shall pay a brokers’ commission due to Broker pursuant to a separate agreement.  Seller and Buyer each hereby indemnify, protect and defend and hold the other harmless from and against all Losses, resulting from the claims of any broker, finder, or other such party, other than Broker, claiming by, through or under the acts or agreements of the indemnifying party.  The obligations of the parties pursuant to this Section 20 shall survive the Closing or any earlier termination of this Agreement.

21.          MISCELLANEOUS.

21.1.       Entire Agreement.  This Agreement constitutes the entire understanding between the parties with respect to the transaction contemplated herein, and all prior or contemporaneous oral agreements, understandings, representations and statements, and all prior written agreements, understandings, letters of intent and proposals, in each case with respect to the transaction contemplated herein, are hereby superseded and rendered null and void and of no further force and effect and are merged into this Agreement.  Neither this Agreement nor any provisions hereof may be waived, modified, amended, discharged or terminated except by an instrument in writing signed by the party against which the enforcement of such waiver, modification, amendment, discharge or termination is sought, and then only to the extent set forth in such instrument.

21.2.       Time of the Essence.  Time is of the essence of this Agreement.

21.3.       Legal Holidays.  If any date herein set forth for the performance of any obligations by Seller or Buyer or for the delivery of any instrument or notice as herein provided should be on a Saturday, Sunday or legal holiday, the compliance with such obligations or delivery shall be deemed acceptable on the next business day following such Saturday, Sunday or legal holiday.  As used herein, the term “legal holiday” means any state or federal holiday for which financial institutions or post offices are generally closed for observance thereof in the State of California.

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21.4.       Conditions Precedent.  The obligations of the parties hereunder to close the transaction contemplated herein are subject to the express Conditions Precedent set forth in this Agreement, each of which is for the sole benefit of Buyer and Seller, respectively, and may be waived at any time by written notice thereof from the applicable party to the other party.  The waiver of any particular Condition Precedent shall not constitute the waiver of any other.  In the event of the failure of a Condition Precedent for any reason whatsoever, the benefited party may elect, in its sole discretion, to terminate this Agreement in which event as to Buyer the provisions of Section 21.8 governing a permitted termination by Buyer shall apply.

21.5.       Construction.  This Agreement shall not be construed more strictly against one party than against the other merely by virtue of the fact that it may have been prepared by counsel for one of the parties, it being recognized that both Seller and Buyer have contributed substantially and materially to the preparation of this Agreement.  The headings of various sections in this Agreement are for convenience only, and are not to be utilized in construing the content or meaning of the substantive provisions hereof.

21.6.       Governing Law.  This Agreement shall be governed by and construed in accordance with the State of California.

21.7.       Partial Invalidity.  The provisions hereof shall be deemed independent and severable, and the invalidity or partial invalidity or enforceability of any one provision shall not affect the validity of enforceability of any other provision hereof.

21.8.       Permitted Termination.  In the event that Buyer exercises any right it may have hereunder to terminate this Agreement, prior to the expiration of the Review Period or, thereafter, in the event of (a) a failure by Seller to have performed fully or tender performance of its obligations hereunder, (b) a failure of a condition to Buyer’s obligations set forth in Section 9, or (c) a circumstance entitling Buyer to the return of the Deposit under Section 14, the Deposit shall be immediately returned to Buyer and neither party shall have any further liability under this Agreement except as otherwise expressly provided hereunder.  In all other events, Seller shall retain the Deposit.

[Signature Page to Follow]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement of Purchase and Sale on the date first above written.

SELLER:
NATIONAL RV HOLDINGS, INC., a Delaware corporation
	By:		\s\ Jon Corn
	Name:			Jon Corn
	Its:	Vice President/General Council

S-1

BUYER:
FIRST INDUSTRIAL ACQUISITIONS, INC., a Maryland corporation
By:		\s\ Bernie Bak
Name:			Bernie Bak
Its:	Authorized Signatory

S-2

SCHEDULE OF EXHIBITS

A             Land

B             Contracts

B-1          Permitted Leases

C             Seller’s Deliveries

D             Grant Deed

E              General Assignment

F              Assignment of Contracts

G             Owner’s Affidavit

H             FIRPTA Certificate

I               Closing Certificates

EXHIBIT A

Legal Description of the Land

A-1

EXHIBIT B

Contracts

None.

B-1

EXHIBIT B-1

Warrior Sublease

Commercial Lease (Private) dated February 8, 2006, by and between Tenant and Weekend Warrior Trailers, Inc. (“Warrior”), as amended by that certain letter agreement dated September 12, 2006 by and between Tenant and Warrior.

B-1

EXHIBIT C

Seller’s Deliveries

1.Copies of any bills and other notices pertaining to any real estate taxes applicable to the Property for the current year and the three (3) years immediately preceding the date of the Agreement.

2.Copies of all management, maintenance, landscaping repair, pest control, and other service and/or supply contracts, and any other contracts or agreements relating to or affecting the Property.

3.Copies of all final, written, third-party reports regarding soil conditions, ground water, wetlands, underground storage tanks, subsurface conditions and/or other environmental or physical conditions relating to the Property, in Seller’s possession or control.

4.Copies of all engineering and architectural plans and specifications, drawings, studies and surveys relating to the Property, in Seller’s possession or control, and copies of all records pertaining to the repair, replacement and maintenance of the mechanical systems at the Property, the roof and the structural components of the Property.

5.Copies of Seller’s most recent owner’s title policy issued in connection with the Property and the most recent survey of the Property, if any.

6.Copies of all, if any, of the following in Seller’s possession or control: subdivision plans or plats, variances, parcel maps or development agreements relating to the Property; and licenses, permits, certificates, authorizations, or approvals issued by any governmental authority in connection with the construction, ownership, use and occupancy of the Property.

C-1

EXHIBIT D

Grant Deed

RECORDING REQUESTED BY AND

WHEN RECORDED MAIL TO:

Barack Ferrazzano Kirschbaum

Perlman & Nagelberg LLP

333 West Wacker Drive, Suite 2700

Chicago, Illinois 60606

Attn: Brett Feinberg

MAIL TAX STATEMENTS TO:

First Industrial Realty Trust, Inc.

898 North Sepulveda Blvd., Suite 750

El Segundo, California  90245

GRANT DEED

A.P.N.:                                                                                                                                      0;                                                                                                                  Amount of tax due is shown on a separate writing and is not for public record. (R&T 11932)

FOR VALUE RECEIVED, National RV Holdings, Inc., a Delaware corporation (“Grantor”), hereby grants to                                                                                         (“Grantee”), that certain real property located in the City of Perris, County of Riverside, State of California, described on Exhibit “A” attached hereto and made a part hereof, together with all improvements, buildings, structures, easements, privileges and rights appurtenant thereto (collectively, the “Property”).

IN WITNESS WHEREOF, Grantor has executed this Grant Deed as of               , 2007.

GRANTOR:

NATIONAL RV HOLDINGS, INC., a Delaware corporation

By:

Its:

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STATE OF	)
	)
COUNTY OF	)

On              , 2007, before me,                                        , a notary public in and for said state, personally appeared                                                                  , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by the signature on the instrument the person executed the instrument.

WITNESS my hand and official seal.

(SEAL)

Notary Public

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EXHIBIT “A”

LEGAL DESCRIPTION

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SEPARATE STATEMENT OF
DOCUMENTARY TRANSFER TAX

Riverside County Registrar-Recorder

Ladies/Gentlemen:

In accordance with Revenue and Taxation Code section 11932, it is requested that this statement of documentary transfer tax due not be recorded with the attached Grant Deed, but affixed to the Grant Deed after recordation and be returned as directed thereon.

The deed names National RV Holdings, Inc., a Delaware corporation, as Grantor, and                                                                                            , as Grantee.  The Property being transferred is located in Perris, County of Riverside, State of California.

The amount of documentary transfer tax due on the attached Grant Deed is                                                                                 ($                          ), computed on the full value of the Property (less the value of any liens and encumbrances remaining on the Property at the time of sale).

Very truly yours,

GRANTOR:

NATIONAL RV HOLDINGS, INC., a Delaware corporation

By:

Its:

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EXHIBIT E

GENERAL ASSIGNMENT

THIS GENERAL ASSIGNMENT (the “Assignment”) is made and entered into this       day of                   , 2007 by and between National RV Holdings, Inc., a Delaware corporation (“Assignor”) and                      (“Assignee”).

R E C I T A L S:

WHEREAS, Assignor and First Industrial Acquisitions, Inc., a Maryland corporation and predecessor-in-interest to Assignee, entered into that certain Purchase and Sale Agreement, dated                     , 2007 (as amended, the “Agreement”), for the purchase and sale of 3411 N. Perris Boulevard and 100 W. Sinclair Street, Perris, California (the “Premises”); and

WHEREAS, in connection with the consummation of the transactions contemplated under the Agreement, Assignor and Assignee desire to execute this Assignment.

NOW, THEREFORE, in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.             Recitals; Defined Terms.  The foregoing recitals are hereby incorporated into this Agreement as if fully rewritten and restated in the body of this Assignment.  Capitalized terms used herein and not otherwise defined shall have the meanings respectively ascribed to them in the Agreement.

2.             Assignment of Intangibles.  Assignor hereby quitclaims unto Assignee, without recourse, representation or warranty of any kind whatsoever, all of Assignor’s right, title and interest (if any) in and to all, if any, Intangibles relating to the Premises.  Such Intangibles are quitclaimed by Assignor to Assignee on an “AS-IS,” “WHERE-IS,” “WITH ALL FAULTS” basis, and without any warranties, representations or guaranties, either express or implied, of any kind, nature or type whatsoever, except the foregoing shall be without limitation upon any representations and warranties expressly contained in the Agreement.

3.             Assumption of Obligations.  Assignee hereby accepts the assignment of the Intangibles subject to the terms and conditions hereof.

4.             Counterparts.  This Assignment may be executed in one or more multiple counterparts, all of which, when taken together shall constitute one and the same instrument.

5.             Governing Law.  This Assignment shall be governed by and construed in accordance with the laws of the State of California.

6.             Partial Invalidity.  The provisions hereof shall be deemed independent and severable, and the invalidity or enforceability of any one provision shall not affect the validity or enforceability of any other provision hereof.

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IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment on the date first above written.

ASSIGNOR:

NATIONAL RV HOLDINGS, INC., a Delaware corporation

By:

Its:

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ASSIGNEE:

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EXHIBIT F

ASSIGNMENT AND ASSUMPTION OF CONTRACTS

THIS ASSIGNMENT AND ASSUMPTION OF CONTRACTS (the “Assignment”) is made and entered into this          day of                        , 2007, by and between NATIONAL RV HOLDINGS, INC., a Delaware corporation (“Assignor”), and                                                                       (“Assignee”).

R E C I T A L S:

WHEREAS, Assignor and First Industrial Acquisitions, Inc., a Maryland corporation and predecessor-in-interest to Assignee, entered into that certain Purchase and Sale Agreement, dated                                 , 2006 (as amended, the “Agreement”), for the purchase and sale of the buildings commonly known as 3411 N. Perris Boulevard and 100 W. Sinclair Street, Perris, California (the “Premises”); and

WHEREAS, in connection with the consummation of the transactions contemplated under the Agreement, Assignor and Assignee desire to execute this Assignment.

NOW, THEREFORE, in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

7.             Recitals; Defined Terms.  The foregoing recitals are hereby incorporated into this Agreement as if fully rewritten and restated in the body of this Assignment.  Capitalized terms used herein and not otherwise defined shall have the meanings respectively ascribed to them in the Agreement.

8.             Assignment of Contracts. Assignor hereby sells, transfers, conveys and assigns to Assignee all of its right, title and interest in and to any and all contracts and agreements relating to the management, leasing, operation, maintenance and repair of the Premises, as set forth on Exhibit A attached hereto and made a part hereof (collectively, the “Contracts”), subject, however, to the terms and covenants of the Contracts and this Assignment.

9.             Assumption of Obligations.  Assignee hereby accepts the assignment of the Contracts subject to the terms and conditions hereof, and from and after the date hereof, Assignee hereby assumes and shall be responsible for and shall perform, discharge and fulfill all of the obligations imposed on Assignee, as the owner of the Premises and the successor-in-interest to Assignor, under the Contracts, which obligations accrue after the date hereof.

10.          Assignee’s Indemnification.  Assignee hereby indemnifies, protects, defends and holds Assignor, Assignor’s shareholders, the partners, officers and directors of Assignor’s shareholders, and all of their respective successors and assigns harmless from any and all claims, damages, losses, suits, proceedings, costs and expenses, including, without limitation, reasonable attorneys’ fees (“Losses”), both known or unknown, present and future, at law or in equity, arising out of, by virtue of, or in any way related to, the breach by Assignee of (or Assignee’s failure to timely perform) any or all of the obligations imposed on Assignee, as the owner of the

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Premises and the successor-in-interest to Assignor, under the Contracts, which obligations accrue after the date hereof.

11.          Assignor’s Indemnification.  Assignor hereby indemnifies, protects, defends and holds Assignee, Assignee’s                            , the partners, officers, directors and shareholders of Assignee’s                                and all of their respective successors and assigns harmless from any and all Losses, both known and unknown, present and future, at law or in equity and arising out of, by virtue of, or related in any way to, the breach by Assignor of (or Assignor’s failure to timely perform) any or all of the obligations imposed upon Assignor, as the owner of the Premises prior to the date hereof, under the Contracts, which obligations accrued on or prior to the date hereof.

12.          Counterparts.  This Assignment may be executed in one or more multiple counterparts, all of which, when taken together shall constitute one and the same instrument.

13.          Governing Law.  This Assignment shall be governed by and construed in accordance with the laws of the State of California.

14.          Partial Invalidity.  The provisions hereof shall be deemed independent and severable, and the invalidity or enforceability of any one provision shall not affect the validity or enforceability of any other provision hereof.

[SIGNATURE PAGES TO FOLLOW]

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IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment on the date first above written.

ASSIGNOR:

NATIONAL RV HOLDINGS, INC., a Delaware corporation

By:

Its:

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ASSIGNEE:
	a
By:
Its:

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EXHIBIT A

Service Contracts

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EXHIBIT G

Owner’s Affidavit

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EXHIBIT H

Entity Transfer Certificate

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EXHIBIT I

CLOSING DATE CERTIFICATE

On this                day of                      , 2007,                                                                                                        , a                                                                 & nbsp;      (“              ”), under that certain Purchase and Sale Agreement (the “Agreement”) dated as of                                             by and between               and                                                              (“               ”), hereby represents and warrants to                         , that, as of the date hereof, all of the representations and warranties of                          set forth in the Agreement are true and correct in all material respects.

[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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By:

Name:

Its:

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EX-10.15

Exhibit 10.15

FOURTH AMENDMENT TO

PURCHASE AND SALE AGREEMENT

THIS FOURTH AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “Fourth Amendment”) is entered into as of March 19, 2007, by and between First Industrial Acquisitions, Inc., a Maryland corporation (“Buyer”) and National RV Holdings, Inc., a Delaware corporation (“Seller”).

RECITALS:

A.            Buyer and Seller entered into that certain Purchase and Sale Agreement (the “Original Agreement”) dated as of December 27, 2007, as amended by that certain Amended/Supplemental Escrow Instructions dated as of February 9, 2007, that certain Amended/Supplemental Escrow Instructions dated as of February 14, 2007 and that certain Amended/Supplemented Escrow Instructions dated as of February 21, 2007 (as amended, the “Agreement”).

B.            Buyer and Seller desire to amend the Agreement in accordance with the terms and conditions set forth below.

AGREEMENT:

1.             Recitals.  The recitals set forth above are herby incorporated into the body of this Fourth Amendment as if fully restated herein.

2.             Defined Terms.  All capitalized terms used herein which are not defined herein shall have the meanings ascribed to them in the Agreement.

3.             Board Approval.  The expiration date for the Condition Precedent regarding the approval of the board of directors of Seller (the “Seller’s Board”) as set forth in Section 11.5 of the Original Agreement is hereby extended until April 5, 2007.  In the event Seller obtains such approval from its board of directors prior to April 5, 2007, Seller shall have the right to waive such Condition Precedent by delivery of written notice to Buyer (such waiver, a “Board Contingency Waiver”).  If Seller’s Board conditions its approval on the modification of certain terms of the transaction described in the Agreement, in no event shall Buyer be obligated to accept such modified terms unless Buyer agrees to such modified terms, in writing.  In the event that Seller fails to exercise its termination right set forth in Section 11.5 of the Original Agreement on or prior to April 5, 2007, then the Condition Precedent set forth in Section 11.5 shall automatically be deemed waived by Seller.

4.             Expense Reimbursement.  The second to last sentence contained in Section 11 of the Original Agreement is hereby deleted in its entirety and replaced with the following: “In the event Seller terminates this Agreement pursuant to Section 11.5, then in addition to causing Escrow Holder to immediately return the Deposit to Buyer, Seller shall also pay to Buyer, within thirty (30) days after receipt a written invoice from Buyer, Buyer’s actual out-

of-pocket expenses incurred in connection with the negotiation of this Agreement and Buyer’s performance of its Due Diligence Inspection (not to exceed, in the aggregate, $100,000.00).”

5.             Review Period Expiration Date.  The Review Period Expiration Date is hereby extended until 5:00 p.m. (California time) on the date that is twelve (12) days after the earlier to occur of Buyer’s receipt of the Board Contingency Waiver or April 5, 2007.

6.             Closing Date.  The Closing Date shall occur on the date that is seven (7) days after the Review Period Expiration Date.

7.             Full Force and Effect.  Except as specifically amended hereby, the Agreement remains in full force and effect and is hereby ratified by the parties hereto.  In the event that any of the terms or conditions of the Agreement conflict with this Fourth Amendment, the terms and conditions of this Fourth Amendment shall control.  Any references to the “Agreement” made in any closing documents or instruments delivered at closing shall be deemed to mean the Agreement as amended hereby.

8.             Counterparts.  This Fourth Amendment may be executed in any number of identical counterparts, any or all of which may contain the signatures of less than all of the parties, and all of which shall be construed together as a single instrument.  For purposes of this Fourth Amendment, signatures by facsimile shall be binding to the same extent as original signatures.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties have executed this Fourth Amendment as of the date first set forth above.

SELLER:
NATIONAL RV HOLDINGS, INC., a Delaware corporation
By:	\s\ Jon Corn
Its:	Vice President /General Council

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BUYER:
FIRST INDUSTRIAL ACQUISITIONS, INC., a Maryland corporation
By:		\s\ Johannson L. Yap
Name:			Johannson L. Yap
Its:	Authorized Signatory

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EX-21.1

Exhibit 21.1

LIST OF SUBSIDIARIES

National R.V., Inc. incorporated in the state of California.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-41905 and No. 333-68636) of National R.V. Holdings, Inc. of our report dated March 29, 2007, which appears in this Form 10-K, relating to the consolidated financial statements and financial statement schedule for the year ended December 31, 2006.

/s/ Swenson Advisors, LLP

San Diego, California

March 29, 2007

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-41905 and No. 333-68636) of National R.V. Holdings, Inc. of our report dated October 6, 2005, except for the restatement discussed in the second and sixth paragraphs of Note 2 (not presented herein) to the consolidated financial statements appearing under Item 8 of the Company’s 2004 Annual Report on Form 10-K/A, as to which the date is March 21, 2006 relating to the financial statements and financial statement schedule, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Orange County, California

March 29, 2007

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Bradley C. Albrechtsen, certify that:

1.I have reviewed this annual report on Form 10-K of NATIONAL RV HOLDINGS, 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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

(d) Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

Date: March 29, 2007
	/s/ Bradley C. Albrechtsen
	Bradley C. Albrechtsen
	Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Thomas J. Martini, certify that:

1.I have reviewed this annual report on Form 10-K of NATIONAL RV HOLDINGS, 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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

(d) Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

Date: March 29, 2007
	/s/ Thomas J. Martini
	Thomas J. Martini
	Chief Financial Officer
	(Principal Accounting and Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of National RV Holdings, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Bradley C. Albrechtsen, Chief Executive Officer and President of the Company, and Thomas J. Martini, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Bradley C. Albrechtsen	/s/ Thomas J. Martini
Bradley C. Albrechtsen	Thomas J. Martini
Chief Executive Officer	Chief Financial Officer
And President	(Principal Accounting and
March 29, 2007	Financial Officer)
	March 29, 2007