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KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, 39TH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: (310) 407-4000

LEE R. BOGDANOFF (State Bar No. 119542) JONATHAN S. SHENSON (State Bar No. 184250) DAVID M. GUESS (State Bar No. 238241) KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 Avenue of the Stars, 39th Floor Los Angeles, California 90067 Telephone: (310) 407-4000 Facsimile: (310) 407-9090 Proposed Bankruptcy Counsel for Debtors and Debtors In Possession Debtors' Mailing Address 3411 N. Perris Blvd. Perris, CA 92571 National R.V. Holdings, Inc.'s Tax I.D. #XX-XXX-1079 National R.V., Inc.'s Tax I.D. #XX-XXX-5022 UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA RIVERSIDE DIVISION In re NATIONAL R.V. HOLDINGS, INC., a Delaware corporation; NATIONAL R.V., INC., a California corporation, Debtors.
Case No.: 6:07-17941-PC Chapter 11 Jointly Administered with Case No.: 6:07-17937-PC DECLARATION OF THOMAS J. MARTINI IN SUPPORT OF EMERGENCY MOTION OF DEBTORS AND DEBTORS IN POSSESSION FOR AUTHORITY TO (1) RECONCILE, ADJUST, AND COLLECT ACCOUNTS RECEIVABLE, (2) SELL EMISSION REDUCTION CREDITS FREE AND CLEAR OF LIENS, CLAIMS AND INTERESTS, AND (3) SELL INVENTORY FREE AND CLEAR OF LIENS CLAIMS AND INTERESTS (INCLUDING A SPECIFIC REQUEST FOR AUTHORITY TO SELL ELEVEN RVs IN KENTUCKY)
Hearing Date: Time: Place: December 12, 2007 10:30 a.m. Courtroom 303 U.S. Bankruptcy Court 3420 Twelfth Street Riverside, CA 92501-3819

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KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, 39TH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: (310) 407-4000

I, Thomas J. Martini, declare as follows:

A.
1.

Qualifications.
I am the Chief Financial Officer and Treasurer of National R.V. Holdings, Inc., a

Delaware corporation ("NRVH"), and the Chief Financial Officer and Treasurer of National R.V., Inc., a California corporation ("NRV"). NRVH and NRV (together, the "Debtors") are debtors and debtors in possession in the above-captioned chapter 11 cases. 2. In these capacities, and in conjunction with the efforts of other members of the

Debtors' senior management, I am involved on a day-to-day basis with all aspects of the Debtors' affairs, including business operations, strategic planning, financial reporting, human resources, legal affairs and other management activities, including the Debtors' efforts to address their current financial difficulties. 3. As a consequence, I review and work extensively with the books and records of

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the Debtors, including their business plans, financial statements and projections, business analyses and reports, contracts and other legal documents, notes and correspondence and the like. On a regular basis, I witness and/or participate in negotiations with lenders, vendors and other creditors of the Debtors, and have worked closely with personnel from all aspects of the Debtors' business operations. 4. I hold a B.S. in accounting from Pennsylvania State University. I am a certified

public accountant and a member of the AICPA. I began working in the recreation vehicle industry nearly 30 years ago. From 1978 to 1984, I served as a controller for Coachmen Industries, Inc ("Coachmen"), which manufactures recreational vehicles ("RVs"), travel trailers, camping trailers, single family homes and multi-family residential structures, distributes to over 500 dealerships throughout the United States, and sells products directly from its companyowned dealership under such brand names as Coachmen, Georgie Boy, Sportscoach, Adrenaline, and Viking. From 1986 to 2001, I worked for Starcraft Industries, Inc. and Miller Building Systems, Inc. where I served as Chief Financial Officer for both companies. In 2001, I returned to Coachmen, where I assumed the role of Vice President and Treasurer. In 2004, I joined the Debtors as Treasurer and in 2005 I assumed the additional position of Chief Financial Officer.

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KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, 39TH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: (310) 407-4000

5.

Based upon the foregoing, I have developed an intimate familiarity with: (a) the

Debtors' books and records, which are maintained in the ordinary course of business under my supervision and control as custodian (and under the control of other members of senior management), (b) the Debtors' business and financial history, and their current business and financial situation, and (c) the financial and operational details of the Debtors' business operations, and (d) the recreation vehicle industry generally. 6.

I am making this Declaration in support of the Emergency Motion Of Debtor

And Debtor In Possession For Authority To (1) Reconcile, Adjust, And Collect Accounts Receivable, (2) Sell Emission Reduction Credits Free And Clear Of Liens, Claims And Interests, And (3) Sell Inventory Free And Clear Of Liens Claims And Interests (including a Request for Specific Authority to Sell Eleven RVs Located in Kentucky) (the "Emergency Motion"). B.
7.

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Emergency Motion and the Need For Emergency Relief. Prepetition, in the ordinary course of its business, the Debtors engaged in the

sale of motor homes, motor home parts, and the collection of the receivables generated from that business. On any given day, the Debtors often generated hundreds of thousands of dollars in revenues. Shortly before the commencement of these cases, the Debtors curtailed their operations and began to turn their attention to liquidating their assets. The Debtors' assets are significant, and include about $5 million in gross accounts receivable and $25 million in gross inventory, among other assets.
8.

As a result of the cessation of the debtors' business operations and the filing of

these chapter 11 cases, however, the Debtors' collections have ground to a halt. The parties with which the Debtors typically conduct business (including as to the existing accounts receivable a relatively small universe of financial institutions that finance dealer inventories) are uncertain as to the extent of the Debtors' authority to continue reconciling and collecting accounts receivable, as well as their authority to continue selling inventory. The Debtors are similarly uncertain, given that their business recently has transitioned from that of a fully

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KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, 39TH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: (310) 407-4000

operational manufacturer to a manufacturer that is winding down their operations and liquidating their assets.
9.

The Debtors filed these chapter 11 cases with approximately $1 million in cash Since the filing, precious little in the way of revenues have been

collateral on hand. collected.

Absent a change in the status quo, the Debtors very shortly will face a

circumstance in which they will be unable to continue their liquidation efforts because they will run out of cash.
10.

The Debtors are seeking the relief requested in the Emergency Motion in order

to eliminate these uncertainties, permit them to reconcile and adjust receivables consistent with past practice, and restore the collection of revenues for the benefit of the estates. The Debtors also seek to generate revenue and maximize the value of the estates by capitalizing on opportunities to (i) sell inventory in a manner consistent with prepetition practice, pending the adoption of a comprehensive auction or liquidation sale process, and (ii) sell ERCs that the Debtors have earned as a result of their good conduct, which credits they have sold in the past, pursuant to a relatively well-established market for such credits. In connection with the relief requested, the Debtors are proposing notice procedures to provide the major stakeholders with transparency in respect of the Debtors' activities and an opportunity to be heard if they object to any material transaction proposed by the Debtors.
C.

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Collection of Accounts Receivable. In the ordinary course of business prepetition, the Debtors reconciled and

11.

collected their own accounts receivable; the account debtors typically are institutional flooring lenders to the dealers that sell the Debtors' products. The flooring lenders typically remit payment to the Debtors on a vehicle delivered to that lender's dealer pursuant to standard processes. Following the Debtors' shipment of a vehicle, the flooring lender determines whether in fact the Debtors have delivered the vehicle that the dealer has ordered. Management of the Debtors and representatives of the flooring lenders communicate regularly to identify what is owing and to reconcile any differences between the Debtors' books and records and those of the flooring lender or dealer (as well as to deal with any 3

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KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, 39TH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: (310) 407-4000

business issues relating to the product that might result in a reduction in the amount via adjustment).

12.

Additionally, in order to close the sale of a finished motor home and collect the

associated account receivable, the Debtors frequently are required either to provide assurance that the motor home chassis has been paid for or, if it has not been paid for, to remit payment to the chassis vendor so as to have the ability to sell the RVs The Debtors' institutional purchasers typically insist on such assurance and/or payment in order to be certain that the motor home is being sold free and clear of any liens and interests. Payment then is remitted to the Debtors. 13. For the reasons I describe above since the filing the Debtors have been unable Although the

to effectively continue these processes and collect account receivables.

Debtors believe that they are authorized, in the ordinary course of business in accordance with Bankruptcy Code section 363(c), to continue these processes, and that third parties should be entitled to rely on the Debtors' representations in that regard, the Debtors recognize and understand that some third parties have been unwilling to do so. 14. The Debtors need to immediately restore the collection of revenue in order to

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fund their chapter 11 efforts and maximize the value of their estates. In order to do so, the Debtors require the authority to reconcile, adjust and collect accounts receivable consistent with past practices, and to provide flexibility to the Debtors to further reduce accounts receivable in order to facilitate their collection (to the extent there is a business justification for doing so, other than to simply bring money into the estates), all as described more fully in the Emergency Motion. D. 15. Sale of Emission Reduction Credits. Over the years, the Debtors have by their environmentally-conscious conduct

earned certain Emission Reduction Credits ("ERCs") issued by the South Coast Air Quality Management District ("SCAQMD"). ERCs are freely transferable subject to the approval of SCAQMD ("SCAQMD Approval") and, from time to time, the Debtors have sold their ERCs

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KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, 39TH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: (310) 407-4000

for cash in the past. The Debtors seek by the Emergency Motion to sell their remaining 100 ERCs, free and clear of any and all liens, claims and interests. 16. ERCs are fungible. There is a government website which sets forth the

following information (which is available to the public): the number of available ERCs, the identity and address of current ERC owners, the number and nature of ERCs owned by particular entities, and the historical market prices for ERCs are publicly available on the AQMD website. 1 In view of these facts, at any given moment in time, there is a relatively efficient market for the ERCs. 17. The Debtors have solicited and received proposals from three different

potential buyers (via brokers) all them proposing to purchase the Debtors' ERCs at between $14,000 and $15,005 per unit. At present, the Debtors are proceeding with negotiations to sell their 100 ERCs for $15,005. (As part of these negotiations, the parties have agreed that 50% of the purchase price would be conditioned upon the SCAQMD Approval. The parties have also agreed that the buyer would be responsible for the entire amount of any broker's commission. Typically, the commission is 7%, with the buyer and seller each being

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responsible for half.) 18. In order to minimize administrative expense and monetize the ERCs as soon as

possible, the Debtors have requested authority in the Emergency Motion to sell the ERCs (in an amount no less than $14,500 per unit), in consultation with Wells Fargo. As the ERCs are fungible and the price of these assets are relatively well-established in the market place (at any point in time), it does not appear from the facts and circumstances presented that the expense of an auction or the adoption of sale procedures would be justified. And for this reason, the Debtors propose to promptly sell the ERCs by private sale. E.
19.

Sale of Inventory. In the ordinary course of their business prepetition, the Debtors engaged in the

sale of motor homes, motor home parts and other inventory items. Although the Debtors intend ultimately to propose a comprehensive process for liquidating all of the Debtors
1

See http://www.aqmd.gov/permit/ERC.htm.

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KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, 39TH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: (310) 407-4000

remaining assets, on a virtually daily basis the Debtors are being presented with opportunities to dispose of inventory at very attractive prices. The Debtors would be remiss if they did not take advantage of those opportunities, while they proceed with a more comprehensive approach to inventory disposition. Accordingly, by the Emergency Motion the Debtors are seeking authority in the interim to sell their inventory postpetition, including completed motor homes, work in progress inventory, parts, and components ("Inventory"), without further order of the Court but subject to the procedures and limitations set forth in the Emergency Motion, with any such sale to be "as is, where is".
20.

The proposed procedures are necessary, reasonable and appropriate. It is the

Debtors' business judgment that if they do not have the authority to immediately sell Inventory, they will lose valuable opportunities to sell inventory to customers who have an immediate need for that Inventory. While some of this Inventory ultimately may be sold on a liquidation basis pursuant to an auction or other sale later in time, the Debtors anticipate that they will only be able maximize the value of their assets if they have the ability to make sales immediately, as and when customers have the need for those goods.
21.

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Separate and apart from the procedures contemplated for the sale of Inventory

generally in Section IV.C. of the Emergency Motion, the Debtors believe it is in their best interest to proceed with a sale of eleven (11) finished RVs currently sitting in storage in Louisville, Kentucky (the "Kentucky RVs") in an amount not less than 75% of the standard, prepetition invoice price for the Kentucky RVs (in the aggregate) of $1,373,180 (reflecting an aggregate discount of $343,295).
22.

There is ample business justification for proceeding with the sale of the

Kentucky RVs. The Debtors have projected (based upon reasonable assumptions, using information reasonably available to them at the time) that they would likely only get between 70 to 75% of invoice price for any finished RV in the context of any orderly liquidation. Moreover, as noted, these RVs are currently sitting in storage in Kentucky, at a cost to the estates (of roughly $1,300), and it would cost more than $20,000 to have these RVs shipped back to Perris, California. 6