UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

MOD-U-KRAF HOMES, INC.
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[_] No fee required

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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[X] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(4) Date Filed:

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Notes:

[MOD-U-KRAF HOMES, INC. LETTERHEAD]

May 26, 2000

To the Shareholders of Mod-U-Kraf Homes, Inc.:

On behalf of the Board of Directors of Mod-U-Kraf Homes, Inc., it is my
pleasure to invite you to attend a Special Meeting of Shareholders of Mod-U-Kraf
to be held on Wednesday, June 21, 2000 at 10:00 a.m., local time, at Ippy's
Restaurant in the Erath Room located at 1760 North Main Street, Rocky Mount,
Virginia.

At the special meeting, you will be asked to consider and vote upon a
merger agreement and plan of merger under which Coachmen Industries, Inc. would
acquire Mod-U-Kraf by merger and you would be entitled to receive $11.75 in cash
for each share of Mod-U-Kraf stock that you hold, unless you properly exercise
your dissenters' rights under Virginia law. As a result of the merger, Mod-U-
Kraf would become a wholly owned subsidiary of Coachmen, and the shareholders of
Mod-U-Kraf will no longer have an equity interest in Mod-U-Kraf.

Your Board of Directors has reviewed and considered the terms and
conditions of the merger agreement, has determined that the merger is in the
best interests of Mod-U-Kraf and its shareholders and has unanimously approved
the merger agreement and the plan of merger. Our financial advisor, Davenport &
Company LLC, rendered to our Board of Directors a written opinion dated April
25, 2000 to the effect that, as of such date and based upon and subject to the
matters stated in the opinion, the $11.75 per share price to be received in the
merger by the Mod-U-Kraf shareholders was fair, from a financial point of view,
to such shareholders.

Your board of directors unanimously recommends that you vote FOR approval
of the merger agreement and the plan of merger.

Under Virginia law, approval and adoption of the merger agreement and the
plan of merger requires the affirmative vote of holders of more than 66-2/3% of
the outstanding shares of common stock entitled to vote at the special meeting.
Each share of common stock is entitled to one vote on all matters to come before
the special meeting.

The enclosed notice of meeting and proxy statement provide you with a
summary of the merger and additional information about the parties involved and
their interests in the merger. I encourage you to read and consider carefully
the information contained in the proxy statement.

Your vote is important. Whether or not you plan to attend the meeting, you
are urged to read the enclosed material carefully and complete, sign and
promptly return the enclosed proxy to assure that your shares will be voted at
the special meeting. If you attend the special meeting, you may revoke your
proxy and vote in person if you choose, even if you have returned your proxy.

If you have any questions, please call me at (540) 483-0291.

Sincerely,

Dale H. Powell
President and Chairman of the Board

Manufacturers of Residential and Commercial Building Systems

MOD-U-KRAF HOMES, INC.

201 Old Franklin Turnpike
P.O. Box 573
Rocky Mount, Virginia 24151

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 21, 2000

To Our Shareholders:

Notice is hereby given that a special meeting of shareholders of Mod-U-Kraf
Homes, Inc., a Virginia corporation, will be held on Wednesday, June 21, 2000 at
10:00 a.m. at Ippy's Restaurant in the Erath Room located at 1760 North Main
Street, Rocky Mount, Virginia, for the following purposes:

1. To consider and vote on a proposal to approve an Agreement and Plan of
Merger pursuant to which Coachmen Acquisition Corporation, a newly-formed
Virginia corporation that is a wholly owned subsidiary of Coachmen Industries,
Inc., an Indiana corporation, will be merged with and into Mod-U-Kraf and each
outstanding share of Mod-U-Kraf's common stock (other than shares held by
shareholders who have properly perfected their dissenters' rights under Virginia
law) will be converted into the right to receive $11.75 in cash, without
interest.

2. To consider and act upon such other matters as may properly come before the
special meeting.

The Board of Directors has determined that only holders of Mod-U-Kraf's
common stock of record at the close of business on May 23, 2000, are entitled to
notice of, and to vote at, the special meeting and any adjournments thereof.

Your vote is important. If you are unable to attend the meeting, please
date, sign and return the accompanying proxy promptly in the enclosed envelope
which requires no postage if mailed in the United States. Please do not send in
any share certificates at this time. Upon approval of the merger, you will be
sent instructions regarding the procedures to exchange your share certificates
for the cash to be paid.

Any shareholder will have the right to dissent from the consummation of the
transaction contemplated by the Agreement and Plan of Merger and to receive
payment of the "fair value" of his or her shares upon compliance with the
procedures set forth in Article 15 of the Virginia Stock Corporation Act. See
"The Merger - Rights of Dissenting Shareholders" in the accompanying proxy
statement.

By Order of the Board of Directors

Edwin J. Campbell
Corporate Secretary

PROXY STATEMENT

MOD-U-KRAF HOMES, INC.
201 Old Franklin Turnpike
P.O. Box 573
Rocky Mount, Virginia 24151

SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 21, 2000

This proxy statement is being furnished to the shareholders of Mod-U-Kraf
Homes, Inc., a Virginia corporation, in connection with the solicitation by its
Board of Directors of proxies to be used at a special meeting of shareholders to
be held on Wednesday, June 21, 2000 at 10:00 a.m. at Ippy's Restaurant in the
Erath Room located at 1760 North Main Street, Rocky Mount, Virginia, and at any
adjournment or adjournments thereof.

At the special meeting, the shareholders of Mod-U-Kraf will be asked to
consider and vote on a proposal to approve an Agreement and Plan of Merger,
dated as of May 1, 2000, among Mod-U-Kraf, Coachmen Industries, Inc., an Indiana
corporation, and Coachmen Acquisition Corporation, a newly-formed Virginia
corporation and wholly owned subsidiary of Coachmen, which is attached to this
proxy statement as Appendix A.
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Pursuant to the Agreement and Plan of Merger, (i) Coachmen Acquisition
Corporation will be merged with and into Mod-U-Kraf and (ii) each outstanding
share of common stock, $1.00 par value, of Mod-U-Kraf, other than shares held by
shareholders who are entitled to and who have perfected their dissenters'
rights, will be canceled and converted automatically into the right to receive
$11.75 in cash, payable to the shareholder thereof, without interest. As a
result of the merger, Coachmen will acquire all of the outstanding shares of
common stock and Mod-U-Kraf's shareholders will no longer have an equity
interest in Mod-U-Kraf.

Only Mod-U-Kraf shareholders at the close of business on May 23, 2000 are
entitled to notice of and to vote at the special meeting or any adjournment(s)
thereof. Under Virginia law, approval and adoption of the merger agreement
requires the affirmative vote of holders of more than 66-2/3% of the outstanding
shares of common stock entitled to vote at the special meeting. Each share of
common stock is entitled to one vote on all matters to come before the special
meeting. The common stock is the only outstanding class of our capital stock.

This transaction has not been approved or disapproved by the Securities and
Exchange Commission, nor has the Commission passed upon the fairness or merits
of such transaction nor upon the accuracy or adequacy of the information
contained in this document. Any representation to the contrary is unlawful.

The date of this proxy statement is May 26, 2000, and this proxy statement,
the notice of special meeting and the enclosed proxy card are first being mailed
to shareholders of Mod-U-Kraf on or about May 26, 2000.

TABLE OF CONTENTS

SUMMARY TERM SHEET......................................................... i
SUMMARY.................................................................... 1
The Special Meeting....................................................... 1
Time, Date and Place...................................................... 1
Purpose................................................................... 1
Vote Required; Record Date................................................ 1
The Merger................................................................ 1
Parties to the Merger..................................................... 1
Mod-U-Kraf............................................................... 1
Coachmen Industries, Inc................................................. 1
Coachmen Acquisition Corporation......................................... 2
Recommendation of Board of Directors..................................... 2
Opinion of Financial Advisor............................................. 2
Interests of Certain Persons in the Merger............................... 2
Federal Income Tax Consequences to Shareholders.......................... 3
Dissenters' Rights....................................................... 3
The Merger Agreement...................................................... 3
Consideration............................................................ 3
Conditions to the Merger; Effective Date................................. 3
No Solicitation.......................................................... 3
Termination.............................................................. 4
Break-Up Fee............................................................. 4
THE SPECIAL MEETING........................................................ 5
Date, Time, Place And Matters To Be Considered............................ 5
Vote Required............................................................. 5
Record Date For Voting.................................................... 5
Quorum.................................................................... 5
Voting And Revocation Of Proxies.......................................... 5
Solicitation Of Proxies................................................... 6
Other Matters............................................................. 6
THE MERGER................................................................. 7
Parties to the Merger..................................................... 7
Mod-U-Kraf............................................................... 7
Coachmen Industries, Inc................................................. 7
Coachmen Acquisition Corporation......................................... 7
Background of the Merger.................................................. 7
Recommendation of the Board of Directors; Reasons for the Merger.......... 9
Opinion of Financial Advisor.............................................. 11
Certain Effects of The Merger............................................. 15
Interests of Certain Persons in the Merger................................ 15
Voting Agreements........................................................ 15
Employment Agreements.................................................... 16
Indemnification.......................................................... 16

(i)

Certain Federal Income Tax Consequences................................... 17
Rights of Dissenting Shareholders......................................... 18
THE MERGER AGREEMENT....................................................... 20
General................................................................... 20
Effective Time of the Merger and Payment for Shares....................... 20
Conversion of Securities.................................................. 21
Conditions and Obligations to the Merger.................................. 21
Representations and Warranties............................................ 22
Covenants................................................................. 23
Other Agreements.......................................................... 24
No Solicitation........................................................... 25
Termination, Amendment and Waiver......................................... 25
Termination.............................................................. 25
Break-Up Fee............................................................. 26
Amendment................................................................ 27
Waiver................................................................... 27
Regulatory Approvals...................................................... 27
Expenses of the Merger.................................................... 27
MARKET PRICES OF COMMON STOCK AND DIVIDENDS................................ 28
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............. 29
SHAREHOLDER PROPOSALS...................................................... 30
WHERE YOU CAN FIND MORE INFORMATION........................................ 30

Appendices

APPENDIX A - Agreement and Plan of Merger

APPENDIX B - Plan of Merger

APPENDIX C - Opinion of Davenport & Company LLC

APPENDIX D - Article 15 of the Virginia Stock Corporation Act

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains certain forward-looking statements. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. The words "believe,"
"expect," "anticipate" and other similar expressions generally identify forward-
looking statements. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. These forward-
looking statements are based largely on Mod-U-Kraf's current expectations and
are subject to a number of risks and uncertainties. Mod-U-Kraf undertakes no
obligation to revise the forward-looking statements publicly to reflect any
future events or circumstances.

SUMMARY TERM SHEET

This term sheet is designed to provide you with a summary description of
the material aspects of the proposed merger described in this proxy statement.
You should also review the proxy statement and its appendices for a more
complete understanding of the proposed merger and its anticipated effect on you
and on Mod-U-Kraf.

Q: Who is offering to acquire Mod-U-Kraf?

A: Coachmen Industries, Inc., an Indiana corporation.

Q: What effect will the merger have on Mod-U-Kraf?

A: Mod-U-Kraf will be merged with a subsidiary of Coachmen and Mod-U-Kraf will
be the surviving company in the merger. After the merger has been completed,
all of the common stock of Mod-U-Kraf will be owned by Coachmen, and it will no
longer be publicly traded.

Q: How much will I receive for my shares and what is the form of payment?

A: If the merger is completed, you will receive $11.75 in cash for each share
of our common stock that you own at the time of the merger.

Q: Will members of our management receive anything different in the merger?

A: Yes. Dale H. Powell, Edwin J. Campbell and Jeff Powell, who are members of
our management team, have signed employment and non-competition agreements that
will become effective at the effective time of the merger. These agreements
provide for compensation and other benefits to be paid to these persons in
connection with their continued employment. These agreements are described in
further detail in "The Merger - Interests of Certain Persons in the Merger."

Q: How does the board recommend that I vote?

A: The Board has unanimously determined that the merger agreement and the
merger are advisable and fair to you and in your best interest and recommends
that you vote "FOR" approval of the merger proposal. In making this
determination, the Board considered the opinion of their financial advisor,
Davenport & Company LLC, to the effect that the $11.75 per share to be received
by you in the merger is fair to you from a financial point of view.

Q: What vote of stockholders is required to approve the merger proposal?

A: The merger proposal must be approved by the affirmative vote of the holders
of more than 66-2/3% of our outstanding shares of common stock.

Q: What do I need to do now?

A: You should complete, date and sign your proxy card and mail it in the
enclosed return envelope as soon as possible so that your shares may be
represented at the special meeting, even if you plan to attend the meeting in
person.

(i)

Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?

A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the procedures provided by your broker as to how to
vote your shares.

Q: What happens if I do not send in my proxy or if I abstain from voting?

A: If you do not send in your proxy or do not instruct your broker to vote your
shares or if you abstain from voting, it will have the same effect as a vote
against the merger proposal.

Q: May I change my vote after I have mailed my signed proxy card?

A: Yes. You may change your vote by sending in a later-dated, signed proxy
card or a written revocation before the special meeting or by attending the
special meeting and voting in person. Your attendance at the meeting will not,
by itself, revoke your proxy. If you have instructed a broker to vote your
shares, you must follow the directions received from your broker to change those
instructions.

Q: Should I send my stock certificates now?

A: No. If the merger is completed, we will send you written instructions for
exchanging your stock certificates for the cash payment.

Q: What are the tax consequences of the merger?

A: The merger will be a taxable transaction to you for federal income tax
purposes. A brief summary of the possible tax consequences to you appears on
page 17 of this proxy statement. You should consult your tax advisor as to the
tax effects of the merger in your particular circumstances.

Q: What rights do I have to dissent from the merger?

A: If you wish, you may dissent from the merger and seek a judicial
determination of the fair value of your shares, but only if you comply with all
requirements of Virginia law which are set forth in Appendix D and summarized on
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pages 18 - 20 of this proxy statement. The appraised fair value of your shares
may be more or less than the price per share to be paid in the merger.

Q: Who can help answer my questions?

A: If you have additional questions about the merger or would like additional
copies of this proxy statement, you should call Dale H. Powell, President and
Chairman of the Board, at (540) 483-0291.

(ii)

SUMMARY

The following is a summary of certain information contained elsewhere in
this proxy statement. Reference is made to, and this summary is qualified in
its entirety by, the more detailed information contained elsewhere in this proxy
statement. You should read this proxy statement and its appendices in their
entirety before voting.

The Special Meeting

Time, Date and Place

The special meeting of shareholders of Mod-U-Kraf Homes, Inc., a Virginia
corporation, will be held on Wednesday, June 21, 2000 at 10:00 a.m., local time,
at Ippy's Restaurant in the Erath Room located at 1760 North Main Street, Rocky
Mount, Virginia.

Purpose

At the special meeting, the Mod-U-Kraf shareholders will be asked to
consider and vote upon a proposal recommended by the Board of Directors to
approve and adopt an Agreement and Plan of Merger dated May 1, 2000 by and among
Mod-U-Kraf, Coachmen Industries, Inc., an Indiana corporation, and Coachmen
Acquisition Corporation, a newly-formed Virginia corporation and wholly owned
subsidiary of Coachmen.

Vote Required; Record Date

The affirmative vote of the holders of more than 66-2/3% of the shares of
Mod-U-Kraf common stock outstanding and entitled to vote at the special meeting
is required for approval of the merger agreement and the related plan of merger.
Certain of our principal shareholders have agreed, among other things, to vote
their shares of common stock entitled to vote at the special meeting
(approximately 46.96% of the outstanding shares of common stock) in favor of the
proposal to approve and adopt the merger agreement. Coachmen also currently
owns 6.04% of the outstanding shares of Mod-U-Kraf common stock and intends to
vote these shares in favor of the merger proposal. See "The Special Meeting --
Vote Required." The close of business on May 23, 2000 is the record date for
determining holders of shares of Mod-U-Kraf common stock entitled to vote at the
special meeting.

The Merger

Parties to the Merger

Mod-U-Kraf

Mod-U-Kraf was incorporated as a Virginia corporation on August 19, 1971.
It is engaged in the business of manufacturing and selling custom-built
sectionalized single family housing units of its own design. Mod-U-Kraf also
customizes a commercial line of products consisting of multi-family and
diversified specialty structures.

Coachmen Industries, Inc.

Coachmen Industries, Inc. was incorporated under the laws of the State of
Indiana on December 31, 1964, as the successor to a proprietorship established
earlier that year.

Coachmen is one of the largest full-line producers of recreational vehicles
and is the largest builder of modular homes in the United States. Coachmen's
RVs are marketed under various brand names including Coachmen, Shasta, and
Viking through approximately 1,300 independent dealers located in 49 states and
internationally and through six company-owned dealerships. Modular homes are
manufactured by the company's All American Homes operation which sells homes
through approximately 300 builders.

Coachmen Acquisition Corporation

Coachmen Acquisition Corporation is a newly-formed Virginia corporation
organized at the direction of Coachmen for the sole purpose of effecting the
merger and has not conducted any prior business.

Recommendation of Board of Directors

The Mod-U-Kraf Board of Directors unanimously recommends that shareholders
vote in favor of the proposal concerning the merger agreement and the related
plan of merger. The Board of Directors determined that the merger was in the
best interests of and fair to all shareholders and then approved and adopted the
merger agreement and the related plan of merger. The Board's conclusions are
based upon a number of factors which are described in detail in "The Merger --
Recommendation of the Board of Directors; Reasons for the Merger."

Opinion of Financial Advisor

Davenport & Company LLC was retained by Mod-U-Kraf on behalf of the Board
of Directors to render an opinion as to the fairness of the merger consideration
to the Mod-U-Kraf shareholders. Davenport has delivered a written opinion to
the Board of Directors to the effect that, in its opinion, the merger
consideration is fair, from a financial point of view, to the Mod-U-Kraf
shareholders. See "The Merger -- Opinion of Financial Advisor."

Interests of Certain Persons in the Merger

In considering the recommendation of the Board of Directors with respect to
the merger, shareholders should be aware that certain members of management,
some of whom are members of the Board, have certain interests which present them
with conflicts of interest in connection with the merger. The Board of
Directors was aware of these conflicts and considered them in connection with
its consideration and approval of the merger. These interests are:

. Dale H. Powell, Edwin J. Campbell and Jeff Powell have entered into
employment and non-compete agreements that will become effective with the
merger;

. Bobbie L. Oliver, Mary L. Fitts, Robert K. Fitts, Dale H. Powell, W. Curtis
Carter, and Edwin J. Campbell (the principal shareholders of Mod-U-Kraf)
entered into voting agreements whereby they each agreed to vote their
shares of Mod-U-Kraf common stock in favor of the merger; and

. Coachmen will provide continuing indemnification for the current directors
and officers of Mod-U-Kraf.

See "The Merger -- Interests of Certain Persons in the Merger."

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Federal Income Tax Consequences to Shareholders

The receipt of the merger consideration in the merger by the Mod-U-Kraf
shareholders will be taxable transactions for federal income tax purposes. A
Mod-U-Kraf shareholder will recognize taxable gain or loss for federal income
tax purposes equal to the difference between the shareholder's adjusted basis in
his or her shares and the amount of the merger consideration received for these
shares. Each Mod-U-Kraf shareholder should consult his or her own tax advisor
as to the specific tax consequences of the merger to such holder. See "The
Merger -- Certain Federal Income Tax Consequences."

Dissenters' Rights

Mod-U-Kraf shareholders who do not vote to approve and adopt the merger
agreement may dissent from the merger and elect to have the fair value of their
shares, based on all relevant factors and excluding any element of value arising
from the accomplishment or expectation of the merger, judicially determined and
paid to them in cash. Such shareholders must deliver a written notice of intent
to demand payment for their shares prior to the taking of the vote on the merger
agreement and comply with the other requirements of Article 15 of the Virginia
Stock Corporation Act, the full text of which is attached to this proxy
statement as Appendix D. Any deviation from such requirements may result in a
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forfeiture of dissenters' rights. See "The Merger -- Rights of Dissenting
Shareholders."

The Merger Agreement

Consideration

If the proposed merger is consummated, each share of common stock
outstanding at that time will be converted into the right to receive $11.75 in
cash, without interest. See "The Merger Agreement -- General" and "--Effective
Time of the Merger and Payment for Shares."

Conditions to the Merger; Effective Date

The respective obligations of Mod-U-Kraf, Coachmen and Coachmen Acquisition
Corporation to consummate the merger are conditioned upon, among other things,
the approval and adoption of the merger agreement by the holders of more than
66-2/3% of the outstanding shares of common stock entitled to vote at the
special meeting. See "The Merger Agreement -- Conditions and Obligations to the
Merger."

The merger will become effective upon the time of filing of articles of
merger with the Virginia State Corporation Commission. The date on which the
merger becomes effective is referred to as the "Effective Date." Delivery of
the articles of merger to the State Corporation Commission for filing will be
made only upon satisfaction or waiver, where permissible, of the conditions
contained in the merger agreement. See "The Merger Agreement --Conditions and
Obligations to the Merger."

No Solicitation

The merger agreement provides that Mod-U-Kraf will not solicit any other
acquisition proposal. However, if prior to the special meeting we receive a
more favorable

-3-

proposal that we did not solicit and we obtain a confidentiality agreement with
the party who provides the more favorable proposal, we may furnish any non-
public information in connection with, negotiate with respect to, or enter into
an agreement with respect to, the party submitting the more favorable proposal.

The merger agreement also provides that our Board of Directors will
recommend approval of the merger agreement to Mod-U-Kraf shareholders unless our
Board of Directors, after having consulted with and considered the advice of
outside counsel, reasonably determines in good faith that such a recommendation
would breach its fiduciary duties.

Termination

Either Mod-U-Kraf or Coachmen may terminate the merger agreement and
prevent completion of the merger under certain circumstances, including if:

. both parties consent in writing;

. the merger is not completed on or before June 30, 2000; or

. the other party materially breaches any of the representations or
warranties or any covenant or agreement it has under the merger
agreement and the breach is not cured within 10 days of notice to the
breaching party.

Coachmen may terminate the merger agreement and prevent completion of the
merger if a governmental entity takes any actions to prevent completion of the
merger.

Mod-U-Kraf may terminate the merger agreement if we receive a higher offer
from another party and are authorized by our Board of Directors to enter into an
agreement with that party, unless Coachmen responds to such an offer with an
equally favorable offer.

Break-Up Fee

Mod-U-Kraf has agreed to pay Coachmen a break-up fee of $500,000 if either
of the following occurs:

. Mod-U-Kraf breaches its covenants in the merger agreement relating to
solicitations of an acquisition proposal; or

. Mod-U-Kraf terminates the merger agreement in the absence of a material
breach by Coachmen or government intervention to permit the merger.

and, in each case,

. within six months of the breach or termination, Mod-U-Kraf signs a
letter of intent or definitive agreement relating to its acquisition by
a third party, and such acquisition is actually completed.

-4-

THE SPECIAL MEETING

Date, Time, Place And Matters To Be Considered

The special meeting will be held on Wednesday, June 21, 2000, at 10:00
a.m., local time, at Ippy's Restaurant in the Erath Room located at 1760 North
Main Street, Rocky Mount, Virginia. At the special meeting, you will be asked
to consider and vote upon the merger proposal.

Vote Required

Approval of the merger proposal requires the affirmative vote of the
holders of more than 66-2/3% of the outstanding shares of our common stock.
Each of Bobbie L. Oliver, Mary L. Fitts, Robert K. Fitts, Dale H. Powell, W.
Curtis Carter, and Edwin J. Campbell have entered into voting agreements with
Coachmen pursuant to which they have committed to vote all shares of our common
stock beneficially owned by them in favor of the merger proposal. Collectively,
these individuals beneficially own an aggregate of 387,725 shares of our common
stock, or 46.96% of the shares outstanding as of the record date. Coachmen has
also acquired 49,889 shares of our common stock, or 6.04% of the shares
outstanding as of the record date, which it intends to vote in favor of the
merger proposal.

Record Date For Voting

The close of business on May 23, 2000 is the record date for determining
holders of shares of Mod-U-Kraf common stock entitled to vote at the special
meeting. Each share of common stock will be entitled to one vote. On the
record date, there were 825,649 shares entitled to vote at the special meeting.

Quorum

The holders of a majority of the outstanding shares of common stock
entitled to vote at the special meeting must be present in person or represented
by proxy to constitute a quorum for the transaction of business. Abstentions
will be counted as shares present and entitled to vote for purposes of
determining a quorum; however, broker non-votes will not be counted as shares
present and entitled to vote for purposes of determining a quorum.

Voting And Revocation Of Proxies

A form of proxy card for your use at the special meeting accompanies this
proxy statement. All properly executed proxies that are received prior to or at
the special meeting and not revoked will be voted at the special meeting in the
manner specified. If you execute and return a proxy and do not specify
otherwise, the shares represented by your proxy will be voted "FOR" approval of
the merger proposal in accordance with the recommendation of our Board of

-5-

Directors. In that event, you will not have the right to dissent from the
merger and exercise your dissenters' rights under Virginia law.

If you are a record holder of our common stock and you have given a proxy
pursuant to this solicitation, you may nonetheless revoke it by attending the
special meeting and giving oral notice of your intention to vote in person. In
addition, you may revoke any proxy you give at any time before the special
meeting by delivering to our Secretary a written statement revoking it or by
delivering a duly executed proxy bearing a later date. Your attendance at the
special meeting will not in and of itself constitute a revocation of your proxy.
If you have instructed a broker to vote your shares, you must follow the
directions provided by your broker to change those instructions. If you vote in
favor of the merger proposal, you will not have the right to dissent and seek
appraisal of the fair value of your shares. If you do not send in your proxy or
do not instruct your broker to vote your shares or if you abstain from voting,
it will have the same effect as a vote against the merger proposal.

Solicitation Of Proxies

We will bear the cost of the solicitation of proxies. We will solicit
proxies initially by mail. Further solicitation may be made by our directors,
officers and employees personally, by telephone or otherwise, but they will not
be specifically compensated for these services. Upon request, we will reimburse
brokers, dealers, banks or similar entities acting as nominees for their
reasonable expenses incurred in forwarding copies of the proxy materials to the
beneficial owners of the shares of common stock they hold of record.

Other Matters

We do not know of any matters other than those described in this proxy
statement which may come before the special meeting. If any other matters are
properly presented to the special meeting for action, we intend that the persons
named in the enclosed form of proxy card will vote in accordance with their best
judgment. These matters may include an adjournment or postponement of the
special meeting from time to time if our Board of Directors so determines,
except that proxies that are voted against the merger proposal may not be voted
by the persons named in the enclosed form of proxy card for an adjournment or
postponement of the special meeting. If any adjournment or postponement is made,
we may solicit additional proxies during the adjournment period.

Your vote is important. Please return your marked proxy card promptly so
your shares can be represented, even if you plan to attend the meeting in
person.

You should not send any certificates representing common stock with your
proxy card. If we complete the merger, you will be sent further information
regarding the procedure for the exchange of certificates representing Mod-U-Kraf
common stock.

-6-

THE MERGER

Parties to the Merger

Mod-U-Kraf

The principal executive offices of Mod-U-Kraf are located at 201 Old
Franklin Turnpike, P. O. Box 573, Rocky Mount, Virginia 24151, and its
telephone number is (540) 483-0291.

Coachmen Industries, Inc.

Coachmen Industries, Inc. was incorporated under the laws of the State of
Indiana on December 31, 1964, as the successor to a proprietorship established
earlier that year. All references to Coachmen include its wholly owned
subsidiaries and divisions.

The principal executive offices of Coachmen are located at 2831 Dexter
Drive, P.O. Box 3300, Elkhart, Indiana 46515, and its telephone number is (219)
262-0123.

Coachmen Acquisition Corporation

Coachmen Acquisition Corporation is a newly-formed Virginia corporation
organized at the direction of Coachmen for the sole purpose of effecting the
merger and has not conducted any prior business.

Background of the Merger

Over the last several years, Mod-U-Kraf's management and Board of Directors
have periodically considered various strategic alternatives, including potential
business combinations, as well as various strategies for maximizing its
performance as an independent company. The Mod-U-Kraf Board and senior
management have previously determined that past proposed business combinations
did not provide sufficient value to Mod-U-Kraf's shareholders.

-7-

Over the same period, Coachmen has monitored the growth of single family
housing in the southeast United States. One of the companies it monitored was
Mod-U-Kraf. Coachmen recognized the growth and expansion of Mod-U-Kraf during
this period. Coachmen was impressed by Mod-U-Kraf's new production facilities,
its products, sales and profit growth and determined to discuss the possibility
of a strategic business combination with members of Mod-U-Kraf senior
management.

On November 11, 1999, two members of the Coachmen senior management team
visited with the officers of Mod-U-Kraf to discuss a possible business
combination.

On December 10, 1999, Coachmen and Mod-U-Kraf executed a mutual
nondisclosure agreement regarding Coachmen's possible acquisition of Mod-U-Kraf.
Mod-U-Kraf furnished Coachmen additional non-public information about Mod-U-Kraf
subsequent to the signing of the nondisclosure agreement.

On January 17, 2000, a team of three Coachmen senior executives met with
the officers of Mod-U-Kraf at the Mod-U-Kraf facilities in Rocky Mount,
Virginia. During this meeting, the parties reviewed Mod-U-Kraf's current and
historical stock prices and discussed how Mod-U-Kraf would fit into the Coachmen
organization if a transaction was consummated.

Between January 17, 2000 and March 9, 2000 the parties conducted due
diligence on each other and negotiated potential terms of a merger, including
the price per share to be paid to existing Mod-U-Kraf shareholders. Mod-U-Kraf
initially suggested a price of $12.11 per share, which Coachmen rejected, and
following extensive negotiation of various matters, none of which were
individually significant, the parties settled on a price of $11.75 per share.

On March 9, 2000, Coachmen presented Mod-U-Kraf a non-binding letter
agreement calling for Coachmen to purchase all of the outstanding common stock
of Mod-U-Kraf for $11.75 per share. After discussing the terms of this letter
agreement with its legal counsel and negotiating the terms of the letter
agreement with Coachmen, Mod-U-Kraf executed this letter agreement on the
evening of March 10, 2000 and announced the proposed transaction on the morning
of March 13, 2000. The agreement called for a 30-day exclusive negotiating
period, a subsequent 30-day "no shop" period and a break up fee payable to
Coachmen in certain circumstances.

After the announcement and prior to the execution of the merger agreement,
Mod-U-Kraf and its advisors received two informal, non-specific inquiries as to
Mod-U-Kraf's receptiveness to other bids. Each inquiring party was informed of
the exclusive negotiating period, but Mod-U-Kraf did not otherwise discourage
their interest. Neither party made any further attempt to contact Mod-U-Kraf.

During the period from March 13 until the definitive merger agreement was
signed on May 1, 2000, Coachmen personnel conducted legal and financial due
diligence at the Mod-U-Kraf offices, plants, properties and building sites.
During this period, the definitive merger

-8-

agreement was negotiated between the parties, their investment bankers, their
accountants and their attorneys.

On March 23, 2000, the Mod-U-Kraf Board of Directors retained Davenport &
Company LLC to advise it as to the financial aspects of the proposed transaction
with Coachmen.

At a meeting of the Mod-U-Kraf Board of Directors held on April 25, 2000,
Mod-U-Kraf's legal counsel updated the directors on the status of the
negotiations and informed them that all substantive issues had been resolved.
Mod-U-Kraf's legal counsel reviewed in detail the obligations of the directors
under Virginia law, as well as the terms of the merger agreement and the other
definitive agreements. Davenport presented its financial analysis of the terms
of the proposed merger and rendered its opinion to the members of the Mod-U-Kraf
Board of Directors to the effect that, as of the date of the meeting and subject
to the conditions, limitations, qualifications, assumptions and other matters
contained in its opinion, the aggregate consideration to be received by Mod-U-
Kraf shareholders in the merger was fair to Mod-U-Kraf shareholders from a
financial point of view. The Mod-U-Kraf Board of Directors, by unanimous vote,
determined that the merger was in the best interests of Mod-U-Kraf and its
shareholders, and approved and adopted the terms of the merger agreement and the
other definitive agreements contemplated by that agreement and authorized their
execution. The merger agreement approved by the Mod-U-Kraf Board of Directors
does not preclude Mod-U-Kraf from considering and approving a better business
combination proposal from a third party if one were presented to Mod-U-Kraf
following announcement of the proposed business combination with Coachmen.

On May 1, 2000, Mod-U-Kraf and Coachmen executed and delivered the merger
agreement and publicly announced the signing.

Recommendation of the Board of Directors; Reasons for the Merger

Our Board of Directors has unanimously determined that the merger agreement
and the plan of merger are advisable and fair to and in the best interests of
Mod-U-Kraf and its shareholders and unanimously voted to recommend to our
shareholders that they vote to approve the merger proposal.

In reaching its decision to approve the merger, our Board of Directors
consulted with Mod-U-Kraf senior management about strategic and operational
matters. Our Board of Directors also sought the advice of its legal counsel
regarding the legal duties of the Mod-U-Kraf Board of Directors, the terms of
the merger agreement, the other definitive agreements contemplated by that
agreement and other relevant matters. Our Board of Directors also consulted with
Davenport & Company LLC with respect to the financial aspects and fairness from
a financial point of view of the aggregate consideration to be received by Mod-
U-Kraf shareholders from Coachmen under the merger agreement. Some of the more
important factors taken into account by the Mod-U-Kraf Board of Directors in
approving the merger are described below:

. the terms and conditions of the merger agreement, including the parties'
representations, warranties and covenants, the conditions to their
respective obligations, the limited ability

-9-

of Coachmen to terminate the merger agreement and the provision for
payment of all cash with no financing condition;

. the financial condition, results of operations, cash flows and prospects
of Mod-U-Kraf;

. the prospects of Mod-U-Kraf if Mod-U-Kraf were to remain independent and
the risks inherent in remaining independent, including competitive risks;

. the extensive arms-length negotiations between Mod-U-Kraf and Coachmen
that resulted in the $11.75 per share price;

. the history of Mod-U-Kraf's discussions with other parties;

. the current status of the industries in which Mod-U-Kraf competes and the
resources available to Mod-U-Kraf's competitors;

. the recent trading price of Mod-U-Kraf's common stock and that the $11.75
per share to be paid in the merger represents a premium of approximately
113.64% over the $5.50 closing sale price for the common stock on The OTC
Bulletin Board on March 10, 2000;

. the fact that no other offers for the company were made after the proposed
transaction was announced on March 13, 2000 and after the exclusive
negotiation period expired on April 9, 2000, and Mod-U-Kraf's
determination that the likelihood that an unconditional superior offer
could be found was insufficient to justify the risk of delay in proceeding
with the favorable transaction with Coachmen;

. the presentation of Davenport & Company LLC made to the Mod-U-Kraf Board,
and the fairness opinion of Davenport & Company LLC delivered to the
Mod-U-Kraf Board at the Board meeting to the effect that the cash
consideration of $11.75 per share to be received by the Mod-U-Kraf
shareholders in the merger was fair, from a financial point of view, to
such shareholders;

. the merger agreement permits the Mod-U-Kraf Board, in order to comply with
its fiduciary duties, to furnish information, and enter into discussions
and negotiations, in connection with a superior unsolicited acquisition
proposal and to withdraw its recommendation of the merger with Coachmen in
favor of a superior unsolicited acquisition proposal;

. the merger agreement permits the Mod-U-Kraf Board, in the exercise of its
fiduciary duties, to terminate the merger agreement in favor of a superior
offer, provided, that, following such termination, Mod-U-Kraf must pay
--------
Coachmen a fee of $500,000 if it completes the transaction with the party
providing the superior offer; and

. the business reputation of Coachmen, its affiliates and their management,
and the financial strength of Coachmen and its affiliates, including its
ability to finance the cash consideration offered in the merger.

-10-

The foregoing discussion of the information and factors considered by the
Mod-U-Kraf Board of Directors is not intended to be exhaustive but is believed
to include all material factors considered by the Mod-U-Kraf Board of Directors.
In reaching its determination to approve the merger agreement and the
transactions contemplated by that agreement, the Mod-U-Kraf Board of Directors
did not assign any relative or specific weights to the foregoing factors, and
individual directors may have given differing weights to different factors. In
particular, the Board viewed Davenport's presentation as a whole, but noted that
Davenport's analysis of the median multiples of earnings before interest and
taxes and earnings before interest, taxes, depreciation and amortization
realized in comparable transactions (see "--Opinion of Financial Advisor") were
higher than the merger consideration of $11.75 per share.

Opinion of Financial Advisor

Mod-U-Kraf retained Davenport & Company LLC on behalf of the Board of
Directors on March 23, 2000 to render its opinion to the Mod-U-Kraf Board as to
the fairness, from a financial point of view, to the shareholders of Mod-U-Kraf
of the cash consideration to be paid in connection with any proposed affiliation
with Coachmen. In requesting Davenport's advice and opinion, no restrictions or
limitations were imposed by Mod-U-Kraf upon Davenport with respect to the
investigations made or the procedures followed by Davenport in rendering its
opinion. On April 25, 2000, Davenport delivered its opinion to the effect that
as of the date of such opinion, and based upon and subject to the assumptions,
limitations and qualifications set forth in such opinion, the cash consideration
to be paid to the Mod-U-Kraf shareholders pursuant to the Agreement and Plan of
Merger was fair to the shareholders of Mod-U-Kraf from a financial point of
view. Davenport subsequently updated its opinion to the date of this proxy
statement.

A copy of the Davenport opinion is attached hereto as Appendix C. Mod-U-
----------
Kraf shareholders are urged to read the Davenport opinion in its entirety for
assumptions made, procedures followed, other matters considered and limits of
the review by Davenport. Davenport has consented to the inclusion and
description of its written opinion in this proxy statement.

The Davenport opinion is directed only to the fairness of the cash
consideration, from a financial point of view, to be paid to the Mod-U-Kraf
shareholders and does not constitute a recommendation to any Mod-U-Kraf
shareholder as to how such shareholder should vote at the special meeting.
Davenport was not retained as an advisor or agent to Mod-U-Kraf shareholders or
any other person, other than as an advisor to the Mod-U-Kraf Board. As part of
its investment banking business, Davenport is regularly engaged in the valuation
of businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
Davenport was selected by Mod-U-Kraf to act as its financial advisor because of
Davenport's expertise in the valuation of businesses and their securities and
its expertise in connection with mergers and acquisitions.

-11-

In arriving at its opinion, Davenport reviewed the agreement and plan of
merger. Davenport also reviewed financial and other information that was
publicly available or furnished to it by Mod-U-Kraf, including information
provided during discussions with management. In addition, Davenport compared
certain financial and securities data of Mod-U-Kraf with various other companies
whose securities are traded in public markets, reviewed the proposed financial
terms of the merger with the financial terms of certain other transactions which
it deemed to be relevant, reviewed the historical stock prices and trading
volumes of Mod-U-Kraf shares, reviewed premiums paid in certain other selected
business combinations and conducted such other financial studies, analyses and
investigations as Davenport deemed appropriate for purposes of rendering its
opinion.

In rendering its opinion, Davenport relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to it from public sources, that was provided to it by Mod-U-Kraf or
their representatives, or that was otherwise reviewed by it. Davenport did not
make any independent evaluation of the assets or liabilities of Mod-U-Kraf, nor
did Davenport independently verify the information reviewed by it.

The Davenport opinion is necessarily based on economic, market, financial
and other conditions as they existed on, and on the information made available
to it as of, the date of its opinion. It should be understood that, although
subsequent developments may affect its opinion, Davenport does not have any
obligation to update, revise or reaffirm the Davenport opinion. The Davenport
opinion is just one of the many factors taken into consideration by the Board of
Directors in determining to approve the merger agreement. See "--Recommendation
of the Board of Directors; Reasons for the Merger." The Davenport opinion does
not address the relative merits of the merger as compared to any alternative
business strategies that might exist for Mod-U-Kraf, nor does it address the
effect of any other business combination in which Mod-U-Kraf might engage.

The following is a summary of the presentation made by Davenport to the
Mod-U-Kraf Board at its April 25, 2000 board meeting.

Analysis of Certain Other Publicly Traded Companies. To provide contextual
----------------------------------------------------
data and comparative market information, Davenport compared selected historical
share price, earnings and operating and financial ratios for Mod-U-Kraf to the
corresponding data and ratios of certain other companies whose securities are
publicly traded (collectively, the "Comparable Companies"). The Comparable
Companies were chosen because they possess general business, operating and
financial characteristics representative of companies in the industry in which
Mod-U-Kraf and Coachmen operate. The Comparable Companies consisted of: American
Homestar Corporation, Butler Manufacturing Company, Cavalier Homes, Inc., Centex
Corporation, Champion Enterprises, Inc., Clayton Homes, Inc., Dynamic Homes,
Inc., Fleetwood Enterprises, Inc., Liberty Homes, Inc., Lindal Cedar Homes,
Inc., Miller Building Systems, Inc., Modtech Holdings, Inc., Nobility Homes,
Inc., Oakwood Homes Corp., and Palm Harbor Homes, Inc. Such data and ratios
included Enterprise Value ("Enterprise Value" is defined as the product of the
stock price and total shares outstanding plus Net Debt ("Net Debt" is defined as
total debt less cash and cash equivalents)) as a multiple of net sales and
EBITDA for the trailing twelve

-12-

months ("TTM") and as a multiple of average net sales and EBITDA over the last
three fiscal years ("TYA"). Such data and ratios also included Market Value of
Equity ("Equity Value") as a multiple of TTM net income, TYA net income and
stockholders' equity.

The median multiple of Enterprise Value to TTM revenues ("TTM revenue
multiple") for the Comparable Companies was 0.33x. The median TTM revenue
multiple was then multiplied by Mod-U-Kraf's TTM net sales, for the period
ending December 31, 1999, to arrive at an implied total Enterprise Value which
was then adjusted for Net Debt to yield an implied total Equity Value, and then
divided by Mod-U-Kraf shares outstanding on a fully diluted basis of 825,649
shares as of April 25, 2000 to arrive at an implied price of $9.44 per fully
diluted share. The median multiple of Enterprise Value to three-year average
revenues ("TYA revenue multiple") for the Comparable Companies was 0.36x. The
methodology indicated in the preceding analysis resulted in an implied price of
$8.25 per fully diluted share.

The median multiple of Enterprise Value to TTM EBITDA ("TTM EBITDA
multiple") for the Comparable Companies was 3.8x and the Enterprise Value to
three-year average EBITDA ("TYA EBITDA multiple") for the Comparable Companies
was 4.4x. Following the same methodology as above resulted in implied prices of
$9.81 and $6.83 per fully diluted share, respectively. Median multiples of
Equity Value to Net Income for the TTM and the TYA were 8.0x and 7.4x, resulting
in per share values of $10.15 and $3.97, respectively. Finally, the median price
to book value multiple of the Comparable Companies was 0.85x. Multiplying this
multiple by Mod-U-Kraf's December 31, 1999 book value resulted in a price per
fully diluted share of $5.89.

Comparable Transaction Analysis. Davenport analyzed the transaction
--------------------------------
details of eleven merger and acquisition transactions that occurred over the
last four years within two Standard Industrial Classification ("SIC") codes.
The two SIC codes chosen were 2452 (Prefabricated Wood Buildings) and 1521
(Single Family Housing Construction) because they most closely matched Mod-U-
Kraf's line of business. The median multiple of Total Invested Capital ("TIC")
to revenue for the eleven transactions was 0.47x. Multiplying this multiple by
Mod-U-Kraf's 1999 revenue resulted in a TIC value of $10.5 million from which
debt of $2.4 million was subtracted to reach an Equity Value of $8.1 million, or
$9.76 per share on a fully diluted basis. Following the same methodology for
the comparable transaction EBITDA and EBIT multiples of 6.6x and 8.1x resulted
in per share values of $13.29 and $12.18, respectively. The average of the
Revenue, EBITDA and EBIT multiples was $11.74 per share on a fully diluted
basis.

Discounted Cash Flow Analysis. Davenport also performed a discounted cash
------------------------------
flow analysis. In conducting its analysis, Davenport employed a single stage
discounted cash flow model and used the company's three-year average revenue and
expense amounts, adjusted for certain non-cash items (e.g., depreciation,
amortization and capital expenditures) as a proxy for the company's free cash
flow over a representative business cycle. To convert this estimate of free
cash flow to a current value, Davenport used discount rates ranging from 14% to
18% and assumed growth rates in free cash flow ranging from 4% to 8%. In doing
so, Davenport derived a range of implied values for Mod-U-Kraf. These values
were then divided by the fully diluted shares to determine a range of equity
values per share for Mod-U-Kraf stand-alone. The range of

-13-

implied equity values was $5.86 to $14.21 per share, with a midpoint estimate of
$8.37 per share (computed using a 6% growth rate and 16% discount rate).

Premiums Paid Analysis. Davenport determined the percentage premium of the
-----------------------
offer price over the trading prices one day, one week and four weeks prior to
the announcement date of 50 selected recent merger or acquisition transactions
involving companies not necessarily comparable to Mod-U-Kraf, but which
transactions occurred after January 1, 1999 and ranged in price (using
Enterprise Value) from $5 million to $25 million. The median premiums for the
selected transactions over the trading prices, one day, one week, and 30 days
prior to the announcement dates were 30.9%, 31.7% and 41.0%, respectively. For
the proposed transaction, Davenport derived premiums based on cash consideration
of $11.75 per share to Mod-U-Kraf's stock price one day, one week, and four
weeks prior to the announcement date of 113.6%, 113.6% and 100.0%, respectively.
In addition, Davenport applied the first quartile, median and third quartile
premiums paid values to the corresponding prices in Mod-U-Kraf stock one day,
one week and 30 days prior to the announcement date. These calculations
resulted in implied per share prices for Mod-U-Kraf ranging from $5.55 to $9.80.

The summary set forth above does not purport to be a complete description
of the analyses performed by Davenport, but describes, in summary form, the
principal elements of the presentation made by Davenport to the Mod-U-Kraf Board
on April 25, 2000. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Each of the analyses conducted by Davenport was carried out in
order to provide a different perspective on the transaction and add to the total
mix of information available. Davenport did not form a conclusion as to whether
any individual analysis, considered in isolation, supported or failed to support
an opinion as to fairness from a financial point of view. Rather, in reaching
its conclusion, Davenport considered the results of the analyses in light of
each other and ultimately reached its opinion based on the results of all
analyses taken as a whole. In performing its analyses, Davenport made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters. The analyses performed by Davenport are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.

Pursuant to the terms of an engagement letter dated March 23, 2000, Mod-U-
Kraf paid Davenport a fee of $15,000 upon the execution of the engagement letter
and is obligated to pay an additional fee of $60,000 upon consummation of the
merger. Mod-U-Kraf has also agreed to indemnify Davenport and certain related
persons against certain liabilities in connection with its engagement, including
liabilities under the federal securities laws. The terms of the fee arrangement
with Davenport, which Davenport and Mod-U-Kraf believe are customary in
transactions of this nature, were negotiated at arm's length between Mod-U-Kraf
and Davenport and the Mod-U-Kraf Board was aware of such arrangement, including
the fact that a significant portion of the aggregate fee payable to Davenport is
contingent upon consummation of the merger.

-14-

Certain Effects of The Merger

As a result of the merger, the entire equity interest in Mod-U-Kraf will be
beneficially owned by Coachmen; Mod-U-Kraf's shareholders will have no further
interest in Mod-U-Kraf except their right to receive the cash consideration for
their shares.

In addition, Mod-U-Kraf common stock will no longer be traded on The OTC
Bulletin Board and price quotations with respect to sales of shares in the
public market will no longer be available. The registration of our common stock
under the Securities Exchange Act of 1934, as amended will be terminated, and
this termination will eliminate Mod-U-Kraf's obligation to file periodic
financial and other information with the Securities and Exchange Commission and
will make most other provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b) and the requirements of furnishing a
proxy or information statement in connection with shareholders' meetings, no
longer applicable.

The receipt of cash pursuant to the merger will be a taxable transaction.
See "-- Certain Federal Income Tax Consequences."

Interests of Certain Persons in the Merger

In considering the recommendation of the Board with respect to the merger,
shareholders should be aware that certain officers and directors of Mod-U-Kraf
have interests in connection with the merger that present them with actual or
potential conflicts of interest. The Board of Directors was aware of their
conflicts and considered them in connection with its consideration and approval
of the merger.

Voting Agreements

Bobbie L. Oliver, Mary L. Fitts, Robert K. Fitts, Dale H. Powell, W. Curtis
Carter, and Edwin J. Campbell have each entered into a voting agreement with
Coachmen which provides that they will vote all shares of our common stock owned
by them in favor of the merger proposal, and each of these persons has also
granted Coachmen an irrevocable proxy to vote their shares in favor of the
merger. These agreements restrict the ability of these persons to solicit
third-party proposals for the acquisition of Mod-U-Kraf, but each of these
persons is still permitted to take any action in his or her capacity as a
director or officer of Mod-U-Kraf in order to permit our Board of Directors to
respond, in accordance with the terms of the merger agreement, to a proposal
superior to the proposal made by Coachmen or to otherwise permit our Board of
Directors to comply with its fiduciary duties under applicable law as advised by
counsel. The voting agreements relate to an aggregate of 387,725 shares
(including shares issuable upon the exercise of stock options) or 46.96% of our
outstanding common stock and any shares that any management investor may
subsequently acquire.

-15-

Employment Agreements

To induce Coachmen to enter into the merger agreement, Mod-U-Kraf has
entered into employment agreements with Dale H. Powell, Edwin J. Campbell and
Jeff Powell that would become effective only if the merger is completed.

The employment agreement with Dale H. Powell provides that Mod-U-Kraf would
employ Mr. Powell for a period of three years following completion of the
merger. Mr. Powell would receive a base salary of $75,000 per year during the
term of the agreement and would be eligible to receive annual bonuses, subject
to achieving certain objectives based on the performance of Mod-U-Kraf. The
agreement provides that Mod-U-Kraf may terminate the employment of Mr. Powell
"for cause" or in cases of death or disability. The agreement also contains
restrictive covenants that, during his employment and for one year after the
termination of his employment (unless such termination occurs more than two
years after the merger is completed), would prevent Mr. Powell from competing in
certain respects with Mod-U-Kraf and from hiring any Mod-U-Kraf employees.

The employment agreement with Edwin J. Campbell provides that Mod-U-Kraf
would employ Mr. Campbell until December 31, 2000. Mr. Campbell would receive a
base salary of $70,000 per year during the term of the agreement and would be
eligible to receive a bonus, subject to achieving certain objectives based on
the performance of Mod-U-Kraf. The agreement provides that Mod-U-Kraf may
terminate the employment of Mr. Campbell "for cause" or in case of disability.
The agreement also contains restrictive covenants that, during his employment
and for two years after the termination of his employment, would prevent Mr.
Campbell from competing in certain respects with Mod-U-Kraf and from hiring any
Mod-U-Kraf employees.

The employment agreement with Jeff Powell provides that Mod-U-Kraf would
employ Mr. Powell for a period of two years following completion of the merger.
Mr. Powell would receive a base salary of $55,000 per year during the term of
the agreement and would be eligible to receive annual bonuses, subject to
achieving certain objectives based on the performance of Mod-U-Kraf. Mr. Powell
would also receive 250 shares of Coachmen common stock each year for a period of
four years if he remains employed by Mod-U-Kraf for two years following
completion of the merger. The agreement provides that Mod-U-Kraf may terminate
the employment of Mr. Powell "for cause" or in cases of death or disability.
The agreement also contains restrictive covenants that during his employment and
for one year after the termination of his employment (unless such termination
occurs more than two years after the merger is completed) would prevent Mr.
Powell from competing in certain respects with Mod-U-Kraf and from hiring any
Mod-U-Kraf employees.

Indemnification

Mod-U-Kraf and Coachmen have agreed in the merger agreement that Mod-U-Kraf
will, for a period of six years following the effective time of the merger,
continue to indemnify and hold harmless each of Mod-U-Kraf's present and former
directors and officers to the same extent as currently provided in Mod-U-Kraf's
articles of incorporation and bylaws. Coachmen has

-16-

agreed to guarantee the payment of any indemnification amounts owed to the
officers and directors. In addition, the surviving company will be required to
maintain in effect the indemnification provisions contained in Mod-U-Kraf's
existing articles of incorporation and bylaws.

Certain Federal Income Tax Consequences

The following discussion summarizes the principal federal income tax
consequences of the merger to Mod-U-Kraf shareholders. This discussion is based
on current law, which is subject to change at any time, possibly with
retroactive effect. This discussion is not a complete description of all tax
consequences of the merger and, in particular, does not address all the federal
income tax consequences applicable to shareholders that are subject to special
treatment under federal income tax law, including but not limited to financial
institutions, broker-dealers, persons who are not citizens or residents of the
United States or who are foreign corporations, foreign partnerships or foreign
estates or trusts and shareholders who acquired their stock through the exercise
of an employee stock option or otherwise as compensation. In addition, this
discussion does not address the tax consequences of the merger under applicable
state, local or foreign law.

Each shareholder should consult his or her own tax advisor as to the
specific tax consequences of the merger to such shareholder, in light of that
shareholder's particular circumstances, including the application and effect of
federal, state, local and other tax laws.

The receipt of the merger consideration by shareholders will be a taxable
transaction for federal income tax purposes. Each shareholder will recognize
gain or loss equal to the difference between the shareholder's adjusted basis in
the common stock surrendered in the merger and the amount of cash received
therefor. Such gain or loss generally will be a capital gain or loss provided
that the shareholder held the common stock as a capital asset. Capital gain or
loss will be treated as long-term capital gain or loss if the shareholder held
the common stock for more than one year at the time of the merger. Long-term
capital gain recognized by a non-corporate shareholder is generally subject to
tax at a maximum rate of 20%. In addition, a shareholder's ability to use
capital losses to offset ordinary income is limited.

A shareholder may be subject to backup withholding at the rate of 31% with
respect to the merger consideration received, unless the shareholder provides a
correct taxpayer identification number ("TIN") and otherwise complies with
applicable requirements of the backup withholding rules, or unless an exemption
applies. In order to avoid backup federal income tax withholding, each
shareholder must (unless an exemption applies and is proved in a manner
satisfactory to Coachmen and First Union) provide First Union with a Form W-9 or
Substitute Form W-9 that provides such shareholder's correct TIN and certifies
under penalties of perjury that (i) such TIN is correct (or that such
shareholder is awaiting a TIN) and (ii) such shareholder is not subject to
backup withholding. (Such Form W-9 or Substitute Form W-9 will be included as
part of the letter of transmittal to be provided by First Union.) A shareholder
who does not provide his or her correct TIN or fails to provide the
certifications described above may

-17-

be subject to penalties imposed by the Internal Revenue Service, as well as
backup withholding. Certain shareholders (including, among others, corporations)
are not subject to backup withholding.

The receipt of cash pursuant to a shareholder's exercise of dissenters'
rights will be a taxable transaction. Any shareholder considering the exercise
of dissenters' rights should consult a tax advisor to determine the tax
consequences of exercising such rights.

Neither Mod-U-Kraf nor Coachmen will recognize gain or loss for tax
purposes as a result of the merger.

Rights of Dissenting Shareholders

Holders of record of Mod-U-Kraf common stock who comply with the procedures
described below will be entitled to dissenters' rights under Article 15 of the
Virginia Stock Corporation Act. Where appropriate, shareholders are urged to
consult with their legal counsel to determine the appropriate procedures for the
making of a notice of intent (as described below).

A vote in favor of the merger by an eligible holder will result in a waiver
of such eligible holder's dissenters' rights.

The following discussion is only a summary and does not purport to be a
complete statement of the law pertaining to dissenters' rights under the
Virginia Stock Corporation Act. The text of Article 15 of the Virginia Stock
Corporation Act is reprinted in its entirety as Appendix D to this proxy
----------
statement.

Under the Virginia Stock Corporation Act, eligible holders who follow the
procedures set forth in Article 15 of the Virginia Stock Corporation Act will be
entitled to receive payment of the "fair value" of such shares. Any eligible
holder who wishes to exercise dissenters' rights should review the following
discussion and Appendix D carefully because failure to comply in a timely and
----------
proper manner with the procedures specified may result in the loss of
dissenters' rights under the Virginia Stock Corporation Act.

An eligible holder wishing to exercise dissenters' rights must deliver to
Mod-U-Kraf, prior to or at the shareholders' meeting (but in any event before
the vote is taken), a written notice of intent to demand payment for the
eligible holder's shares. An eligible holder delivering a notice of intent must
not vote his shares in favor of the merger or he will lose his dissenters'
rights. All notices of intent should be sent or delivered to Mod-U-Kraf,
Attention: President, 201 Old Franklin Turnpike, P.O. Box 573, Rocky Mount,
Virginia 24151.

Within ten days after the effective date of the merger, if the shareholders
approve the merger agreement, Mod-U-Kraf shall deliver a dissenter's notice in
writing to all dissenting holders. The dissenter's notice shall:

. state where the dissenting holder's payment demands shall be sent and
where and when stock certificates shall be deposited;

-18-

. set a date by which the surviving corporation must receive the
payment demand; and

. include such other information as required by the Virginia Stock
Corporation Act. A dissenting holder to whom a notice is sent must
demand payment within the time specified in the dissenter's notice,
deposit his stock certificates in accordance with the terms of the
dissenter's notice and make certain certifications required by the
Virginia Stock Corporation Act. If a dissenting holder fails to take
such actions, the dissenting holder loses his dissenters' rights.

Within 30 days of Mod-U-Kraf's receipt of a demand for payment from a
dissenting holder, Mod-U-Kraf must pay the dissenting holder Mod-U-Kraf's
estimate of the fair value of the dissenting holder's shares plus interest.
With any payment, Mod-U-Kraf must provide its most recent year-end and interim
financial statements, an explanation of how Mod-U-Kraf calculated the fair value
of the shares and interest, a statement of the dissenting holder's right to
continue to demand fair value for his shares and a copy of Article 15 of the
Virginia Stock Corporation Act. Mod-U-Kraf's payment obligation may be enforced
by a dissenting holder on an expedited basis in a Virginia circuit court, if
necessary.

A dissenting holder who is not satisfied with the amount paid or offered by
Mod-U-Kraf must notify Mod-U-Kraf of the dissenting holder's own estimate of the
fair value of his shares and the amount of interest due (less any amount already
received by the dissenting holder from Mod-U-Kraf). This notice must be given
in writing within 30 days of the date that Mod-U-Kraf made or offered to make
payment for the dissenting holder's shares.

If a dissenting holder's demand for payment remains unsettled, Mod-U-Kraf
is obligated to commence a proceeding to determine the fair value of the shares
and accrued interest within 60 days of the receipt of the dissenting holder's
payment demand. If Mod-U-Kraf fails to commence such proceeding in accordance
with the Virginia Stock Corporation Act, Mod-U-Kraf must pay the dissenting
holder the amount demanded by the dissenting holder. The appraisal proceeding
must be brought in a Virginia circuit court.

Dissenting holders considering seeking appraisal should be aware that the
fair value of their shares of common stock, as determined under Article 15 of
the Virginia Stock Corporation Act, could be more than, the same as or less than
the merger consideration that would be paid to them pursuant to the merger
agreement and the plan of merger. The costs and expenses of the appraisal
proceeding will be determined by the court and assessed against Mod-U-Kraf
unless the court determines that the dissenting holder did not act in good faith
in demanding payment of the fair value of their shares, in which case such costs
and expenses may be assessed against the dissenting holder.

Dissenting holders will only be entitled to receive payment in accordance
with Article 15 of the Virginia Stock Corporation Act and will not be entitled
to vote their shares of common stock or exercise any other rights of a
shareholder. A dissenting holder may withdraw his demand only with the consent
of Mod-U-Kraf.

-19-

If any eligible holder who demands appraisal of his shares under Article 15
fails to perfect, or effectively withdraws or loses, his right to appraisal, as
provided in the Virginia Stock Corporation Act, the shares of Mod-U-Kraf stock
of such holder will be converted into the right to receive the merger
consideration in accordance with the merger agreement and the plan of merger.

Failure to follow the steps required by Article 15 of the Virginia Stock
Corporation Act for perfecting dissenters' rights may result in the loss of such
rights. The preceding discussion summarizes for general information the
dissenters' rights provisions of Article 15 of the Virginia Stock Corporation
Act. Shareholders are urged to consult Appendix D which sets forth in full
----------
Article 15 of the Virginia Stock Corporation Act. This summary is qualified in
its entirety by a reference to Article 15 of the Virginia Stock Corporation Act.

THE MERGER AGREEMENT

General

The merger agreement provides that, subject to the approval of the merger
by the shareholders of Mod-U-Kraf and satisfaction of certain other conditions,
Coachmen Acquisition Corporation will be merged with and into Mod-U-Kraf and
Mod-U-Kraf will be the surviving company. The merger will become effective upon
the filing of articles of merger with the Virginia State Corporation Commission.
At the effective time, Mod-U-Kraf's Articles of Incorporation and Bylaws will be
amended to conform to the Articles of Incorporation and Bylaws of Coachmen
Acquisition Corporation in effect immediately prior to the effective time. In
addition, the directors and officers of Coachmen Acquisition Corporation will
become the directors and officers of Mod-U-Kraf upon consummation of the merger.
All references and summaries of the merger agreement in this proxy statement are
qualified in their entirety by reference to the text of the merger agreement,
which is attached hereto as Appendix A.
----------

Upon consummation of the merger, the Mod-U-Kraf shareholders as of the
record date will be entitled to receive $11.75 in cash, without interest, for
each share of common stock owned by them. Under Virginia law, dissenters'
rights are available for shares of any dissenting shareholder who complies with
the provisions of Article 15 of the Virginia Stock Corporation Act. See "The
Merger--Rights of Dissenting Shareholders." After the merger, shareholders will
possess no other interest in or rights as shareholders of Mod-U-Kraf.

Effective Time of the Merger and Payment for Shares

The effective time is currently expected to occur as soon as practicable
after the special meeting, subject to approval of the merger agreement at the
special meeting and satisfaction or waiver of the terms and conditions of the
merger agreement. Detailed instructions with regard to the surrender of stock
certificates, together with a letter of transmittal, will be forwarded to
shareholders by Mod-U-Kraf's transfer agent, First Union National Bank,
Charlotte, North Carolina, promptly following the effective time. Shareholders
should not submit their stock certificates to First Union until they have
received such materials. First Union will send payment

-20-

of the merger consideration to shareholders as promptly as practicable following
receipt by First Union of their stock certificates and other required documents.
No interest will be paid or accrued on the cash payable upon the surrender of
stock certificates. Shareholders may be subject to backup withholding at a rate
of 31%, unless the shareholder provides First Union with a correct taxpayer
identification number and makes certain certifications (or is exempt from backup
withholding). See "The Merger - Certain Federal Income Tax Consequences."
Shareholders should not send any stock certificates to Mod-U-Kraf or First Union
at this time.

Conversion of Securities

At the effective time, subject to the terms, conditions and procedures set
forth in the merger agreement, each share of common stock issued and outstanding
immediately prior to the effective time (other than the dissenting shares) will,
by virtue of the merger, be automatically converted into the right to receive
the merger consideration. Each holder of a stock certificate formerly
representing any shares (other than the dissenting shares) will after the
effective time cease to have any rights with respect to such shares other than
the right to receive the merger consideration for such shares upon surrender of
the stock certificate. Shares of common stock of Coachmen Acquisition
Corporation issued and outstanding immediately prior to the effective time shall
become shares of the surviving company and shall thereafter constitute all the
issued and outstanding shares of Mod-U-Kraf.

Payment to be made to a person other than the registered holder of the
stock certificate surrendered is conditioned upon the stock certificate so
surrendered being properly endorsed and otherwise in proper form for transfer,
as determined by First Union. Further, the person requesting such payment will
be required to pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the stock certificate
surrendered or establish to the satisfaction of First Union that such tax has
been paid or is not payable. Notwithstanding the foregoing, neither First Union
nor any party to the merger agreement will be liable to any holder of stock
certificates formerly representing shares for any amount paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.

Conditions and Obligations to the Merger

Each party's obligation to effect the merger is subject to the satisfaction
of each of the following conditions at or prior to the effective time:

. the merger agreement and the transactions contemplated therein shall
have been approved and adopted by the affirmative vote of the holders
of more than 66-2/3% of the outstanding shares of common stock
entitled to vote thereon in accordance with Virginia law; and

. no party to the merger agreement shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction
which enjoins or prohibits the consummation of the merger.

-21-

The obligations of Mod-U-Kraf to complete the merger are subject to the
satisfaction of certain conditions at or prior to the effective time, unless
waived by Mod-U-Kraf, including:

. the representations and warranties of Coachmen and Coachmen
Acquisition Corporation in the merger agreement shall be true and
correct in all material respects on and as of the closing of the
merger, except as otherwise permitted by the merger agreement;

. Coachmen and Coachmen Acquisition Corporation shall have performed or
complied in all material respects with all obligations required by
the merger agreement to be performed or complied with by them at or
prior to the effective time;

. Coachmen shall have delivered to Mod-U-Kraf certain closing
certificates; and

. Mod-U-Kraf shall have received a legal opinion from Wyatt, Tarrant &
Combs, legal counsel to Coachmen.

The obligations of Coachmen to complete the merger are subject to the
satisfaction of certain conditions at or prior to the effective time, unless
waived by Coachmen, including:

. the representations and warranties of Mod-U-Kraf in the merger
agreement shall be true and correct in all material respects on and
as of the closing of the merger, except as otherwise permitted by the
merger agreement;

. Mod-U-Kraf shall have performed or complied in all material respects
with all obligations, agreements and covenants required by the merger
agreement to be performed or complied with by it at or prior to the
effective time;

. Mod-U-Kraf shall have delivered to Coachmen certain closing
certificates;

. Coachmen shall have received a legal opinion from Hunton & Williams,
legal counsel to Mod-U-Kraf; and

. Mod-U-Kraf shall have delivered to Coachmen a current certificate of
good standing from the Virginia State Corporation Commission.

Representations and Warranties

Mod-U-Kraf has made representations and warranties in the merger agreement
regarding, among other things, its organization and good standing, corporate
authority to enter into the transaction, its capitalization, requisite
governmental and other consents and approvals, financial statements, absence of
liabilities, contracts, employment and labor matters, litigation, environmental
matters, insurance, tax matters, intellectual property matters, title to its
assets, the

-22-

content and submission of forms and reports required to be filed by Mod-U-Kraf
with the Securities and Exchange Commission, and its receipt of a fairness
opinion from Davenport.

Coachmen and Coachmen Acquisition Corporation have made representations and
warranties in the merger agreement regarding, among other things, their
organization and good standing, their capitalization, their authority to enter
into the transaction, adequacy of their financial resources to pay the merger
consideration and the absence of any pending claims, actions or proceedings that
would materially hinder or delay consummation of the merger.

The representations and warranties of the parties in the merger agreement
will expire upon consummation of the merger. After such expiration none of the
parties to the merger agreement or their respective officers, directors or
principals will have any liability for any such representations or warranties.

Covenants

Mod-U-Kraf has agreed in the merger agreement that, until the effective
time of the merger or the earlier termination of the merger agreement, we will
conduct our business only in the ordinary course consistent with past practice,
use all reasonable efforts to preserve our business organization, goodwill and
third party relationships and generally maintain the services of our officers
and employees. In addition, we have agreed that we will not take certain actions
without Coachmen's prior written consent, including without limitation:

. incur or commit to capital expenditures outside of the ordinary course
of business consistent with past practices;

. enter into or amend any contract involving marketing, distribution,
development or similar rights with respect to any of our products or
technology, or amend or modify any other contracts, except in the
ordinary course of business;

. declare, set aside or pay dividends or make distributions in respect of
our capital stock;

. split, combine, reclassify, redeem or repurchase our capital stock, or
issue or authorize the issuance of any securities in respect of our
capital stock;

. authorize, issue or sell any shares of our capital stock;

. amend our articles of incorporation, bylaws or other governing
documents;

. acquire or purchase a substantial equity interest or a substantial
portion of the assets of any other entity;

. sell, lease or dispose of any material assets, except in the ordinary
course of business consistent with past practices;

-23-

. incur any indebtedness, except for trade credit or advances to employees
in the ordinary course of business consistent with past practices, or
guarantee any indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;

. make loans to others, except to contractors or customers in the ordinary
course of business consistent with past practices, or purchase debt
securities of others or amend the terms of any outstanding loan
agreement;

. grant any severance or termination pay to any director or officer, or to
any other employee except as consistent with past practices;

. enter into or amend employment agreements and employee benefit plans or
increase the amounts payable to our directors, officers, and employees;

. revalue any of our assets, including writing down the value of inventory
or writing off notes or accounts receivable, except in the ordinary
course of business;

. pay or discharge any claim, liability or obligation, in any amount in
excess of $10,000 individually or $30,000 in the aggregate, except in
the ordinary course of business;

. except as required by law, make or rescind any election relating to
taxes;

. enter into a strategic alliance or joint marketing arrangement or
agreement;

. except as consistent with past practices, hire, terminate or enter into
settlement agreements with any employees, or encourage employees to
resign from Mod-U-Kraf; or

. take or refrain from taking any action to cause our representations and
warranties to be untrue or prevent us from performing our covenants in
the merger agreement.

In addition, we and Coachmen have agreed, that, from the date of the merger
agreement until the effective time or earlier termination of the merger
agreement, we will use best efforts to take all appropriate actions as are
necessary to cause the merger to be consummated.

Other Agreements

In addition to our agreements regarding the conduct of our business, we
have also agreed to take several other actions:

-24-

. we have agreed to furnish access to our facilities and any information
concerning us in connection with the merger agreement to Coachmen as it
may reasonably request; and

. we have agreed to give Coachmen prompt notice of any event which is
likely to cause our representations and warranties in the merger
agreement to be untrue and any failure to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by us
under the merger agreement.

No Solicitation

The merger agreement provides that we will not, and we will not permit any
of our officers, directors, employees or any investment banker, financial
advisor, attorney, accountant, consultant or other representative to, directly
or indirectly, solicit or take certain other actions with respect to an
acquisition proposal. However, we may, in response to an unsolicited proposal
received prior to the special meeting that our Board of Directors determines in
good faith is more favorable to our shareholders from a financial point of view
than Coachmen's offer and is reasonably capable of being completed, subject to
obtaining an executed confidentiality agreement, furnish any non-public
information in connection with, negotiate with respect to, or enter into an
agreement with respect to, the more favorable proposal.

The merger agreement further provides that the Mod-U-Kraf Board of
Directors will recommend approval of the merger agreement to the Mod-U-Kraf
shareholders unless the Mod-U-Kraf Board of Directors, after having consulted
with and considered the advice of outside counsel, reasonably determines in good
faith that the making of this recommendation, or the failure to withdraw or
modify its recommendation, would constitute a breach of its fiduciary duties.

Termination, Amendment and Waiver

Termination

Notwithstanding any other provision of the merger agreement, the merger
agreement may be terminated, and the merger abandoned, prior to the effective
time, either before or after its approval by the shareholders of Mod-U-Kraf:

. by mutual, written agreement of Mod-U-Kraf and Coachmen;

. by Coachmen or by Mod-U-Kraf if the effective time shall not have
occurred by June 30, 2000; provided, however, that the right to
terminate the merger agreement under this section shall not be
available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the merger to occur
on or before such date and such action or failure to act constitutes
breach of the merger agreement;

-25-

. by Coachmen or by Mod-U-Kraf if: (i) there shall be a final non-
appealable order of a federal or state court in effect preventing
consummation of the merger, or (ii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed
applicable to the merger by any governmental entity that would make
consummation of the merger illegal;

. by Coachmen if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed
applicable to the merger by any governmental entity, which would (i)
prohibit Coachmen's ownership or operation of any portion of the
business of Mod-U-Kraf, or (ii) compel Coachmen or Mod-U-Kraf to
dispose of or hold separate all or a material portion of the business
or assets of Mod-U-Kraf or Coachmen as a result of the merger;

. by either Mod-U-Kraf or Coachmen if it is not in material breach of
its obligations under the merger agreement and there has been a
material breach of any representation, warranty, covenant or agreement
of the other party contained in the merger agreement such that the
conditions in the merger agreement would not be satisfied and such
breach has not been cured within 10 calendar days after written notice
thereof to the breaching party; provided, however, that no cure period
shall be required for a breach which by its nature cannot be cured; or

. by Mod-U-Kraf if we receive, prior to the effective time, a proposal
from another party that the Mod-U-Kraf Board of Directors determines
in good faith is more financially favorable to the Mod-U-Kraf
shareholders than the Coachmen offer and is reasonably capable of
being completed, and the Mod-U-Kraf Board of Directors authorizes us
to enter into a definitive agreement concerning such transaction;
provided that Mod-U-Kraf must first provide information about the
superior proposal to Coachmen and Mod-U-Kraf may not terminate the
merger agreement if Coachmen makes an equally attractive offer within
five days of receiving such information.

Break-Up Fee

If (a) Mod-U-Kraf breaches its covenants relating to solicitation of an
acquisition proposal or provides to Coachmen written notice that the merger
agreement is terminated in the absence of a material breach of the
representations, warranties and covenants of Coachmen and Coachmen Acquisition
Corporation or governmental intervention to prohibit the merger, and (b) within
six months of such event, Mod-U-Kraf signs a letter of intent or other agreement
relating to the acquisition of a material portion of Mod-U-Kraf capital stock or
of Mod-U-Kraf, its assets, or business, in whole or in part, whether directly or
indirectly, through purchase, merger, consolidation, or otherwise (other than
sales of inventory or immaterial portions of Mod-U-Kraf's assets in the ordinary
course) and such transaction is ultimately completed, then Mod-U-Kraf will pay
to Coachmen a break-up fee of $500,000 by wire transfer of immediately available
funds.

-26-

Amendment

The merger agreement may be amended by Mod-U-Kraf and Coachmen at any time
by execution of an instrument in writing signed (i) on behalf of Coachmen, and
(ii) on behalf of Mod-U-Kraf.

Waiver

At any time prior to the effective time, Coachmen and Mod-U-Kraf may, to
the extent legally allowed:

. extend the time for the performance of any of the obligations of the
other party pursuant to the merger agreement;

. waive any inaccuracies in the representations and warranties made to
such party in the merger agreement or in any document delivered
pursuant to the merger agreement; and

. waive compliance with any of the agreements or conditions for the
benefit of such party contained in the merger agreement. Any
agreement to any such extension or waiver shall be valid only if in
writing and signed on behalf of a party.

Regulatory Approvals

No federal or state regulatory approvals are required to be obtained that
have not already been obtained, nor any regulatory requirements complied with,
in connection with the consummation of the merger by any party to the merger
agreement, except for (i) the requirements of Virginia law in connection with
shareholder approval and consummation of the merger and (ii) the requirements
under the federal securities laws.

Expenses of the Merger

Each of the parties will be responsible for and bear all of their own
costs and expenses incurred at any time in connection with pursuing or
consummating the merger. However, if Coachmen terminates the merger agreement,
it shall promptly reimburse Mod-U-Kraf for all of its reasonable out-of-pocket
expenses incurred in connection with the merger, up to a maximum of $25,000,
unless it terminates as a result of:

. a breach by Mod-U-Kraf of the merger agreement;

. Coachmen's discovery that the business or financial condition of Mod-
U-Kraf is materially and adversely different from that disclosed in
Mod-U-Kraf's audited and interim financial statements;

. the failure of the Mod-U-Kraf to deliver certain closing
certificates; or

-27-

. the existence of litigation involving Mod-U-Kraf or Mod-U-Kraf
capital stock which has not been previously disclosed in writing to
Coachmen.

MARKET PRICES OF COMMON STOCK AND DIVIDENDS

Mod-U-Kraf common stock is traded sporadically on The OTC Bulletin Board
under the symbol "MODU." The following table sets forth, for the periods
indicated, the high and low bid and ask prices of the common stock as reported
on the OTCBB and dividends paid.

Quotations Dividends
------------------------------------------------------------ -------------
BID ASK
------------------------------ ----------------------------
High Low High Low
-------------- -------------- ------------- -------------

1998
First Quarter $6 $6 $7-1/2 $7-1/2 $0.03
Second Quarter 5-7/8 5-7/8 7-1/2 7-1/2 0.03
Third Quarter 5-7/8 5-7/8 7-1/2 7-1/2 0.03
Fourth Quarter 5-7/8 5-3/4 8 7-1/2 0.03

1999
First Quarter 5-3/4 5-3/4 8 8 0.03
Second Quarter 5-3/4 5-3/4 8 8 0.03
Third Quarter 5-3/4 5-3/4 8 8 0.03
Fourth Quarter 5-3/4 5-3/4 8 8 0.03

On March 10, 2000, the last trading day prior to the public announcement of
the proposed merger, the bid and ask sales price per share of Mod-U-Kraf common
stock was $5.50. On May 23, 2000, the closing price per share of Mod-U-Kraf
common stock was $11.75.

At May 23, 2000, there were 825,649 shares of Mod-U-Kraf common stock
outstanding and 361 holders of record of Mod-U-Kraf common stock.

-28-

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of May 23, 2000 the number of shares and
percentage of outstanding common stock owned by (i) each person known to the
company to be the beneficial owners of more than five percent (5%) of Mod-U-
Kraf's outstanding common stock on the Record Date, as disclosed in certain
reports regarding such ownership filed by such persons with Mod-U-Kraf and with
the Securities and Exchange Commission ("SEC") in accordance with Sections 13(d)
and 13(g) of the Securities Exchange Act of 1934, as amended and (ii) all
directors and executive officers of Mod-U-Kraf, Coachmen and Coachmen
Acquisition Corporation as a group.

Amount and Nature of
--------------------------------
Name of Beneficial Owner Beneficial Ownership Percent of Class
- ------------------------------ ----------------------------------- --------------------------------

Edwin J. Campbell 30,052(1)(2) 3.64%
Dale H. Powell 69,000(2) 8.36
W. Curtis Carter 36,720(2) 4.45
Bobbie L. Oliver 173,406(2) 21.00
Mary L. Fitts 66,000(2)(3) 7.99
All officers and directors as
a group (8 persons) 375,490 45.48

Robert K. Fitts 78,547(2)(4) 9.51
P.O. Box 82
Boones Mill, VA 24065

Coachmen Industries, Inc. 437,614(5) 53.00
2831 Dexter Drive
Elkhart, Indiana 6515

(1) Includes shares held in various fiduciary capacities and owned by or with
certain relatives.

(2) The owner of these shares has signed a voting agreement with Coachmen
agreeing to vote these shares in favor of the merger proposal and has also
granted Coachmen an irrevocable proxy to vote these shares in favor of the
merger proposal.

(3) Includes 66,000 shares with respect to which voting and investment power is
shared with Robert K. Fitts.

(4) Includes 12,547 shares with respect to which Mr. Fitts has sole voting and
investment power and 66,000 shares with respect to which such power is
shared with Mary L. Fitts.

(5) Includes 49,889 shares purchased in May 2000 and 387,725 shares for which
the owner has signed a voting agreement with Coachmen agreeing to vote
these shares in favor of the merger proposal and has also granted Coachmen
an irrevocable proxy to vote these shares in favor of the merger proposal.

-29-

SHAREHOLDER PROPOSALS

If the merger is not completed, any shareholder proposal that is submitted
to us for inclusion in our proxy statement for our annual meeting in 2001
pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 must be
received by us before the close of business on November 2, 2000. In addition,
if Mod-U-Kraf receives notice of a shareholder proposal after January 16, 2001,
the persons named as proxies in the proxy statement for the 2001 Annual Meeting
will have discretionary authority to vote on such proposal at the 2001 Annual
Meeting.

SEC rules establish standards as to which shareholder proposals are
required to be included in a proxy statement for an annual meeting. We will
only consider proposals meeting the requirements of applicable SEC rules.

WHERE YOU CAN FIND MORE INFORMATION

As required by law, Mod-U-Kraf files reports, proxy statements and other
information with the SEC. The reports, proxy statements and other information
that we file with the SEC contain additional information about us. You may
access this information via the SEC's web site at http://www.sec.gov. You may
also read and copy this information at the following offices of the SEC:

Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661

For further information concerning the SEC's public reference rooms, you
may call the SEC at 1-800-SEC-0330. You may obtain copies of this information
by mail from the public reference section of the SEC, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, at prescribed rates.

The delivery of this proxy statement shall not imply that there has been no
change in the affairs of Mod-U-Kraf or Coachmen since the date hereof or that
the information in this proxy statement is current as of any time subsequent to
the date hereof.

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APPENDIX A

Agreement and Plan of Merger
by and among
Coachmen Industries, Inc.,
Coachmen Acquisition Corporation and
Mod-U-Kraf Homes, Inc.

Dated as of May 1, 2000

TABLE OF CONTENTS

Page
----

ARTICLE I THE REORGANIZATION........................................................................ 1
1.1. The Merger........................................................................... 1
1.2. Effective Time....................................................................... 2
1.3. Effect of the Merger................................................................. 2
1.4. Certificate of Incorporation and Bylaws.............................................. 2
1.5. Directors and Officers............................................................... 2
1.6. Effect of Merger on the Capital Stock of the Constituent Corporations................ 3
1.7. Dissenting Shares.................................................................... 5
1.8. Surrender of Certificates............................................................ 6
1.9. No Further Ownership Rights in Company Capital Stock................................. 6
1.10. Lost, Stolen or Destroyed Certificates............................................... 7
1.11. Taking of Necessary Action; Further Action........................................... 7

ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY... ........................................ 7
2.1. Organization of the Company.......................................................... 7
2.2. Company Capital Structure............................................................ 8
2.3. Authority............................................................................ 8
2.4. No Conflict.......................................................................... 9
2.5. Consents............................................................................. 9
2.6. Company Financial Statements......................................................... 10
2.7. SEC Filings.......................................................................... 10
2.8. Information Supplied................................................................. 10
2.9. Opinion of Financial Advisor......................................................... 11
2.10. No Undisclosed Liabilities........................................................... 11
2.11. Changes.............................................................................. 11
2.12. Tax Matters.......................................................................... 13
2.13. Restrictions on Business Activities.................................................. 16
2.14. Title of Properties; Absence of Liens and Encumbrances; Condition of Equipment....... 16
2.15. Intellectual Property................................................................ 17
2.16. Agreements, Contracts and Commitments................................................ 19
2.17. Interested Party Transactions........................................................ 20
2.18. Governmental Authorization........................................................... 20
2.19. Litigation........................................................................... 20
2.20. Accounts Receivable/Inventory........................................................ 21
2.21. Minute Books......................................................................... 21
2.22. Environmental Matters................................................................ 21
2.23. Brokers' and Finders' Fees........................................................... 22
2.24. Employee Benefit Plans and Compensation.............................................. 22
2.25. Insurance............................................................................ 26
2.26. Compliance with Laws................................................................. 26

TABLE OF CONTENTS
(continued)

Page
----

2.27. Warranties; Indemnities................................................... 26
2.28. Complete Copies of Materials.............................................. 27
2.29. Representations Complete.................................................. 27

ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO........................... 27
3.1. Organization, Standing and Power.......................................... 27
3.2. Authority................................................................. 27
3.3. No Conflict............................................................... 28
3.4. Capital Resources......................................................... 28
3.5. Consents.................................................................. 28
3.6. Brokers' and Finders' Fees................................................ 28
3.7. Representations Complete.................................................. 28

ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME........................................... 29
4.1. Conduct of Business of the Company........................................ 29
4.2. No Solicitation........................................................... 31
4.3. Break-Up Fee.............................................................. 32

ARTICLE V ADDITIONAL AGREEMENTS.......................................................... 33
5.1. Shareholders' Meeting..................................................... 33
5.2. Access to Information..................................................... 34
5.3. Confidentiality........................................................... 34
5.4. Company's Expenses........................................................ 34
5.5. Public Disclosure......................................................... 35
5.6. Consents.................................................................. 35
5.7. Reasonable Efforts........................................................ 35
5.8. Notification of Certain Matters........................................... 35
5.9. Additional Documents and Further Assurances............................... 36
5.10. Release of Liens.......................................................... 36
5.11. Indemnification........................................................... 36

ARTICLE VI CONDITIONS TO THE MERGER...................................................... 36
6.1. Conditions to Obligations of Each Party to Effect the Merger.............. 36
6.2. Conditions to the Obligations of Parent and Newco......................... 37
6.3. Conditions to Obligations of the Company.................................. 39

ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............................................ 39
7.1. Termination............................................................... 39
7.2. Effect of Termination..................................................... 41
7.3. Amendment................................................................. 41
7.4. Extension; Waiver......................................................... 41

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TABLE OF CONTENTS
(continued)

Page
----

ARTICLE VIII GENERAL PROVISIONS................................................ 41
8.1. Notices.......................................................... 41
8.2. Interpretation................................................... 43
8.3. Counterparts..................................................... 43
8.4. Entire Agreement; Assignment..................................... 43
8.5. Severability..................................................... 43
8.6. Other Remedies................................................... 43
8.7. Governing Law.................................................... 44
8.8. Rules of Construction............................................ 44
8.9. Approval of Parent............................................... 44

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INDEX OF EXHIBITS

Exhibit Description

Exhibit A Form of Employment and Noncompete Agreement

Exhibit B Principal Shareholders

Exhibit C Form of Voting Agreement

Exhibit D Form of Plan of Merger

Exhibit E List of Key Employees

Exhibit F Form of Legal Opinion of Counsel to the Company

Exhibit G Form of Legal Opinion of Counsel to Parent

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of May 1, 2000 by and among Coachmen Industries, Inc., an Indiana
corporation ("Parent"), Coachmen Acquisition Corporation, a Virginia corporation
("Newco"), and Mod-U-Kraf Homes, Inc., a Virginia corporation (the "Company").

RECITALS

A. The Boards of Directors of each of Parent, Newco and the Company believe
it is in the best interests of each company and its respective shareholders for
Parent to acquire the Company by the statutory merger of Newco with and into the
Company pursuant to which the shareholders of the Company shall be entitled to
receive cash (the "Merger").

B. The Company, on the one hand, and Parent and Newco, on the other hand,
desire to make certain representations, warranties, covenants and other
agreements in connection with the Merger.

C. Concurrently with the execution and delivery of this Agreement, as a
material inducement to Parent and Newco to enter into this Agreement, (i) Dale
H. Powell and Edwin J. Campbell as well as certain other Key Employees
(hereinafter defined) shall enter into Employment and Noncompete Agreements,
each in the form attached hereto as Exhibit A which shall become effective at
Closing (the "Employment Agreements"), with Parent and (ii) as a material
inducement to Parent and Newco to enter into this Agreement, the principal
shareholders of the Company listed on Exhibit B hereto (each a "Principal
Shareholder" and collectively the "Principal Shareholders") are entering into
voting agreements in the form attached hereto as Exhibit C (the "Voting
Agreements").

NOW, THEREFORE, in consideration of the mutual agreements, covenants and
other promises set forth herein, the mutual benefits to be gained by the
performance thereof, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged and accepted, the parties
hereby agree as follows:

ARTICLE I
THE REORGANIZATION

1.1. The Merger.

At the Effective Time and subject to and upon the terms and conditions of
this Agreement and the applicable provisions of the Virginia Stock Corporation
Act ("VSCA"), Newco shall be merged with and into the Company, the separate
corporate existence of Newco shall cease and the Company shall continue as the
surviving corporation and as a wholly-owned subsidiary of Parent. The
corporation surviving the Merger of Newco into the Company is sometimes referred
to hereinafter as the "Surviving Corporation."

1.2. Effective Time.

Unless this Agreement is earlier terminated pursuant to Section 7.1 hereof,
the closing of the Merger (the "Closing") will take place no later than five (5)
business days following satisfaction or waiver of the conditions set forth in
Article VI hereof, at the offices of Brown, Edwards and Company, 319 McClanahan
Street, S.W., Roanoke, Virginia, unless another time and/or place is mutually
agreed upon in writing by Parent and the Company. The date upon which the
Closing actually occurs shall be referred to herein as the "Closing Date." On
the Closing Date, the parties hereto shall cause the Merger to be consummated by
filing a Plan of Merger (or like instrument) in the form attached hereto as
Exhibit D, with the Virginia State Corporation Commission (the "Plan of
Merger"), in accordance with the applicable provisions of Virginia Law (the time
of acceptance by the Virginia State Corporation Commission of such filing shall
be referred to herein as the "Effective Time").

1.3. Effect of the Merger.

At the Effective Time, the effect of the Merger shall be as provided in the
applicable provisions of the VSCA. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Newco shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
Newco shall become the debts, liabilities and duties of the Surviving
Corporation.

1.4. Certificate of Incorporation and Bylaws.

(a) Unless otherwise determined by Parent prior to the Effective Time, the
articles of incorporation of Newco, as in effect immediately prior to the
Effective Time, shall be the articles of incorporation of the Surviving
Corporation at the Effective Time until thereafter amended in accordance with
applicable law and as provided in such articles of incorporation; provided,
however, that at the Effective Time, Article I of the articles of incorporation
of the Surviving Corporation shall be amended and restated in their entirety to
read as follows: "The name of the corporation is Mod-U-Kraf Homes, Inc."

(b) Unless otherwise determined by Parent prior to the Effective Time, the
bylaws of Newco, as in effect immediately prior to the Effective Time but
amended to reflect that the name of the corporation is "Mod-U-Kraf Homes, Inc.",
shall be the bylaws of the Surviving Corporation at the Effective Time until
thereafter amended in accordance with applicable law and as provided in the
articles of incorporation of the Surviving Corporation and such bylaws.

1.5. Directors and Officers.

Unless otherwise determined by Parent prior to the Effective Time, the
directors of Newco immediately prior to the Effective Time shall be the
directors of the Surviving Corporation immediately after the Effective Time,
each to hold the office of a director of the Surviving Corporation in accordance
with the provisions of applicable law, and the articles of incorporation and
bylaws of the Surviving Corporation, as applicable, until their successors are

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duly elected and qualified. Unless otherwise determined by Parent prior to the
Effective Time, the officers of Newco immediately prior to the Effective Time
shall be the officers of the Surviving Corporation immediately after the
Effective Time, each to hold office in accordance with the provisions of the
bylaws of the Surviving Corporation.

1.6. Effect of Merger on the Capital Stock of the Constituent
Corporations.

(a) Definitions. For all purposes of this Agreement, the following
terms shall have the following respective meanings:

"1933 Act" means the Securities Act of 1933, as amended.

"1934 Act" means the Securities Exchange Act of 1934, as
amended.

"Code" means the Internal Revenue Code of 1986, as amended.

"Company Capital Stock" shall mean (i) shares of Company
Common Stock, and (ii) any other shares of capital stock of the Company.

"Company Common Stock" shall mean shares of common stock,
$1.00 par value, of the Company.

"Company Options" shall mean all issued and outstanding
options, warrants or other rights to purchase or otherwise acquire Company
Capital Stock (whether or not vested) held by any person or entity.

"Exchange Amount" shall mean an amount equal to the quotient
obtained by dividing (x) the Total Consideration by (y) the Total Outstanding
Shares.

"GAAP" shall mean United States generally accepted
accounting principles consistently applied.

"Key Employees" shall mean those employees of the Company
listed on Exhibit E hereto.

"Knowledge" and similar terms used herein shall mean, with
respect to the Company, the knowledge that the Company's officers, directors,
Key Employees, and Principal Shareholders who are also officers of the Company
have concerning the Company, its business, assets, liabilities and operations.

"Material Adverse Effect" on a Party shall mean an event,
change or occurrence which, individually or together with any other event,
change or occurrence, has a material adverse impact on (a) the financial
position, business, or results of operations of such Party and its subsidiaries,
taken as a whole, or (b) the ability of such party to perform its obligations

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under this Agreement or to consummate the Merger, other than any event, change
or occurrence relating to (i) the United States economy, the southeastern
regional economy or securities markets in general or (ii) this Agreement or the
transactions contemplated hereby or announcement thereof.

"Newco Common Stock" shall mean shares of Common Stock, no
par value, of Newco.

"Party" shall mean any of the Company, Parent or Newco, and
"Parties" shall mean the Company, Parent and Newco.

"Person" shall mean a natural person or any legal,
commercial or governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited partnership, limited liability
company, trust, business association, group acting in concert, or any person
acting in a representative capacity.

"Principal Officers/Shareholders" shall jointly and
severally refer to and mean (i) Dale H. Powell, (ii) Edwin J. Campbell, (iii)
the Key Employees who are also Shareholders, and (iv) the Principal Shareholders
who are also officers or directors of the Company .

"SEC" means the Securities and Exchange Commission.

"Shareholder" or "Shareholders" shall mean each holder of
any Company Capital Stock immediately prior to the Effective Time.

"Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, (i)
of which such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interests in such partnership) or (ii) at least a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or other performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.

"Total Consideration" shall be the sum of NINE MILLION SEVEN
HUNDRED ONE THOUSAND THREE HUNDRED SEVENTY-FIVE U.S. DOLLARS AND SEVENTY-FIVE
U.S. CENTS ($9,701,375.75).

"Total Outstanding Shares" shall be the aggregate number of
shares of Company Common Stock issued and outstanding immediately prior to the
Effective Time, (including the maximum number of shares of Company Common Stock
or other Company Capital Stock issuable on exercise and/or conversion of all
outstanding Company Options and other rights convertible into, or exercisable or
exchangeable for, shares of Company Common Stock or Company Capital Stock
assuming full conversion, exercise or exchange thereof).

-4-

(b) Effect on Company Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Newco, the Company, Parent
or any of the Shareholders, each share of Company Capital Stock issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares (as defined in Section 1.7 hereof)) shall be canceled and extinguished,
and automatically converted into the right to receive from Parent, upon
surrender of the certificate representing such shares of Company Capital Stock
in the manner provided in Sections 1.8(c) and 1.8(d) hereof, but subject to
conditions set forth below in this Section 1.6 and throughout this Agreement,
the Exchange Amount.

(c) Capital Stock of Newco. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Newco or the Company, each
share of Newco Common Stock, issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of Common Stock of the Surviving Corporation.
Each stock certificate evidencing ownership of any such shares of Newco Common
Stock shall thereafter evidence ownership of an equivalent number of shares of
Common Stock of the Surviving Corporation.

(d) Withholding Taxes. Any cash amounts payable to any Shareholder
pursuant to Article I hereof shall be subject to, and reduced by an amount equal
to, the amount of any requisite state, local, federal and foreign withholding
taxes.

(e) Shareholder Loans. Except as set forth in Section 1.6(e) of the
Disclosure Schedule there are no outstanding loans from the Company to the
Shareholders. In the event that any Shareholder has outstanding loans from the
Company as of the Effective Time, the cash amounts payable to such Shareholder
pursuant to Section 1.6(b) hereof shall be reduced by an amount equal to the
outstanding principal plus accrued interest of such Shareholder's loans as of
the Effective Time, and such loans shall be deemed paid in full.

1.7. Dissenting Shares.

Notwithstanding any other provisions of this Agreement to the contrary, any
shares of Company Capital Stock held by a holder who has exercised and perfected
dissenters' rights for such shares in accordance with the VSCA and who, as of
the Effective Time, has not effectively withdrawn or lost such dissenters'
rights ("Dissenting Shares"), shall not be converted into or represent a right
to receive the consideration for Company Capital Stock set forth in Section 1.6
hereof, but the holder thereof shall only be entitled to such rights as are
provided by the VSCA in respect of dissenters' shares.

(a) Notwithstanding the provisions of Section 1.6(a) hereof, if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) such holder's dissenters' rights under the VSCA, then,
as of the later of the Effective Time and the occurrence of such event, such
holder's shares shall automatically be converted into and represent only the
right to receive the consideration for Company Capital Stock set forth in
Section 1.6 hereof, without interest thereon, upon surrender of such holder's
certificate representing such shares.

-5-

(b) The Company shall give Parent (i) prompt notice of any written
demand for dissenters' rights received by the Company pursuant to the applicable
provisions of the VSCA and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to any such demands or offer to settle or settle any such demands.

1.8. Surrender of Certificates.

(a) Exchange Agent. First Union National Bank, Charlotte, North
Carolina, or such other agent reasonably acceptable to Parent and the Company,
shall serve as the exchange agent (the "Exchange Agent") for the Merger.

(b) Parent to Provide Consideration. On the Closing Date, Parent
shall make available to the Exchange Agent for exchange in accordance with this
Article I the consideration issuable pursuant to Section 1.6 hereof in exchange
for the outstanding shares of Company Capital Stock being exchanged in the
Merger.

(c) Exchange Procedures. On or after the Closing Date, the
Shareholders will surrender the certificates representing their Company Capital
Stock (the "Company Stock Certificates") to the Exchange Agent for cancellation
together with a letter of transmittal in such form and having such provisions
that Parent may reasonably request. Upon surrender of a Company Stock
Certificate for cancellation to the Exchange Agent, or such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
subject to the terms of Section 1.6 (d) and (e) hereof, the holder of such
Company Stock Certificate shall be entitled to receive from the Exchange Agent
in exchange therefor the amount of cash (without interest) payable in exchange
for such Company Stock Certificate pursuant to this Article I, and the Company
Stock Certificate so surrendered shall be canceled. Until so surrendered, each
outstanding Company Stock Certificate will be deemed from and for all corporate
purposes, to evidence only the right to receive payment (without interest)
pursuant to this Article I. Payment due to each Shareholder pursuant to this
Section 1.8 shall be made as promptly as practicable following the later of (i)
receipt by Parent of confirmation of filing of the Plan of Merger and (ii)
Parent's receipt of such Shareholder's properly completed letter of transmittal
and Company Stock Certificates pursuant to this Section 1.8.

(d) No Liability. Notwithstanding anything to the contrary in this
Section 1.8, neither the Exchange Agent, the Surviving Corporation nor any party
hereto shall be liable to a holder of shares of Company Capital Stock for any
amount properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.

1.9. No Further Ownership Rights in Company Capital Stock.

The consideration paid in respect of the surrender for exchange of shares
of Company Capital Stock in accordance with the terms hereof shall be deemed to
be full satisfaction of all rights pertaining to such shares of Company Capital
Stock, and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Company Capital Stock

-6-

which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Company Stock Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.

1.10. Lost, Stolen or Destroyed Certificates.

In the event any certificates evidencing shares of Company Capital Stock
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed certificates, upon the making of an
affidavit in a form satisfactory to Parent, of that fact by the holder thereof,
such amount, if any, as may be required pursuant to Section 1.6 hereof;
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the Shareholder who is the owner of
such lost, stolen or destroyed certificates to deliver a bond in such amount as
it may reasonably direct against any claim that may be made against Parent or
the Exchange Agent with respect to the certificates alleged to have been lost,
stolen or destroyed.

1.11. Taking of Necessary Action; Further Action.

If at any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company, Parent, Newco and the
officers and directors of the Company, Parent and Newco are fully authorized in
the name of their respective corporations or otherwise to take, and will take,
all such lawful and necessary action.

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent and Newco, subject to
such exceptions as are specifically disclosed in the disclosure schedule
(referencing the appropriate section and paragraph numbers) supplied by the
Company to Parent (the "Disclosure Schedule") and dated as of the date hereof,
that on the date hereof and as of the Closing Date as though made at the Closing
Date as follows (provided, that the representations and warranties made as of a
specified date will be true and correct as of such date):

2.1. Organization of the Company.

The Company is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia. The Company has the
corporate power to own its properties and to carry on its business as now being
conducted. The Company is duly qualified or licensed to do business in each
jurisdiction listed on Section 2.1 of the Disclosure Schedule and is in good
standing as a foreign corporation in each such jurisdiction. The Company has
delivered a true and correct copy of its Articles of Incorporation and

-7-

bylaws, each as amended to date and in full force and effect on the date hereof,
to Parent. Section 2.1 of the Disclosure Schedule lists the directors and
officers of the Company. The operations now being conducted by the Company are
not now conducted by the Company under any other name. The Company does not have
any Subsidiaries.

2.2. Company Capital Structure.

(a) The authorized capital stock of the Company consists of 2,000,000
shares of Common Stock, of which 825,649 shares are issued and outstanding as of
the date hereof. All outstanding shares of Company Capital Stock are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the articles of incorporation or bylaws of
the Company, or any agreement to which the Company is a party or by which it is
bound, and have been issued in compliance with federal and state securities
laws. There are no declared or accrued but unpaid dividends with respect to any
shares of Company Capital Stock. The Company has no other capital stock
authorized, issued or outstanding.

(b) The Company does not presently have any stock option plan or
other stock-related plan providing for equity compensation of any person. There
are no options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which the Company is a party or by which it is
bound obligating the Company to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of
Company Capital Stock and the Company is not obligated to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter into
any option, warrant, call, right, commitment or agreement upon the closing of
the transaction contemplated hereby or upon the occurrence of any other event.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting stock of the Company.

2.3. Authority.

The Company has all requisite power and authority to enter into this
Agreement and any Related Agreements (as hereinafter defined in this Section
2.3) to which it is a party and to consummate the transactions contemplated
hereby and thereby. Except for the requisite approval of the shareholders of the
Company, the execution and delivery of this Agreement and any Related Agreements
to which the Company is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company and no further action is required on
the part of the Company to authorize the Agreement and any Related Agreements to
which it is a party and the transactions contemplated hereby and thereby. This
Agreement, the Plan of Merger and the Merger have been unanimously approved and
adopted by the Board of Directors of the Company in accordance with Virginia
Law, and the articles of incorporation and bylaws of the Company. The only vote
of the holders of any class or series of capital stock of the Company necessary
to approve this Agreement and the transactions contemplated hereby is the
affirmative vote of the holders of more than 66-2/3% of the outstanding shares
of Company Common Stock (the "Company Stockholders' Approval"). This Agreement
and each of the Related Agreements to which the Company is a party has been duly
executed and delivered by the Company, and assuming the due authorization,
execution and delivery by the other parties hereto and thereto, constitute the

-8-

valid and binding obligations of the Company, enforceable against it in
accordance with their respective terms, except as such enforceability may be
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. The Company has taken all action
necessary to exempt the Merger and this Agreement and the transactions
contemplated hereby from the restrictions of the VSCA Control Share Acquisition
statute, and, accordingly, neither such statute nor any other antitakeover or
similar statute or regulation applies to any such transactions. No other
"control share acquisition," "fair price," "moratorium" or other antitakeover
laws or regulations enacted under U.S. state or federal laws apply to this
Agreement or any of the transactions contemplated hereby. For all purposes of
this Agreement, the term "Related Agreements" shall mean all ancillary
agreements contemplated by this Agreement to be executed and delivered in
connection with the transactions contemplated hereby.

2.4. No Conflict.

The execution and delivery by the Company of this Agreement and any Related
Agreement to which the Company is a party, and the consummation of the
transactions contemplated hereby and thereby, will not conflict with or result
in any violation of or default under (with or without notice or lapse of time,
or both) or give rise to a right of termination, cancellation, modification or
acceleration of any obligation or loss of any benefit under (any such event, a
"Conflict") (i) any provision of the articles of incorporation or bylaws of the
Company, (ii) any mortgage, indenture, lease, contract, covenant or other
agreement, instrument or commitment, permit, concession, franchise or license
(individually a "Contract") to which the Company or any of its properties or
assets (including intangible assets), is subject, or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
any of its properties (tangible and intangible). The Company is in compliance
with in all material respects and has not breached, violated or defaulted under,
or received notice that it has breached, violated or defaulted under, any of the
terms or conditions of any Contract, nor to the Company's Knowledge is there any
event that would constitute such a breach, violation or default with the lapse
of time, giving of notice or both. Each Contract is in full force and effect and
the Company is not subject to any default thereunder, nor to the Knowledge of
the Company is any party obligated to the Company pursuant to any such Contract
subject to any default thereunder.

2.5. Consents.

No consent, waiver, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other federal, state, county, local or foreign governmental authority,
instrumentality, agency or commission (each, a "Governmental Entity") or any
third party, including a party to any agreement with the Company (so as not to
trigger any Conflict), is required by the Company in connection with the
execution and delivery of this Agreement and any Related Agreement to which the
Company is a party or with respect to the consummation of the transactions
contemplated hereby and thereby, except for the filing of the Plan of Merger

-9-

with the Virginia State Corporation Commission (or other appropriate state
filing authority). The Company has obtained, or will obtain prior to the
Effective Time, all necessary consents, waivers and approvals of parties to any
Contract as are required thereunder in connection with the Merger, or for any
such Contract to remain in full force and effect without limitation,
modification or alteration after the Effective Time. Following the Effective
Time, the Company will be permitted to exercise all of its rights under the
Contracts without the payment of any additional amounts or consideration other
than ongoing fees, royalties or payments which the Company would otherwise be
required to pay had the transactions contemplated by this Agreement not
occurred.

2.6. Company Financial Statements.

The Company has delivered to Parent (i) the Company's audited balance sheet
as of December 31, 1999 and 1998, and the related audited statements of income
and cash flow for the twelve months ending December 31, 1999, 1998 and 1997
(collectively, the "Audited Financials") and (ii) the Company's unaudited
balance sheet as of March 31, 2000 and the related unaudited statements of
income and cash flow for the three (3) month period then ended (the "Interim
Financials"). The Audited Financials and the Interim Financials are correct in
all material respects and have been prepared in accordance with GAAP
consistently applied on a basis consistent throughout the periods indicated and
consistent with each other (except that the Interim Financials do not contain
footnotes and other presentation items that may be required by GAAP). The
Audited Financials and Interim Financials present fairly the financial
condition, operating results and cash flows of the Company as of the dates and
during the periods indicated therein, subject, if applicable, to normal year-end
adjustments, which will not be material in amount or significance in any
individual case or in the aggregate. The Company's balance sheet referred to
above as of March 31, 2000 may be referred to hereinafter as the "Current
Balance Sheet."

2.7. SEC Filings.

The Company has filed all required registration statements, prospectuses,
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC since January1,1998 (collectively, including all exhibits
thereto, the "Company SEC Documents"). As of its filing date, each Company SEC
Document complied as to form in all material respects with the applicable
requirements of the 1933 Act and the 1934 Act, as the case may be. None of the
Company SEC Documents as of their respective dates contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.

2.8. Information Supplied.

The information supplied by the Company for inclusion in the proxy
statement or any amendment or supplement thereto (the "Proxy Statement") to be
sent to the stockholders of Company in connection with their meeting to consider
this Agreement and the Merger (the "Company Stockholders' Meeting") shall not,
on the date the Proxy Statement is first mailed to the stockholders of Company

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or at the time of the Company Stockholders' Meeting or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

2.9. Opinion of Financial Advisor.

The Company has received an opinion of Davenport & Company, LLC, financial
advisor to the Company, to the effect that, as of the date of this Agreement,
from a financial point of view, the Exchange Amount is fair to the holders of
Company Common Stock.

2.10. No Undisclosed Liabilities.

The Company does not have any liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, whether accrued,
absolute, contingent, matured, unmatured or other (whether or not required to be
reflected in its financial statements in accordance with GAAP), which
individually or in the aggregate (i) has not been reflected in the Current
Balance Sheet, or (ii) has not arisen in the ordinary course of business
consistent with past practices since December 31, 1999.

2.11. Changes.

Since December 31, 1999 to the date hereof, there has not been, occurred or
arisen any:

(a) transaction by the Company, except in the ordinary course of
business as conducted on the date hereof and consistent with past practices;

(b) amendments or changes to the articles of incorporation or bylaws
of the Company;

(d) payment, discharge or satisfaction, in any amount in excess of
$12,000 in any one case, or $60,000 in the aggregate, of any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
except for the payment of trade payables incurred in the ordinary course of
business;

(e) destruction of, damage to or loss of any material assets,
material business or material customer of the Company (whether or not covered by
insurance);

(f) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;

(g) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company other than as
required by GAAP;

-11-

(h) change in any material election in respect of Taxes (as defined
below), adoption or change in any accounting method in respect of Taxes,
agreement or settlement of any material claim or assessment in respect of Taxes
in excess of $10,000 in any one case, or $20,000 in the aggregate, or extension
or waiver of the limitation period applicable to any claim or assessment in
respect of Taxes;

(i) revaluation by the Company of any of its assets;

(j) declaration, setting aside or payment of a dividend or other
distribution (whether in cash, stock or property) in respect of any Company
Capital Stock, or any split, combination or reclassification in respect of any
shares of Company Capital Stock, or any issuance or authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of Company Capital Stock, or any direct or indirect repurchase,
redemption, or other acquisition by the Company of any shares of Company Capital
Stock (or options, warrants or other rights convertible into, exercisable or
exchangeable therefor), except in accordance with the agreements evidencing
Company Options;

(k) other than in the ordinary course of business consistent with
past practices, (i) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers or directors or to any of
its employees or advisors, or (ii) the declaration, payment or commitment or
obligation of any kind for the payment, by the Company, of a severance payment,
termination payment, bonus or other additional salary or compensation to any
such person;

(l) agreement, contract, covenant, instrument, lease, license or
commitment to which the Company is a party or by which it or any of its assets
(including intangible assets) are bound or any termination, extension, amendment
or modification of the terms of any agreement, contract, covenant, instrument,
lease, license or commitment to which the Company is a party or by which it or
any of its assets are bound, other than any such agreement in the ordinary
course of business or otherwise described in the Disclosure Schedule;

(m) except for sales of modular homes in the ordinary course of
business, sale, lease, license or other disposition of any of the material
assets or material properties of the Company or any creation of any security
interest in such material assets or material properties;

(n) loan by the Company to any person or entity, incurrence by the
Company of any indebtedness, guarantee by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guarantee of any debt
securities of others, except in the ordinary course of business consistent with
past practices;

(o) waiver or release of any right or claim of the Company, including
any write-off or other compromise of any account receivable of the Company;

-12-

(p) the commencement, settlement, notice or, to the Knowledge of the
Company, threat of any lawsuit or proceeding or other investigation against the
Company or its affairs, or any reasonable basis for any of the foregoing;

(q) notice of any claim or potential claim of ownership by any person
other than the Company of the Company Intellectual Property (as defined in
Section 2.15 hereof) owned by or developed or created by the Company or of
infringement by the Company of any other person's Intellectual Property (as
defined in Section 2.15 hereof);

(r) issuance or sale, or contract to issue or sell, by the Company
of any shares of Company Capital Stock or securities convertible into, or
exercisable or exchangeable for, shares of Company Capital Stock, or any
securities, warrants, options or rights to purchase any of the foregoing;

(s) agreement or modification to any agreement pursuant to which any
other party was granted marketing, distribution, development or similar rights
of any type or scope with respect to any products or technology of the Company;

(t) any event or condition of any character that has had, or is
reasonably likely to have, a Material Adverse Effect on the Company; or

(u) agreement by the Company, or any officer or employees on behalf
of the Company, to do any of the things described in the preceding clauses (a)
through (t) of this Section 2.11 (other than negotiations with Parent and its
representatives regarding the transactions contemplated by this Agreement).

2.12. Tax Matters.

(a) Definition of Taxes. For the purposes of this Agreement, the term
"Tax" or, collectively, "Taxes" shall mean (i) any and all federal, state, local
and foreign taxes, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts, (ii) any liability for the payment of any
amounts of the type described in clause (i) of this Section 2.12(a) as a result
of being a member of an affiliated, consolidated, combined or unitary group for
any period, and (iii) any liability for the payment of any amounts of the type
described in clauses (i) or (ii) of this Section 2.12(a) as a result of any
express or implied obligation to indemnify any other person or as a result of
any obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
or transferor entity.

-13-

(b) Tax Returns and Audits.

(i) As of the Closing Date, the Company will have
prepared and timely filed all required federal, state, local and foreign
returns, estimates, information statements and reports (collectively, "Returns")
relating to any and all Taxes concerning or attributable to the Company or its
respective operations and such Returns are true and correct in all material
respects and have been completed in accordance with applicable law.

(ii) The Company is and has been for the past four years a
member of an affiliated group, within the meaning of Section 1504(a) of the
Code, of which the Company is the common parent, and such affiliated group files
a consolidated federal income Tax Return.

(iii) The Company is not a Person other than a United
States person within the meaning of the Code.

(iv) The Company does not have and has not had a permanent
establishment in any foreign country, as defined in any applicable Tax treaty or
convention between the United States of America and such foreign country.

(v) The Company is not a party to any joint venture,
partnership, or other arrangement or contract which is required to be treated as
a partnership for federal income tax purposes.

(vi) To the Company's Knowledge, each material asset with
respect to which the Company claims depreciation, amortization or similar
expense for income Tax purposes is owned for income Tax purposes by the Company.

(vii) There are no pending requests for rulings with any
Tax authority that if issued would be binding on the Company.

(viii) As of the Closing Date, the Company (A) will have
timely paid all material Taxes it is required to have paid and will have
withheld, with respect to its employees, all federal and state income taxes,
Federal Insurance Contribution Act ("FICA"), Federal Unemployment Tax Act
("FUTA") and other Taxes required to be withheld, and (B) will have accrued on
the Current Balance Sheet all Taxes attributable to the periods covered by the
Current Balance Sheet and not yet required to be paid, and will not have
incurred any liability for Taxes for the period commencing after the date of the
Current Balance Sheet and ending immediately prior to the Closing Date other
than in the ordinary course of business. Neither the Company nor any subsidiary
of the Company (A) has been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was the Company) or (B) has any liability for the income Taxes of any
other party (other than the Company and its subsidiaries) under Treas. Reg. ss.
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise.

-14-

(ix) There is no Tax deficiency outstanding, assessed
or proposed against the Company, nor has the Company executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax for any currently open taxable period

(x) No audit or other examination of any Return of the
Company is presently in progress, nor has the Company been notified of any
request for such an audit or other examination.

(xi) The Company has made available to Parent, copies
of all foreign, federal, state and local income and all state and local sales
and use Returns for the Company filed for the past three(3) years.

(xii) There are (and immediately following the Closing
Date there will be) no liens, pledges, charges, claims, restrictions on
transfer, mortgages, security interests or other encumbrances of any sort
(collectively, "Liens") on the assets of the Company relating to or attributable
to Taxes other than customary Liens for Taxes not yet due and payable.

(xiii) The Company does not have any Knowledge of any
proposed assertion of any claim relating or attributable to Taxes which, if
adversely determined, would result in any Lien on the assets of the Company.

(xiv) None of the Company's assets is treated as "tax-
exempt use property," within the meaning of Section 168(h) of the Code.

(xv) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(4) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.

(xvi) The Company is not a party to any tax sharing,
indemnification or allocation agreement nor does the Company owe any amount
under any such agreement.

(xvii) The Company's tax basis in its assets for purposes
of determining its future amortization, depreciation and other federal income
Tax deductions is accurately reflected on the Company's tax books and records.

(xviii) The Company has not been at any time, a "United
States Real Property Holding Corporation" within the meaning of Section
897(c)(2) of the Code.

(xix) No adjustment relating to any Return filed by the
Company has been proposed in writing by any tax authority to the Company or any
representative thereof.

(xx) Since April 16, 1997, the Company has not been a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code.

-15-

(xxi) The Company has no "excess loss accounts" under
Treas. Reg.ss.1.1502-19.

(c) Executive Compensation Tax. There is no contract, agreement,
plan or arrangement to which the Company is a party, including, without
limitation, the provisions of this Agreement, covering any employee or former
employee of the Company, which, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to Sections 280G
or 162(m) of the Code (or any corresponding provision of state, local or foreign
income tax law).

2.13. Restrictions on Business Activities.

There is no agreement (non-compete or otherwise), commitment, judgment,
injunction, order or decree to which the Company is a party or otherwise binding
upon the Company which has or may reasonably be expected to have the effect of
prohibiting or impairing any business practice of the Company, any acquisition
of property (tangible or intangible) by the Company, the conduct of business by
the Company or otherwise limiting the freedom of the Company to engage in any
line of business or to compete with any person. Without limiting the generality
of the foregoing, the Company has not entered into any agreement under which the
Company is restricted from selling, licensing or otherwise distributing any of
its technology or products to, or providing services to, customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any segment of the market.

2.14. Title of Properties; Absence of Liens and Encumbrances; Condition
of Equipment.

(a) Section 2.14(a) of the Disclosure Schedule sets forth the
real property owned by the Company. With respect to real property leased by or
for the Company, Section 2.14(a) of the Disclosure Schedule also sets forth a
list of all leases, the name of the lessor, the date of the lease and each
amendment thereto and, with respect to any current lease, the aggregate annual
rental payable under any such lease. All such current leases are in full force
and effect, are valid and effective in accordance with their respective terms,
and there is not, under any of such leases, any existing default or event of
default (or event which with notice or lapse of time, or both, would constitute
a default).

(b) The Company has good and valid title to all real property
owned by the Company and valid leasehold interests in, all of its properties and
assets, real, personal and mixed, tangible or intangible, used or held for use
in its business, free and clear of any Liens, except those Liens listed and
disclosed on Section 2.14(b) of the Disclosure Schedule and (i) as reflected in
the Current Balance Sheet, (ii) Liens for Taxes not yet due and payable, and
(iii) such imperfections of title and encumbrances, if any, which do not detract
from the value or interfere with the present use of the property subject thereto
or affected thereby.

(c) Section 2.14(c) of the Disclosure Schedule lists all material
items of equipment (the "Equipment") owned or leased by the Company and, except
as noted on the Disclosure Schedule, such Equipment is (i) adequate for the

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conduct of the business of the Company as currently conducted, and (ii) in good
operating condition, regularly and properly maintained, subject to normal wear
and tear.

(d) The Company has sole and exclusive ownership, free and clear
of any Liens, of all customer lists, customer contact information, customer
correspondence and customer licensing and purchasing histories relating to its
current and former customers (the "Customer Information"). No person other than
the Company possesses any claims or rights with respect to use of the Customer
Information.

2.15. Intellectual Property.

(a) Definitions. For all purposes of this Agreement, the
following terms shall have the following respective meanings:

"Intellectual Property" shall mean any or all of the
following: (i) works of authorship including, without limitation, computer
programs, source code and executable code, whether embodied in software,
firmware or otherwise, documentation, designs, files, records, data and mask
works, (ii) inventions (whether or not patentable), improvements, and
technology, (iii) proprietary and confidential information, trade secrets and
know how, (iv) databases, data compilations and collections and technical data,
(v) logos, trade names, trade dress, trademarks and service marks, (vi) domain
names, web addresses and sites, (vii) manufacturing and construction processes
and sectional home technology; (viii) manufacturing, construction or building
designs, blueprints or floor plans, (ix) tools, methods and processes, and (x)
all instantiations of the foregoing in any form and embodied in any media.

"Intellectual Property Rights" shall mean worldwide common
law and statutory rights associated with (i) patents and patent applications,
(ii) copyrights, copyright registrations and copyright applications and "moral"
rights, (iii) the protection of trade and industrial secrets and confidential
information, (iv) other proprietary rights relating to intangible intellectual
property, (v) trademarks, trade names and service marks, (vi) analogous rights
to those set forth above, and (vii) divisions, continuations, renewals,
reissuances and extensions of the foregoing (as applicable).

"Company Intellectual Property" shall mean any
Intellectual Property and Intellectual Property Rights that are owned by or
exclusively licensed to the Company.

"Registered Intellectual Property Rights" shall mean
Intellectual Property Rights that have been registered, filed, certified or
otherwise perfected by recordation with any state, government or other public
legal authority.

(b) Section 2.15(b) of the Disclosure Schedule lists all
Registered Intellectual Property Rights owned by, or filed in the name of, the
Company.

-17-

(c) Each item of Company Intellectual Property is free and clear
of any Liens or other encumbrances. The Company is the exclusive owner of all
Company Intellectual Property.

(d) The Company has not transferred ownership of, or granted any
exclusive license of or exclusive right to use, or authorized the retention of
any exclusive rights to use or joint ownership of, any Intellectual Property or
Intellectual Property Rights that is or was Company Intellectual Property, to
any other person.

(e) The Company Intellectual Property constitutes all the
Intellectual Property and Intellectual Property Rights used in and/or necessary
to the conduct of the business of the Company as it currently is conducted or
planned to be conducted, including, without limitation, the design, development,
manufacture, use, and sale of products, technology and services (including
products, technology or services currently under development).

(f) The operation of the business of the Company as it currently
is conducted or planned by the Company, including but not limited to the design,
development, use, import, manufacture and sale of the products, technology or
services (including products, technology or services currently under
development) of the Company does not infringe or misappropriate the Intellectual
Property Rights of any person or entity, violate the rights of any person or
entity (including rights to privacy or publicity), or constitute unfair
competition or trade practices under the laws of any jurisdiction, and the
Company has not received notice from any person or entity claiming that such
operation or any act, product, technology or service (including products,
technology or services currently under development) of the Company infringes or
misappropriates the Intellectual Property Rights of any person or entity or
constitutes unfair competition or trade practices under the laws of any
jurisdiction (nor is the Company or the CEO aware of any basis therefor).

(g) To the Knowledge of the Company, no person or entity is
infringing or misappropriating any Company Intellectual Property.

(h) The Company has taken all reasonable steps that are required
to protect the Company's rights in confidential information and trade secrets of
the Company or provided by any other person or entity to the Company.

(i) No Company Intellectual Property is subject to any proceeding
or outstanding decree, order, judgment or settlement agreement or stipulation
that restricts in any manner the use, transfer or licensing thereof by the
Company or may affect the validity, use or enforceability of such Company
Intellectual Property.

(j) All of the Company's Information Technology (as defined
below) that contains or uses a calendar function, including without limitation
any function indexed to a CPU clock and any function providing specific dates or
days or calculating spans of dates or days, records, stores, processes does
provide, and where appropriate inserts true and accurate calendar dates and
calculation for all such dates and spans (collectively, "Year 2000 Compliant"),
and has not caused any interruption in the ongoing operations of the Company's

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business on or after January 1, 2000. The Company has not given any assurances,
warranties or indemnities nor undertaken any obligation with respect to products
or technology sold or licensed by the Company being Year 2000 Compliant. For
purposes of the foregoing, the term "Information Technology" shall mean and
include all software, hardware, firmware, telecommunications systems, network
systems, embedded systems and other systems, components and/or services that are
owned or used by the Company in the conduct of its business, or purchased by the
Company from third party suppliers.

2.16. Agreements, Contracts and Commitments.

(a) The Company is not a party to or bound by:

(i) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization;

(ii) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement;

(iii) any fidelity or surety bond or completion bond;

(iv) any lease of personal property having a value in
excess of $5,000 individually or $10,000 in the aggregate;

(v) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $12,000
individually or $60,000 in the aggregate;

(vi) any agreement, contract or commitment relating to
the disposition or acquisition of assets or any interest in any business
enterprise outside the ordinary course of the Company's business;

(vii) any mortgages, indentures, industrial revenue or
other bonds, guarantees, loans or credit agreements, security agreements or
other agreements or instruments relating to the borrowing of money or extension
of credit;

(viii) other than in the ordinary course of business, any
purchase order or contract for the purchase of materials involving in excess of
$25,000 individually or $100,000 in the aggregate;

(ix) other than in the ordinary course of business, any
construction contracts;

(x) any dealer, distribution, joint marketing or
development agreement;

-19-

(xi) any sales representative, original equipment
manufacturer, value added, remarketer, reseller or independent vendor or other
agreement for sale, use or distribution of the Company's products, technology or
services; or

(xii) any other agreement, contract or commitment that
involves in excess of $25,000 individually or $100,000 in the aggregate and is
not cancellable without penalty within thirty (30) days.

2.17. Interested Party Transactions.

No officer, director or, to the Knowledge of the Company, Principal
Shareholder of the Company (nor to the knowledge of the Company any ancestor,
sibling, descendant or spouse of any of such persons, or any trust, partnership
or corporation in which any of such persons has an interest), has, directly or
indirectly, (i) an interest in any entity which furnished or sold, or furnishes
or sells, services, products or technology that the Company furnishes or sells,
or proposes to furnish or sell, or (ii) any interest in any entity that
purchases from or sells or furnishes to the Company, any goods or services, or
(iii) a beneficial interest in any Contract to which the Company is a party;
provided, however, that ownership of no more than five percent (5%) of the
outstanding voting stock of a publicly traded corporation shall not be deemed to
be an "interest in any entity" for purposes of this Section 2.17.

2.18. Governmental Authorization.

Each consent, license, permit, grant or other authorization (i)
pursuant to which the Company currently operates or holds any interest in any of
its properties, or (ii) which is required for the operation of the Company's
business as currently conducted or the holding of any such interest
(collectively, "Company Authorizations") has been issued or granted to the
Company. The Company Authorizations are in full force and effect and constitute
all Company Authorizations required to permit the Company to operate or conduct
its business or hold any interest in its properties or assets.

2.19. Litigation.

There is no action, suit, claim or proceeding of any nature pending, or
to the Knowledge of the Company threatened, against the Company, its properties
(tangible or intangible) or any of its officers or directors, nor to the
Knowledge of the Company, is there any reasonable basis for any such action,
suit, claim or proceeding of any nature that could lead to damages or losses to
the Company in excess of $1,000. There is no investigation or other proceeding
pending, or to the Knowledge of the Company, threatened, against the Company,
any of its properties (tangible or intangible) or any of its officers or
directors by or before any Governmental Entity, nor, to the Knowledge of the
Company, is there any reasonable basis therefor. No Governmental Entity has at
any time challenged or questioned the legal right of the Company to conduct its
operations as presently or previously conducted.

-20-

2.20. Accounts Receivable/Inventory.

(a) The Company has made available to Parent a list of all
accounts receivable and notes receivable of the Company as of the date of the
Current Balance Sheet, together with a range of days elapsed since invoice
evidencing such accounts or the making of such notes which shall be included on
Section 2.20(a) of the Disclosure Schedule.

(b) All of the Company's accounts receivable and notes receivable
arose in the ordinary course of business, are carried at values determined in
accordance with GAAP consistently applied, and are collectible except to the
extent of reserves therefor set forth in the Current Balance Sheet or, for any
such receivables arising subsequent to the date of the Current Balance Sheet, as
reflected on the books and records of the Company (which are prepared in
accordance with GAAP consistently applied). No person or entity has any Lien on
any of the Company's accounts receivable or notes receivable and no request or
agreement for deduction or discount has been made with respect to any of the
Company's accounts receivable or notes receivable.

(c) All of the inventories of the Company reflected on the
Interim Financials and the Company's books and records were purchased, acquired
or produced in the ordinary and regular course of business and in a manner
consistent with the Company's regular inventory practices and are set forth on
the Company's books and records in accordance with the practices and principles
of the Company consistent with the method of treating said items in prior
periods. None of the inventory of the Company reflected on the Interim
Financials or on the Company's books and records (in either case net of the
reserve therefor) is obsolete, defective or in excess of the needs of the
business of the Company reasonably anticipated for the normal operation of its
business consistent with past practices and outstanding customer contracts. The
presentation of inventory on the Interim Financials conforms to GAAP
consistently applied and such inventory is stated at the lower of cost
(determined using the first-in, first-out method) or net realizable value.

2.21. Minute Books.

The minutes of the Company made available to the Parent are the only
minutes of the Company and contain accurate summaries of all meetings of the
Board of Directors (or committees thereof) of the Company and their shareholders
or actions by written consent since the time of incorporation of the Company.

2.22. Environmental Matters.

(a) Hazardous Material. The Company has not: (i) operated any
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased, or (ii) illegally released any amount of
any substance that has been designated by any Governmental Entity or by
applicable foreign, federal, state or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, and urea-formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as a

-21-

hazardous waste pursuant to the United States Resource Conservation and Recovery
Act of 1976, as amended, and the regulations promulgated pursuant to said laws
(a "Hazardous Material"), but excluding office and janitorial supplies properly
and safely maintained. No Hazardous Materials are present in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that the Company has at any time owned, operated, occupied or
leased.

(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Effective Time, nor has the Company disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any or all of
the foregoing being collectively referred to herein as "Hazardous Materials
Activities") in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Entity in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.

(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities, respectively, and other businesses of the Company as such activities
and businesses are currently being conducted.

(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Knowledge of the Company, threatened, concerning any Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of the Company. The
Company does not have any Knowledge of any fact or circumstance which could
involve the Company in any environmental litigation or impose upon the Company
any environmental liability.

2.23. Brokers' and Finders' Fees.

The Company has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with the Agreement or any transaction
contemplated hereby. Section 2.20 of the Disclosure Schedule sets forth the
principal terms and conditions of any agreement, written or oral, with respect
to such fees.

2.24. Employee Benefit Plans and Compensation.

(a) Definitions. For all purposes of this Agreement, the
following terms shall have the following respective meanings:

"Affiliate" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code, and the regulations issued thereunder.

-22-

"Company Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other material arrangement providing
for compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written, unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any Employee, or with respect to which the Company
or any Affiliate has or may have any liability or obligation.

"COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.

"DOL" shall mean the United States Department of Labor.

"Employee" shall mean any current or former employee,
consultant or director of the Company or any Affiliate.

"Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, or contract between the Company or any
Affiliate and any Employee.

"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.

"FMLA" shall mean the Family Medical Leave Act of 1993, as
amended.

"IRS" shall mean the United States Internal Revenue
Service.

"PBGC" shall mean the United States Pension Benefit
Guaranty Corporation.

"Pension Plan" shall mean each Company Employee Plan which
is an "employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.

(b) Schedule. Section 2.24(b) of the Disclosure Schedule contains
an accurate and complete list of each Company Employee Plan and each form of
Employee Agreement under each Company Employee Plan, and each other Employee
Agreement. The Company does not have any plan or commitment to establish any new
Company Employee Plan or Employee Agreement, to modify any Company Employee Plan
or Employee Agreement (except to the extent required by law or to conform any
such Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to adopt or enter into any Company Employee Plan
or Employee Agreement. The Company has no employees performing services outside
the United States.

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(c) Documents. The Company has made available to Parent (i)
correct and complete copies of all documents embodying each Company Employee
Plan and each Employee Agreement including, without limitation, all amendments
thereto and all related trust documents, (ii) the three (3) most recent annual
reports (Form Series 5500 and all schedules and financial statements attached
thereto), if any, required under ERISA or the Code in connection with each
Company Employee Plan, (iii) if the Company Employee Plan is funded, the most
recent annual and periodic accounting of Company Employee Plan assets, (iv) the
most recent summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each Company
Employee Plan, (v) all material written agreements and contracts relating to
each Company Employee Plan, including, without limitation, administrative
service agreements and group insurance contracts, (vi) all communications
material to any Employee or Employees relating to any Company Employee Plan and
any proposed Company Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
liability to the Company, (vii) all correspondence to or from any governmental
agency relating to any Company Employee Plan, (viii) all COBRA forms and related
notices used by the Company (or such forms and notices as required under
comparable law), (ix) all policies pertaining to fiduciary liability insurance
covering the fiduciaries for each Company Employee Plan, (x) all discrimination
tests for each Company Employee Plan for the most recent plan year for which
tests have been required to be performed, and (xi) all registration statements,
annual reports (Form 11-K and all attachments thereto) and prospectuses prepared
in connection with each Company Employee Plan.

(d) Employee Plan Compliance. The Company has performed in all
material respects all obligations required to be performed by it under, is not
in default or violation of, and has no Knowledge of any default or violation by
any other party to each Company Employee Plan, and each Company Employee Plan
has been established and maintained in all material respects in accordance with
its terms and in compliance with all applicable laws, statutes, orders, rules
and regulations, including but not limited to ERISA or the Code. No "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred
with respect to any Company Employee Plan. There are no actions, suits or claims
pending, or, to the Knowledge of the Company, threatened or reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan. Each Company
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without liability to Parent, the
Company or any Affiliate (other than ordinary administration expenses). There
are no audits, inquiries or proceedings pending or to the Knowledge of the
Company, threatened by the IRS, DOL or any other Governmental Entity with
respect to any Company Employee Plan. Neither the Company nor any Affiliate is
subject to any penalty or tax with respect to any Company Employee Plan under
Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.

-24-

(e) No Pension Plans. Neither the Company nor any other Affiliate
has ever maintained, established, sponsored, participated in, or contributed to,
any (i) Pension Plans subject to Title IV of ERISA, or (ii) "multiemployer plan"
within the meaning of Section (3)(37) of ERISA.

(f) No Post-Employment Obligations. No Company Employee Plan
provides, reflects or represents any liability to provide, retiree life
insurance, retiree health or other retiree employee welfare benefits to any
person for any reason, except as may be required by COBRA or other applicable
statute, and the Company has never represented to, promised to, or contracted
with, (whether in oral or written form) any Employee (either individually or to
Employees as a group) or any other person that such Employee(s) or other person
would be provided with retiree life insurance, retiree health or other retiree
employee welfare benefit, except to the extent required by statute or as
disclosed in Section 2.24(f) of the Disclosure Schedule.

(g) Health Care Compliance. Neither the Company nor any Affiliate
has, prior to the Effective Time and in any material respect, violated any of
the health care continuation requirements of COBRA, the requirements of FMLA,
the requirements of the Health Insurance Portability and Accountability Act of
1996, the requirements of the Women's Health and Cancer Rights Act of 1998, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such act, or any similar provisions of any state law
applicable to its Employees.

(h) Effect of Transaction. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent event) constitute an
event of default under any Company Employee Plan, Employee Agreement, trust or
loan that will or may result 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
Employee, except as expressly required by or disclosed in this Agreement.

(i) Employment Matters. The Company (i) is in compliance with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees, (ii) has withheld
and reported all amounts required by law or by agreement to be withheld and
reported with respect to wages, salaries and other payments to Employees, (iii)
is not liable for any arrears of wages or any taxes or any penalty for failure
to comply with any of the foregoing, and (iv) is not liable for any payment to
any trust or other fund governed by or maintained by or on behalf of any
governmental authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no pending or, to the Knowledge of the Company,
threatened, or reasonably anticipated claims or actions against the Company
under any worker's compensation policy or long-term disability policy.

(j) Labor. No work stoppage or labor strike against the Company
is pending or, to the Knowledge of the Company, threatened, or reasonably
anticipated. The Company does not know of any activities or proceedings of any
labor union to organize any Employees. There are no actions, suits, claims,

-25-

labor disputes or grievances pending, or to the Knowledge of the Company,
threatened, or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints. The Company has
not engaged in any unfair labor practices within the meaning of the National
Labor Relations Act. The Company is not presently, nor has it been in the past,
a party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by the Company.

(k) No Interference or Conflict. To the Knowledge of the Company,
no shareholder, officer, employee or consultant of the Company is obligated
under any contract or agreement subject to any judgment, decree or order of any
court or administrative agency that would interfere with such person's efforts
to promote the interests of the Company or that would interfere with the
Company's business. Neither the execution nor delivery of this Agreement, nor
the carrying on of the Company's business as presently conducted or proposed to
be conducted nor any activity of such officers, directors, employees or
consultants in connection with the carrying on of the Company's business as
presently conducted or currently proposed to be conducted, will, to the
Knowledge of the Company, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract or
agreement under which any of such officers, directors, employees or consultants
is now bound.

2.25. Insurance.

Section 2.25 of the Disclosure Schedule lists all insurance policies
and fidelity bonds covering the assets, business, equipment, properties,
operations, employees, officers and directors of the Company or any Affiliate.
There is no claim by the Company or any Affiliate pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid, and the Company and its
Affiliates are otherwise in material compliance with the terms of such policies
and bonds (or other policies and bonds providing substantially similar insurance
coverage). The Company does not have any Knowledge of any threatened termination
of, or premium increase with respect to, any of such policies.

2.26. Compliance with Laws.

The Company has complied in all material respects with, is not in
violation of, and has not received any notices of violation with respect to, any
foreign, federal, state or local statute, law or regulation.

2.27. Warranties; Indemnities.

Except for warranties implied by law, the Company has not given any
warranties or indemnities relating to products or technology sold or services
rendered by the Company.

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2.28. Complete Copies of Materials.

The Company has delivered or made available true and complete copies of
each document (or summaries of same) referenced, listed, described or required
to be disclosed on the Disclosure Schedule.

2.29. Representations Complete.

Neither any of the representations or warranties made by the Company
(as modified by the Disclosure Schedule) in this Agreement, nor any statements
made in any exhibit, schedule or certificate furnished by the Company pursuant
to this Agreement contains or will contain at the Effective Time, any untrue
statement of a material fact, or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO

Parent and Newco hereby represent and warrant to the Company that on
the date hereof and as of the Closing Date, as though made at the Closing Date,
as follows:

3.1. Organization, Standing and Power.

Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Indiana. Newco is or will be prior to
the Effective Time a corporation duly organized, validly existing and in good
standing under the laws of the State of Indiana. Each of Parent and Newco has
the corporate power to own its properties and to carry on its business as now
being conducted and is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to be so qualified or
licensed would have a material adverse effect on the business, assets (including
intangible assets), condition (financial or otherwise), results of operations or
capitalization of Parent (a "Parent Material Adverse Effect").

3.2. Authority.

Each of Parent and Newco has all requisite corporate power and
authority to enter into this Agreement and any Related Agreements to which it is
a party and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and any Related Agreements to which it
is a party and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of Parent and Newco. This Agreement and any Related Agreements to which Parent
and Newco are parties have been duly executed and delivered by Parent and Newco
and constitute the valid and binding obligations of Parent and Newco,

-27-

enforceable in accordance with their terms, except as such enforceability may be
limited by principles of public policy and subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.

3.3. No Conflict.

The execution and delivery by the Parent and Newco of this Agreement
and any Related Agreement to which the Parent and/or the Newco is a party, and
the consummation of the transactions contemplated hereby and thereby, will not
conflict with (i) any provision of the certificate of incorporation or bylaws of
Parent or Newco, (ii) any contract to which Parent or Newco or any of their
respective properties or assets (including intangible assets) is subject, or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Newco or any of their respective properties (tangible or
intangible) or assets.

3.4. Capital Resources.

Parent has sufficient capital resources to pay the Total Consideration
and to consummate all of the transactions contemplated by the Agreement and the
Related Agreements.

3.5. Consents.

No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, or any third
party is required by or with respect to Parent or Newco in connection with the
execution and delivery of this Agreement and any Related Agreements to which
Parent or Newco is a party or the consummation of the transactions contemplated
hereby and thereby, except for such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings which, if not obtained
or made, would not have a Parent Material Adverse Effect, and the filing of the
Plan of Merger with the Virginia State Corporation Commission.

3.6. Brokers' and Finders' Fees.

Neither Parent nor Newco has incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.

3.7. Representations Complete.

Neither any of the representations or warranties made by the Parent in
this Agreement nor any statements made in any exhibit, schedule or certificate
furnished by the Parent or Newco pursuant to this Agreement contains or will
contain at the Effective Time, any untrue statement or a material fact, or omits
or will omit at the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading. The information supplied by
Parent for inclusion in the Proxy Statement shall not, on the date the Proxy
Statement is first mailed to the stockholders of the Company or at the time of

-28-

the Company Stockholders' Meeting or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME

4.1. Conduct of Business of the Company.

During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, the Company
agrees to use commercially reasonable efforts to cause the Company, except to
the extent that Parent shall otherwise consent in writing, which consent shall
not be unreasonably withheld or delayed, to carry on the Company's business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay the debts and Taxes of the Company when due, to pay
or perform other obligations when due, and, to the extent consistent with such
business, use commercially reasonable efforts, consistent with past practice and
policies, to preserve intact the Company's present business organizations, keep
available the services of the Company's present officers and Key Employees and
preserve the Company's relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it, all with the
goal of preserving unimpaired the Company's goodwill and ongoing businesses at
the Effective Time. The Company shall promptly notify Parent of any event or
occurrence or emergency not in the ordinary course of business of the Company
and any material event involving the Company. Except as expressly contemplated
by this Agreement as set forth in Section 4.1 of the Disclosure Schedule, the
Company shall not, without the prior written consent of Parent, which consent
shall not be unreasonably withheld or delayed:

(a) make any expenditures or enter into any commitment or
transaction exceeding $75,000 individually or $150,000 in the aggregate or any
commitment or transaction of the type described in Section 2.8 hereof, other
than in the ordinary course of business consistent with past practices;

(b) make any purchases, or enter into any Contract to purchase, any
inventory, exceeding $75,000 individually or $150,000 in the aggregate, other
than in the ordinary course of business consistent with past practices;

(c) enter into or amend any Contract pursuant to which any other
party is granted marketing, distribution, development or similar rights of any
type or scope with respect to any products or technology of the Company;

(d) amend or otherwise modify (or agree to do so), except in the
ordinary course of business or except as would not be reasonably likely to have
a Material Adverse Effect on the Company, or violate the terms of, any of the
Contracts set forth or described in the Disclosure Schedule;

-29-

(e) declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any Company
Capital Stock, or split, combine or reclassify any Company Capital Stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of Company Capital Stock, or repurchase, redeem
or otherwise acquire, directly or indirectly, any shares of Company Capital
Stock (or options, warrants or other rights exercisable therefor);

(f) issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of Company Capital Stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue or purchase any such shares
or other convertible securities;

(g) cause or permit any amendments to the articles of incorporation,
bylaws or other organizational documents of the Company;

(h) acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the Company's
business;

(i) except as allowed pursuant to Section 4.1 hereof, sell, lease,
license or otherwise dispose of any of its properties or assets, except in the
ordinary course of business and consistent with past practices;

(j) incur any indebtedness, except for trade credit or advances to
employees in the ordinary course of business consistent with past practices, or
guarantee any indebtedness or issue or sell any debt securities or guarantee any
debt securities of others;

(k) grant any loans to others, except to contractors or customers in
the ordinary course of business consistent with past practices, or purchase debt
securities of others or amend the terms of any outstanding loan agreement;

(l) grant any severance or termination pay (i) to any director or
officer, or (ii) to any other employee except consistent with prior practices of
the Company as disclosed in the Disclosure Schedule;

(m) adopt or amend any employee benefit plan, or enter into any
employment contract or, except as otherwise contemplated by this Agreement, non-
competition agreement, pay or agree to pay any special bonus or special
remuneration to any director or employee, or, increase the salaries or wage
rates of its employees except payments made pursuant to standard written
agreements in place on the date hereof and disclosed in the Disclosure Schedule;

-30-

(n) revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;

(o) pay, discharge or satisfy, in an amount in excess of $10,000 in
any one case, or $30,000 in the aggregate, any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the Current Balance Sheet or
subsequently incurred in the ordinary course of business;

(p) except as may be required by applicable law, make or change any
material election in respect of Taxes, adopt or change any accounting method in
respect of Taxes, enter into any closing agreement, settle any material claim or
assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes;

(q) enter into any strategic alliance or joint marketing arrangement
or agreement;

(r) except in a manner consistent with the Company's past practices,
hire, terminate or enter into settlement agreements with any employees, or
encourage any employees to resign from the Company; or

(s) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through 4.1(r) hereof, or any other action
that would make any of its representations or warranties contained in this
Agreement untrue or incorrect or prevent the Company or any of the Principal
Officers/Shareholders from performing or cause the Company or any of the
Principal Officers/Shareholders not to perform their respective covenants
hereunder.

4.2. No Solicitation.

Until the earlier of (i) the Effective Time, or (ii) the date of
termination of this Agreement pursuant to the provisions of Section 7.1 hereof
and except with respect to this Agreement and the transactions contemplated
hereby, the Company shall not (nor shall the Company permit, as applicable, any
of its officers, directors, employees, shareholders, agents, representatives or
affiliates, including any investment banker, attorney or accountant retained by
it, to), directly or indirectly, take any of the following actions with any
party other than Parent and its designees: (a) solicit, encourage, initiate,
facilitate or participate in any inquiry, negotiations or discussions, or enter
into any agreement, with respect to any offer or proposal to acquire all or any
material part of the Company's business or properties, or 20% or more of any
Company Capital Stock (whether or not outstanding), whether by merger, purchase
of assets, tender offer or otherwise, or effect any such transaction (an
"Acquisition Proposal"), (b) disclose any information not customarily disclosed
to any person or entity concerning the Company's business or properties, or
afford to any person or entity access to their respective properties,
technologies, books or records, not customarily afforded such access, or (c)

-31-

assist or cooperate with any person or entity to make any proposal to purchase
all or any portion of the Company Capital Stock or assets of the Company, other
than in the ordinary course of business, or (d) approve or recommend or propose
to approve or recommend or execute or enter into any letter of intent or
agreement with any person or entity providing for the acquisition of the
Company, whether by merger, purchase of assets, tender offer or otherwise or
propose publicly or agree to do any of the foregoing. In the event that the
Company or any of the Company's affiliates shall receive, prior to the Effective
Time or the termination of this Agreement, any offer, proposal, or request,
directly or indirectly, of the type referenced in clause (a) or (c) above, or
any request for disclosure or access pursuant to clause (b) above, the Company
shall immediately notify Parent thereof, including information as to the
identity of the offeror 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 Parent may reasonably request.

Notwithstanding anything in this Agreement to the contrary, the Company
shall be permitted to (A) to the extent applicable, comply with Rule 14d-9 and
Rule 14e-2 promulgated under the 1934 Act with regard to an Acquisition Proposal
and (B) engage in any discussions or negotiations with, or provide any
information to, any Person in response to an unsolicited bona fide Acquisition
Proposal by any such Person, if and only to the extent that, in any such case
referred to in clause (B), (i) the Company Stockholders' Meeting shall not have
occurred, (ii) the Company has received an unsolicited bona fide Acquisition
Proposal from a third party and the Board of Directors concludes in good faith
that such Acquisition Proposal constitutes a Superior Proposal (as defined
below), (iii) the Board of Directors after consultation with outside counsel
determines in good faith that the failure to take such action would be
inconsistent with its fiduciary duties under applicable law, and (iv) prior to
providing any information or data to any Person in connection with an
Acquisition Proposal by any such Person, its Board of Directors receives from
such Person an executed confidentiality agreement having provisions that are
customary in such agreements, as advised by counsel. Nothing in this Section 4.2
shall permit the Company to terminate this Agreement except as specifically
provided in Article VII hereof or affect any other obligation of the Company
hereunder. During the term of this Agreement, the Company shall not submit to
the vote of its stockholders any Acquisition Proposal other than the Merger. For
purposes of this Agreement, a "Superior Proposal" means a bonafide written
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation or sale of all or substantially all of the assets of the Company
or a tender or exchange offer for more than 50% of the equity securities of the
Company, that the Board of Directors of the Company determines in good faith
after consultation with its financial advisor and outside counsel, taking into
account, among other things, all legal, financial, regulatory and other aspects
of the proposal and the Person making the proposal would, if consummated, be
more favorable to the Company's shareholders (in their capacities as
shareholders) from a financial point of view than the Merger and is reasonably
capable of being completed. Any such offer, proposal or request having already
occurred after the effective date of the Letter of Intent previously signed by
the Parent and the Company shall be disclosed in Section 4.2 of the Disclosure
Schedule.

4.3. Break-Up Fee.

If (a) the Company breaches any provisions of Section 4.2 above or the
Company provides to the Parent written notice that this Agreement is terminated
in the absence of a material breach of the representations, warranties and
covenants of the Parent and Newco hereunder or the failure of the conditions set

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forth in Sections 6.1(b) or (c), and (b) within six months after the later of
the date of such termination or the Termination Date, as the case may be, the
Company signs a letter of intent or other agreement relating to the acquisition
of a material portion of the Company Capital Stock or of the Company, its
assets, or business, in whole or in part, whether directly or indirectly,
through purchase, merger, consolidation, or otherwise (other than sales of
inventory or immaterial portions of the Company's assets in the ordinary course)
and such transaction is ultimately consummated, then, immediately upon the
closing of such transaction, the Company will pay to the Parent the sum of
$500,000 (the "Break-Up Fee") by wire transfer of immediately available funds.
This Break-Up Fee will serve as the exclusive remedy to the Parent under this
Agreement in the event of a breach by the Company of the provisions of Section
4.2 and in any other case where the Break-Up Fee is payable.

The parties acknowledge that the agreements contained in Section 4.2 and
this Section 4.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if the Company fails promptly to pay any amount due
pursuant to this Section 4.3, and, in order to obtain such payment, Parent
commences a suit which results in a judgment against the Company for the fee set
forth in this Section 4.3, the Company shall pay to Parent its costs and
expenses (including reasonable attorneys' fees and expenses) in connection with
such suit, together with interest on the amount of the fee at the prime rate
published in the Wall Street Journal on the date such payment was required to be
made. Where the Break-Up Fee is not payable under this Section 4.3, the parties
agree that any remedy or amount payable pursuant to this Section 4.3 shall not
be an exclusive remedy for any breach of any representation, warranty, covenant
or agreement contained in this Agreement; provided that there shall be no
remedies for any breaches resulting in a loss of less than $10,000 individually
or in the aggregate.

ARTICLE V
ADDITIONAL AGREEMENTS

5.1. Shareholders' Meeting.

This Agreement, the Plan of Merger and the Merger shall be submitted for
approval to the Shareholders of the Company at the Company Stockholders' Meeting
to be called and held in accordance with the applicable provisions of Virginia
law and the articles of incorporation and bylaws of the Company. The Company
shall cause the Company Stockholders' Meeting to be held as promptly as
practicable and in any event within fifty (50) days from the date hereof or, if
later, within forty (40) days of the Company's receipt of notice from the SEC
that it has no further comments with respect to the Company's Proxy Statement
relating to the Company Stockholders' Meeting and shall disseminate to its
Shareholders all materials required of it under law to be disseminated in
connection with the consideration by the Shareholders of this Agreement and the
Merger. Parent shall cooperate in the preparation of the shareholder materials
and shall furnish all material information concerning it as the Company may

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reasonably request. In connection with the Company Stockholders' Meeting, (i)
the Board of Directors of the Company shall recommend to the Shareholders the
approval of the matters submitted for approval (unless the Board of Directors of
the Company, after consultation with outside counsel, determines in good faith
that the making of such recommendation, or the failure to withdraw or modify its
recommendation, would constitute a breach of the fiduciary duties of the Board
of Directors), and (ii) the Company shall use its commercially reasonably
efforts to obtain the Shareholders' approval (unless the Board of Directors of
the Company, after consultation with outside counsel, determines in good faith
that the taking of such actions would constitute a breach of the fiduciary
duties of the Board of Directors).

5.2. Access to Information.

The Company shall afford Parent and its accountants, counsel and other
representatives, reasonable access during the period prior to the Effective Time
to (i) all of the Company's properties, books, contracts, commitments and
records, including the Company's source code, (ii) all other information
concerning the business, properties and personnel (subject to restrictions
imposed by applicable law) of the Company as Parent may reasonably request, and
(iii) all employees of the Company as identified by Parent. The Company agrees
to provide to Parent and its accountants, counsel and other representatives
copies of internal financial statements (including Tax returns and supporting
documentation) promptly upon request. No information or knowledge obtained in
any investigation pursuant to this Section 5.2 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger in accordance with the terms
and provisions hereof.

5.3. Confidentiality.

Each of the parties hereto hereby agrees that the information obtained in
any investigation pursuant to Section 5.2 hereof, or pursuant to the negotiation
and execution of this Agreement or the effectuation of the transaction
contemplated hereby, shall be governed by the terms of the Nondisclosure
Agreement effective as of December 10, 1999 between the Company and Parent,
which is incorporated herein by this reference.

5.4. Company's Expenses.

The Parent and the Company will be responsible for and bear all of their
own costs and expenses incurred at any time in connection with pursuing or
consummating the Merger. If Parent terminates this Agreement other than a result
of any of (i) a breach by the Company of this Agreement, (ii) Parent's discovery
that the business or financial condition of the Company is materially and
adversely different from that disclosed in the Audited Financials and Interim
Financials, (iii) the failure of the condition set forth in Section 6.2(i)
hereof, or (iv) the existence of litigation involving the Company or the Company
capital Stock which has not been previously disclosed in writing to Parent, then
Parent shall promptly reimburse the Company for all of its reasonable out-of-
pocket expenses incurred in connection with the Merger, up to a maximum of
$25,000.

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5.5. Public Disclosure.

Neither party shall issue any statement or communication to any third party
(other than their respective agents) regarding the subject matter of this
Agreement or the transactions contemplated hereby, including, if applicable, the
termination of this Agreement and the reasons therefor, without the consent of
the other party, which consent shall not be unreasonably withheld, except that
this restriction shall be subject to Parent and the Company's obligation to
comply with applicable securities laws.

5.6. Consents.

The Company shall use commercially reasonable efforts to obtain the
consents, waivers and approvals under any of the Contracts to which the Company
is a party deemed appropriate or necessary by any party in connection with the
Merger, including all consents, waivers and approvals set forth in the
Disclosure Schedule, so as to preserve all rights of, and benefits to, the
Company thereunder from and after the Effective Time.

5.7. Reasonable Efforts.

Subject to the terms and conditions provided in this Agreement, each of the
parties hereto shall use commercially reasonable efforts to take promptly, or
cause to be taken, all actions, and to do promptly, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, to obtain
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings and to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement.

5.8. Notification of Certain Matters.

The Company shall give prompt notice to Parent of: (i) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which is likely
to cause any representation or warranty of the Company contained in this
Agreement to be untrue or inaccurate at or prior to the Effective Time, and (ii)
any failure of the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.8 shall not (a) limit
or otherwise affect any remedies available to the party receiving such notice or
(b) constitute an acknowledgment or admission of a breach of this Agreement. No
disclosure by the Company pursuant to this Section 5.8, however, shall be deemed
to amend or supplement the Disclosure Schedule or prevent or cure any
misrepresentations, breach of warranty or breach of covenant.

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5.9. Additional Documents and Further Assurances.

Each party hereto, at the request of another party hereto, shall execute
and deliver such other instruments and do and perform such other acts and things
as may be necessary or desirable for effecting completely the consummation of
the Merger and the transactions contemplated hereby.

5.10. Release of Liens.

At the request of the Parent, the Company shall enter into all agreements,
instruments, certificates and other documents, in form and substance reasonably
satisfactory to Parent, that are necessary or appropriate to evidence the
release of all Liens on the assets of the Company, except for the Liens listed
on Section 2.14(b) of the Disclosure Schedule or otherwise expressly permitted
in this Agreement.

5.11. Indemnification.

Parent agrees that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
now existing in favor of the current or former directors, officers or agents of
the Company as provided in its articles of incorporation or bylaws, shall
continue in full force and effect in accordance with their terms for at least
six years after the Effective Time. Parent further agrees to guarantee the
payment of any amounts due to such persons under such provisions and that all
determinations about the availability of indemnification and exculpation
pursuant to this Section 5.11 shall be made in good faith after consultation
with independent legal counsel. In addition, from and after the Effective Time,
directors and officers of the Company who become or continue as directors or
officers of the Surviving Corporation will be entitled to the same indemnity
rights and protections as are afforded to other directors and officers of the
Surviving Corporation. In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity or such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision will be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section 5.11.

ARTICLE VI
CONDITIONS TO THE MERGER

6.1. Conditions to Obligations of Each Party to Effect the Merger.

The respective obligations of the Company, Newco, and Parent to effect the
Merger shall be subject to the satisfaction at or prior to the Effective Time of
the following conditions:

(a) Shareholder Approval. The Shareholders of the Company holding not
less than the minimum number of shares necessary to approve this Agreement, the
Merger and the transactions contemplated hereby and thereby shall have voted

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all their respective shares of Capital Stock in favor of approval of this
Agreement, the Merger and the transactions contemplated hereby and thereby.

(b) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.

(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending.

6.2. Conditions to the Obligations of Parent and Newco.

The obligation of Parent and Newco to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by Parent and
Newco :

(a) Representations, Warranties and Covenants. (i) The
representations and warranties of the Company in this Agreement shall have been
true and correct in all material respects on the date they were made and shall
be true and correct in all material respects on and as of the Closing Date as
though such representations and warranties were made on and as of such time
(other than the representations and warranties of the Company as of a specified
date, which will be true and correct in all material respects as of such date),
and (ii) the Company shall have performed and complied in all material respects
with all covenants and obligations under this Agreement required to be performed
and complied with by such parties as of the Closing.

(b) Governmental Approval. Approvals from any court,
administrative agency or commission or other federal, state, county, local or
other foreign governmental authority, instrumentality, agency or commission (if
any) deemed appropriate or necessary by Parent shall have been timely obtained.

(c) Litigation. There shall be no action, suit, claim or
proceeding of any nature pending, or overtly threatened, against Parent, Newco
or the Company, their respective properties or any of their respective officers
or directors, arising out of, or in any way connected with, the Merger or the
other transactions contemplated by the terms of this Agreement.

(d) Third Party Consents. Parent shall have received all
consents, waivers, approvals, and assignments listed in Schedule 6.2(d) to this
Agreement.

(e) Release of Liens. Parent shall have received from the
Company a duly and validly executed copy of all agreements, instruments,
certificates and other documents, in form and substance reasonably satisfactory
to Parent, that are necessary or appropriate to evidence the release of all
Liens set forth in Section 6.2(e) of the Disclosure Schedule except for the
Permitted Encumbrances listed in Section 2.14(b) of the Disclosure Schedule to
this Agreement.

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(f) Legal Opinion. Parent shall have received a legal opinion
from Hunton & Williams, legal counsel to the Company, substantially in the form
attached hereto as Exhibit F.

(g) No Material Adverse Effect. There shall not have occurred
any event or condition of any character that has had, or is reasonably likely to
have, a Material Adverse Effect on the Company since the date of this Agreement.

(h) Noncompete Agreements. Each of the Key Employees shall,
prior to the Effective Time, have executed and delivered to Parent an Employment
and Noncompete Agreement in the form attached hereto as Exhibit A, and all of
such Agreements shall be in full force and effect.

(i) Certificate of the Company. Parent shall have received a
certificate, validly executed by or on behalf of the Company to the effect that,
as of the Closing:

(i) all representations and warranties made by the Company
in this Agreement are true and correct in all material respects
on and as of the Closing Date as though such representations and
warranties were made on and as of such time (other than the
representations and warranties of the Company as of a specified
date, which will be true and correct in all material respects as
of such date); and

(ii) all covenants and obligations under this Agreement to be
performed by the Company on or before the Closing have been so
performed in all material respects.

(j) Certificate of Secretary of Company. Parent shall have
received a certificate, validly executed by the Secretary of the Company,
certifying as to (i) the terms and effectiveness the articles of incorporation
and the bylaws of the Company, (ii) the valid adoption of resolutions of the
Board of Directors and Shareholders of the Company approving this Agreement and
the approval of the transactions contemplated hereby and that such approvals are
in full force and effect without modification, (iii) the incumbency of the
officers of the Company executing this Agreement and the Related Agreements or
other instruments or certificates relating hereto or thereto.

(k) Certificate of Good Standing. Parent shall have received
current certificates of good standing with respect to the Company from the State
Corporation Commission of the State of Virginia.

(l) Settlement of Outstanding Litigation. The Company shall have
settled or shall otherwise no longer be subject to the actions, suits or
proceedings listed in Section 6.2(m) of the Disclosure Schedule.

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(m) Receipt of Permits. The Company shall have obtained the
permits listed in Section 6.2(n) of the Disclosure Schedule.

6.3. Conditions to Obligations of the Company.

The obligations of the Company to consummate and effect this Agreement and
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by the Company:

(a) Representations, Warranties and Covenants. (i) The
representations and warranties of Parent and Newco in this Agreement (other than
the representations and warranties of Parent and Newco as of a specified date,
which will be true and correct in all material respects as of such date) shall
be true and correct in all material respects on the date they were made and
shall be true and correct in all material respects on and as of the Closing Date
as though such representations and warranties were made on and as of such time,
and (ii) Parent and Newco shall have performed and complied in all material
respects with all covenants and obligations of this Agreement required to be
performed and complied with by such parties as of the Closing.

(b) Certificate of Parent. The Company shall have received a
certificate executed on behalf of Parent by a corporate officer to the effect
that, as of the Closing:

(i) all representations and warranties made by Parent and
Newco in this Agreement (other than the representations and
warranties of Parent and Newco as of a specified date, which
will be true and correct as of such date) are true and correct
in all material respects on and as of the Closing Date as though
such representations and warranties were made on and as of such
time; and

(ii) all covenants and obligations under this Agreement to
be performed by Parent and Newco on or before the Closing have
been so performed in all material respects.

(c) Legal Opinion. The Company shall have received a legal
opinion from Wyatt, Tarrant & Combs, legal counsel to Parent, substantially in
the form attached hereto as Exhibit G.

ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER

7.1. Termination.

Except as provided in Section 7.2 hereof, this Agreement may be terminated
and the Merger abandoned at any time prior to the Closing:

(a) by mutual, written agreement of the Company and the Parent ;

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(b) by Parent or by the Company, if the Closing Date shall not
have occurred by June 30, 2000, provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes breach of this Agreement;

(c) by Parent or by the Company if: (i) there shall be a final
non-appealable order of a federal or state court in effect preventing
consummation of the Merger, or (ii) there shall be any statute, rule, regulation
or order enacted, promulgated or issued or deemed applicable to the Closing by
any Governmental Entity that would make consummation of the Closing illegal;

(d) by Parent if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity, which would prohibit
Parent's ownership or operation of any portion of the business of the Company,
or (ii) compel Parent or the Company to dispose of or hold separate all or a
material portion of the business or assets of the Company or Parent as a result
of the Merger;

(e) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement of the Company contained in this Agreement such
that the conditions set forth in Section 6.2(a) would not be satisfied and such
breach has not been cured within ten (10) calendar days after written notice
thereof to the Company; provided, however, that no cure period shall be required
for a breach which by its nature cannot be cured; or

(f) by the Company if the Company is not in material breach its
obligations under this Agreement and there has been a material breach of any
representation. warranty, covenant or agreement of the Parent or Newco contained
in this Agreement such that the conditions set forth in Section 6.3(a) would not
be satisfied and such breach has not been cured within ten (10) calendar days
after written notice thereof to Parent; provided, however, that no cure period
shall be required for a breach which by its nature cannot be cured.

(g) by the Company, if, prior to the Effective Time, a Superior
Proposal has been made and the Board of Directors of the Company authorizes the
Company to enter into a definitive agreement concerning such transaction;
provided, that the Company shall not terminate this Agreement pursuant to this
Section 7.1(g) if Parent makes, within five business day of receiving written
notice of such Superior Proposal (specifying the material terms and conditions
of such Superior Proposal (and including a copy thereof and all accompanying
documentation), identifying the person making such Superior Proposal and stating
whether the Company intends to enter into a definitive agreement with such
person) an offer that the Board of Directors of the Company determines, in good
faith after consultation with its financial advisor, is at least as favorable to
the Company and its stockholders as the Superior Proposal.

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7.2. Effect of Termination.

In the event of termination of this Agreement as provided in Section 8.1
hereof, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Parent, the Company or the Shareholders,
or their respective officers, directors or shareholders, if applicable;
provided, however, that each party hereto shall remain liable for any breaches
of this Agreement prior to its termination; and provided further, however, that,
the provisions of Sections 4.3, 5.4, 5.5 and 5.6 hereof, Article VIII hereof and
this Section 7.2 shall remain in full force and effect and survive any
termination of this Agreement pursuant to the terms of this Article VII.

7.3. Amendment.

This Agreement may be amended by the parties hereto at any time by
execution of an instrument in writing signed (i) on behalf of Parent, and (ii)
on behalf of the Company.

7.4. Extension; Waiver.

At any time prior to the Closing, Parent, on the one hand, and the Company
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations of the other party hereto, (ii) waive any inaccuracies in
the representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.

ARTICLE VIII
GENERAL PROVISIONS

8.1. Notices.

All notices and other communications hereunder shall be in writing, shall
be effective when received, and shall in any event be deemed received and
effectively given (i) upon delivery, if delivered personally or by commercial
messenger or courier service, (ii) three days after deposit in the U.S. mail, if
delivered by registered or certified mail (postage prepaid, return receipt
requested), (iii) one business day after the day of facsimile transmission, if
sent by facsimile with confirming copy by U.S. mail (first class, postage
prepaid), or (iv) one business day after the business day of deposit with
Federal Express or similar carrier for overnight delivery, freight prepaid, in
each case to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):

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(a) if to Parent, to:

Coachmen Industries, Inc.
2831 Dexter Drive
P. O. Box 3300
Elkhart, Indiana 46515
Attention: Mr. Jim Jack
Richard M. Lavers, Esq.
Telephone No.: (219) 262-0123
Facsimile No.: (219) 262-8823

with a copy to:

Wyatt, Tarrant & Combs
250 W. Main Street, Suite 1700
Lexington, Kentucky 40507-1746
Attention: Caryn F. Price, Esq.
and Judge B. Wilson II, Esq.
Telephone No.: (606) 233-2012
Facsimile No.: (606) 259-0649

(b) if to the Company, to:

Mod-U-Kraf Homes, Inc.
201 Old Franklin Turnpike
P. O. Box 573
Rocky Mount, Virginia 24151
Attention: Mr. Dale H. Powell
Telephone No.: (540) 483-0291
Facsimile No.: (540) 483-2228

with a copy to:

Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: Randall S. Parks, Esq.
Telephone No.: (804) 788-7375
Facsimile No.: (804) 788-8218

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8.2. Interpretation.

The words "include," "includes" and "including" when used herein shall be
deemed in each case to be followed by the words "without limitation." The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.

8.3. Counterparts.

This Agreement may be executed in one or more counterparts, all of which
shall be deemed originals, shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.

8.4. Entire Agreement; Assignment.

This Agreement, the Exhibits hereto, the Disclosure Schedule, together with
the Nondisclosure Agreement dated as of December 10, 1999 between Parent and the
Company, and the documents and instruments and other agreements among the
parties hereto referenced herein: (i) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings both written and oral, among the parties with
respect to the subject matter hereof, (ii) are not intended to confer upon any
other person or entity any rights or remedies hereunder, and (iii) shall not be
assigned by operation of law or otherwise, except that Parent and Newco may
assign their respective rights and delegate their respective obligations
hereunder to any entity or entities that are wholly-owned by Parent, directly or
indirectly.

8.5. Severability.

In the event that any provision of this Agreement or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as to reasonably effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.

8.6. Other Remedies.

Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with, and not exclusive of, any
other remedy conferred hereby, or by law or equity upon such party, and the
exercise by a party of any one remedy will not preclude the exercise of any
other remedy.

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8.7. Governing Law.

This Agreement shall be governed by and construed in accordance with the
laws of the State of Virginia, as applied to contracts entered into and wholly
to be performed within such state by residents thereof. Each of the parties
hereto irrevocably consents to the exclusive jurisdiction and venue of the
federal district courts located within the Western District of Virginia, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein unless otherwise provided herein, agrees that
process may be served upon them in any manner authorized by the laws of the
Commonwealth of Virginia for such persons and waives and covenants not to assert
or plead any objection which they might otherwise have to such jurisdiction,
venue and such process.

8.8. Rules of Construction.

The parties hereto agree that they have been represented by counsel during
the negotiation and execution of this Agreement and, therefor, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.

8.9. Approval of Parent.

The approval of this Agreement by Parent constitutes the approval of the
same and the transactions contemplated herein by Parent as the sole Shareholder
of Newco.

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IN WITNESS WHEREOF, Parent, Newco, and the Company have caused this
Agreement to be signed, all as of the date first written above.

COACHMEN INDUSTRIES, INC.

By: /s/ GENE E. STOUT
-----------------------------
Title: Executive Vice President

COACHMEN ACQUISITION CORPORATION

By: /s/ GENE E. STOUT
------------------------------
Title: Vice President

MOD-U-KRAF HOMES, INC.

By: /s/ EDWIN J. CAMPBELL
-------------------------------
Title: Executive Vice President and
Corporate Secretary

The directors of Mod-U-Kraf Homes, Inc. execute this Agreement to indicate
their approval of the transactions contemplated herein, subject to the terms and
conditions of this Agreement, in their capacities as directors.

BOARD OF DIRECTORS OF MOD-U-KRAF
HOMES, INC.

/s/ BOBBIE L. OLIVER
-------------------------------------
BOBBIE L. OLIVER, DIRECTOR

/s/ MARY L. FITTS
-------------------------------------
MARY L. FITTS, DIRECTOR

/s/ DALE H. POWELL
-------------------------------------
DALE H. POWELL, DIRECTOR

/s/ W. CURTIS CARTER
-------------------------------------
W. CURTIS CARTER, DIRECTOR

/s/ EDWIN J. CAMPBELL
-------------------------------------
EDWIN J. CAMPBELL, DIRECTOR

APPENDIX B

PLAN OF MERGER

COACHMEN ACQUISITION CORPORATION

INTO AND WITH

MOD-U-KRAF HOMES, INC.

Pursuant to this Plan of Merger ("Plan of Merger"), Coachmen
Acquisition Corporation, a corporation organized and existing under the laws of
the State of Virginia ("Newco") and a wholly-owned subsidiary of Coachmen
Industries, Inc. ("Parent"), shall be merged into and with Mod-U-Kraf Homes,
Inc., a corporation organized and existing under the laws of the State of
Virginia ("Company").

ARTICLE 1

TRANSACTIONS AND TERMS OF MERGER

1.1 Merger. Subject to the terms and conditions of this Plan
of Merger, at the Effective Time, Newco shall be merged with and into Company in
accordance with the provisions of ss. 13.1-716 of the VSCA and with the effect
provided in ss. 13.1-721 of the VSCA (the "Merger"). Company shall be the
Surviving Corporation resulting from the Merger and shall continue to be
governed by the laws of the State of Virginia.

1.2 Effective Time. The Merger and the other transactions
contemplated by this Plan of Merger shall become effective on the date and at
the time the Articles of Merger shall become effective with the Virginia State
Corporation Commission (the "Effective Time"). The date on which the closing of
the Merger occurs is referred to in this Plan of Merger as the "Closing Date."

1.3 Articles of Incorporation. The Articles of Incorporation
of Newco in effect immediately prior to the Effective Time shall be the Articles
of Incorporation of the Surviving Corporation after the Effective Time until
otherwise amended or repealed except that Article I of the Articles of
Incorporation shall be amended and restated to read in its entirety as follows:
"The name of the corporation is Mod-U-Kraf, Inc."

1.4 Bylaws. The Bylaws of Newco in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation after the
Effective Time until otherwise amended or repealed.

1.5 Directors and Officers. The directors of Newco in office
immediately prior to the Effective Time, together with such additional
individuals thereafter elected, shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of Newco in office immediately prior to
the Effective Time, together with such additional individuals thereafter
elected, shall serve as the officers of the Surviving Corporation from and after
the Effective Time in accordance with the Bylaws of the Surviving Corporation.

ARTICLE 2

MANNER OF CONVERTING SHARES

2.1 Conversion of Shares. Subject to the provisions of this
Article 2, at the Effective Time, by virtue of the Merger and without any action
on the part of Newco or Company or the stockholders of either of the foregoing,
the shares of the constituent corporations to the Merger shall be converted as
follows:

(a) Effect on Company Capital Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of Newco, the
Company, Parent or any of the Shareholders, each share of Company Capital Stock
issued and outstanding immediately prior to the Effective Time (other than any
Dissenting Shares (as defined in Section 2.4 hereof)) shall be canceled and
extinguished, and automatically converted into the right to receive from Parent,
upon surrender of the certificate representing such shares of Company Capital
Stock in the manner provided in Sections 2.3(c) and 2.3(d) hereof, but subject
to conditions set forth below in this Section 2.1 and throughout this Agreement,
the Exchange Amount.

(b) Capital Stock of Newco At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Newco or Company,
each share of Newco Common Stock, issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of Common Stock of the Surviving Corporation.
Each stock certificate evidencing ownership of any such shares of Newco Common
Stock shall thereafter evidence ownership of an equivalent number of shares of
Common Stock of the Surviving Corporation.

(c) Withholding Taxes. Any cash amounts payable to any
Shareholder pursuant to Article 2 hereof shall be subject to, and reduced by an
amount equal to, the amount of any requisite state, local, federal and foreign
withholding taxes.

(d) Shareholder Loans. In the event that any Shareholder has
outstanding loans from the Company as of the Effective Time, the cash amounts
payable to such Shareholder pursuant to Section 2.1 hereof shall be reduced by
an amount equal to the outstanding principal plus accrued interest of such
Shareholder's loans as of the Effective Time, and such loans shall be deemed
paid in full.

(e) Definitions. For all purposes of this Plan of Merger, the
following terms shall have the following respective meanings:

"Company Capital Stock" shall mean (i) shares of
Company Common Stock, and (ii) any other shares of capital stock of Company.

"Company Common Stock" shall mean shares of common
stock, $1.00 par value, of Company.

"Company Options" shall mean all issued and
outstanding options, warrants or other rights to purchase or otherwise acquire
Company Capital Stock (whether or not vested) held by any person or entity.

"Exchange Amount" shall mean an amount equal to the
quotient obtained by dividing (x) the Total Consideration by (y) the Total
Outstanding Shares.

"Newco Common Stock" shall mean shares of Common
Stock, no par value, of Newco

"Shareholder" or "Shareholders" shall mean each
holder of any Company Capital Stock immediately prior to the Effective Time.

"Total Consideration" shall be the sum of NINE
MILLION SEVEN HUNDRED ONE THOUSAND THREE HUNDRED SEVENTY-FIVE U.S. DOLLARS AND
SEVENTY-FIVE U.S. CENTS ($9,701,375.75).

"Total Outstanding Shares" shall be the aggregate
number of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time, (including the maximum number of shares of Company
Common Stock or other Company Capital Stock issuable on exercise and/or
conversion of all outstanding Company Options and other rights convertible into,
or exercisable or exchangeable for, shares of Company Common Stock or Company
Capital Stock assuming full conversion, exercise or exchange thereof).

2.2 Dissenting Shares

(a) Notwithstanding any other provisions of this Plan of
Merger to the contrary, any shares of Company Capital Stock held by a holder who
has exercised and perfected dissenters' rights for such shares in accordance
with the VSCA and who, as of the Effective Time, has not effectively withdrawn
or lost such dissenters' rights ("Dissenting Shares"), shall not be converted
into or represent a right to receive the consideration for Company Capital Stock
set forth in Section 2.1 hereof, but the holder thereof shall only be entitled
to such rights as are provided by the VSCA in respect of dissenters' shares .

(b) Notwithstanding the provisions of Section 2.1 hereof, if
any holder of Dissenting Shares shall effectively withdraw or lose (through
failure to perfect or otherwise) such holder's dissenters' rights under the
VSCA, then, as of the later of the Effective Time and the occurrence of such

event, such holder's shares shall automatically be converted into and represent
only the right to receive the consideration for Company Capital Stock set forth
in Section 2.1 hereof, without interest thereon, upon surrender of such holder's
certificate representing such shares.

(c) The Company shall give Parent (i) prompt notice of any
written demand for dissenters' rights received by the Company pursuant to the
applicable provisions of the VSCA and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to any such demands or offer to settle or settle any such demands.

2.3 Surrender of Certificates

(a) Exchange Agent. First Union National Bank, Charlotte,
North Carolina, or such other agent reasonably acceptable to Parent and the
Company, shall serve as the exchange agent (the "Exchange Agent") for the
Merger.

(b) Parent to Provide Consideration. On the Closing Date,
Parent shall make available to the Exchange Agent for exchange in accordance
with this Article 2 the consideration issuable pursuant to Section 2.1 hereof in
exchange for the outstanding shares of Company Capital Stock being exchanged in
the Merger.

(c) Exchange Procedures. On or after the Closing Date, the
Shareholders will surrender the certificates representing their Company Capital
Stock (the "Company Stock Certificates") to the Exchange Agent for cancellation
together with a letter of transmittal in such form and having such provisions
that Parent may reasonably request. Upon surrender of a Company Stock
Certificate for cancellation to the Exchange Agent, or such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
subject to the terms of Section 2.1 hereof, the holder of such Company Stock
Certificate shall be entitled to receive from the Exchange Agent in exchange
therefor the amount of cash (without interest) payable in exchange for such
Company Stock Certificate pursuant to this Article 2, and the Company Stock
Certificate so surrendered shall be canceled. Until so surrendered, each
outstanding Company Stock Certificate will be deemed from and for all corporate
purposes, to evidence only the right to receive payment (without interest)
pursuant to this Article 2. Payment due to each Shareholder pursuant to this
Section 2.3 shall be made as promptly as practicable following the later of (i)
receipt by Parent of confirmation of filing of the Plan of Merger and (ii)
Parent's receipt of such Shareholder's properly completed letter of transmittal
and Company Stock Certificates pursuant to this Section 2.3.

(d) No Liability. Notwithstanding anything to the contrary in
this Section 2.3, neither the Exchange Agent, the Surviving Corporation nor any
party hereto shall be liable to a holder of shares of Company Capital Stock for
any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.

2.4 No Further Ownership Rights in Company Capital Stock The
consideration paid in respect of the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof shall be deemed to be full
satisfaction of all rights pertaining to such shares of Company Capital Stock,
and there shall be no further registration of transfers on the records of the

Surviving Corporation of shares of Company Capital Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Company
Stock Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article 2.

2.5 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificates, upon the making of an affidavit in a form
satisfactory to Parent, of that fact by the holder thereof, such amount, if any,
as may be required pursuant to Section 2.1 hereof; provided, however, that
Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the Shareholder who is the owner of such lost, stolen or
destroyed certificates to deliver a bond in such amount as it may reasonably
direct against any claim that may be made against Parent or the Exchange Agent
with respect to the certificates alleged to have been lost, stolen or destroyed.

2.6 Taking of Necessary Action; Further Action. If at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company, Parent, Newco and the officers and
directors of the Company, Parent and Newco are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.

ARTICLE 3

MISCELLANEOUS

3.1 Conditions Precedent. Consummation of the Merger by
Company shall be conditioned on the satisfaction of, or waiver of, the
conditions precedent to the Merger set forth in Section 6 of the Plan and
Agreement of Merger dated as of May 1, 2000 by and among Parent, Newco and the
Company (the "Merger Agreement").

3.2 Termination. This Plan of Merger may be terminated at any
time prior to the Effective Time by the parties hereto as provided in Section 7
of the Merger Agreement.

APPENDIX C

April 25, 2000

The Board of Directors MOD-U-KRAF HOMES, INC.
P. O. Box 573
Rocky Mount, Virginia 24151

Members of the Board:

You have requested our opinion as to the fairness, from a financial
point of view, to the shareholders of MOD-U-KRAF HOMES, INC. (the "Company") of
the cash consideration in the merger (the "Merger") of a wholly-owned subsidiary
of Coachmen Industries, Inc. ("Coachmen") with and into the Company, pursuant to
the Agreement and Plan of Merger in the form presented to the Board of
Directors on April 25, 2000 (the "Agreement"). As is more specifically set
forth in the Agreement, upon consummation of the Merger (the "Closing Date"),
each outstanding share of the common stock of the Company, except for any
dissenting shares, will be entitled to receive cash consideration of $11.75 per
share.

Davenport & Company LLC, as part of its investment banking business, is
routinely engaged in the valuation of closely held businesses and their
securities in connection with mergers and acquisitions, private placements,
estate and gift taxes, corporate and various other purposes. In arriving at our
opinion, we have reviewed, analyzed and relied upon material bearing upon the
financial and operating condition of the Company and the Merger, including among
other things, the following:

i. Reviewed the Agreement and the exhibits thereto;

ii. Reviewed certain historical financial and other information
concerning the Company for the five years ended December 31,
1999 and for the quarter ended March 31, 2000;

iii. Reviewed the historical transactions in, and stock prices
of, the common stock of the Company;

iv. Held discussions with senior management of the Company with
respect to its past and current financial performance,
financial condition and future prospects;

v. Analyzed certain publicly available information of other
companies that we deemed comparable or otherwise relevant to
our inquiry, and compared the Company from a financial point
of view with certain of these companies;

vi. Reviewed the financial terms of certain recent business
combinations that we deemed comparable or otherwise relevant
to our inquiry; and

vii. Conducted such other financial studies, analyses and
investigations and reviewed such other information as we
deemed appropriate to enable us to render our opinion.

In conducting our review and arriving at our opinion, we have relied
upon the accuracy and completeness of all of the financial and other information
provided to us or publicly available and we have not assumed any responsibility
for independently verifying the accuracy or completeness of any such
information. We did not make or obtain any independent evaluations or appraisals
of any assets or liabilities of the Company nor did we verify any of the
Company's books or records. We have also assumed that the Merger and the other
transactions contemplated by the Agreement will be consummated as described in
the Agreement.

We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including, among others, the following: (i)
the historical and financial position and results of operations of the Company;
(ii) the assets and liabilities of the Company; and (iii) the nature and terms
of certain other merger transactions. We also have taken into account our
assessment of general economic, market and financial conditions and our
experience in other transactions, as well as our experience in securities
valuation generally. Our opinion is necessarily based upon conditions as they
exist and can be evaluated on the date hereof and the information made available
to us through the date hereof. Based upon and subject to the foregoing, it is
our opinion that, as of the date hereof, the Cash Consideration pursuant to the
Agreement is fair, from a financial point of view, to the shareholders of the
Company.

This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Merger. This
opinion does not address the merits of the underlying decision by the Company to
engage in the Merger, and does not constitute a recommendation to any
shareholder of the Company as to how such shareholder should vote with respect
to the Merger.

DAVENPORT & COMPANY LLC

By: /s/ Robert F. Mizell, CFA
-------------------------------
Robert F. Mizell, CFA

APPENDIX D

Article 15.
Dissenters' Rights.

ss. 13.1-729. Definitions.

In this article:

"Corporation" means the issuer of the shares held by a dissenter before
the corporate action, except that (i) with respect to a merger, "corporation"
means the surviving domestic or foreign corporation or limited liability company
by merger of that issuer, and (ii) with respect to a share exchange,
"corporation" means the acquiring corporation by share exchange, rather than the
issuer, if the plan of share exchange places the responsibility for dissenters'
rights on the acquiring corporation.

"Dissenter" means a shareholder who is entitled to dissent from
corporate action under ss. 13.1-730 and who exercises that right when and in the
manner required by ss.ss. 13.1-732 through 13.1-739.

"Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.

"Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.

"Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.

"Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.

"Shareholder" means the record shareholder or the beneficial
shareholder.

ss. 13.1-730. Right to dissent.

A. A shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:

1. Consummation of a plan of merger to which the corporation is a party
(i) if shareholder approval is required for the merger by ss. 13.1-718 or the
articles of incorporation and the shareholder is entitled to vote on the merger
or (ii) if the corporation is a subsidiary that is merged with its parent under
ss. 13.1-719;

2. Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;

3. Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation if the shareholder was entitled to vote on the
sale or exchange or if the sale or exchange was in furtherance of a dissolution
on which the shareholder was entitled to vote, provided that such dissenter's
rights shall not apply in the case of (i) a sale or exchange pursuant to court
order, or (ii) a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale;

4. Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.

B. A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.

C. Notwithstanding any other provision of this article, with respect to
a plan of merger or share exchange or a sale or exchange of property there shall
be no right of dissent in favor of holders of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at the meeting at which the plan of merger or
share exchange or the sale or exchange of property is to be acted on, were (i)
listed on a national securities exchange or on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) or (ii) held by at least
2,000 record shareholders, unless in either case:

1. The articles of incorporation of the corporation issuing such shares
provide otherwise;

2. In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange to
accept for such shares anything except:

a. Cash;

b. Shares or membership interests, or shares or membership interests
and cash in lieu of fractional shares (i) of the surviving or acquiring
corporation or limited liability company or (ii) of any other corporation or
limited liability company which, at the record date fixed to determine the

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shareholders entitled to receive notice of and to vote at the meeting at which
the plan of merger or share exchange is to be acted on, were either listed
subject to notice of issuance on a national securities exchange or held of
record by at least 2,000 record shareholders or members; or

c. A combination of cash and shares or membership interests as set
forth in subdivisions 2 a and 2 b of this subsection; or

3. The transaction to be voted on is an "affiliated transaction" and is
not approved by a majority of "disinterested directors" as such terms are
defined inss.13.1-725.

D. The right of a dissenting shareholder to obtain payment of the fair
value of his shares shall terminate upon the occurrence of any one of the
following events:

1. The proposed corporate action is abandoned or rescinded;

2. A court having jurisdiction permanently enjoins or sets aside the
corporate action; or

3. His demand for payment is withdrawn with the written consent of the
corporation.

E. Notwithstanding any other provision of this article, no shareholder
of a corporation located in a county having a county manager form of government
and which is exempt from income taxation under ss. 501 (c) or ss. 528 of the
Internal Revenue Code and no part of whose income inures or may inure to the
benefit of any private share holder or individual shall be entitled to dissent
and obtain payment for his shares under this article.

ss. 13.1-731. Dissent by nominees and beneficial owners.

A. A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different shareholders.

B. A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:

1. He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and

2. He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.

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ss. 13.1-732. Notice of dissenters' rights.

A. If proposed corporate action creating dissenters' rights under ss.
13.1-730 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.

B. If corporate action creating dissenters' rights under ss. 13.1-730
is taken without a vote of shareholders, the corporation, during the ten-day
period after the effectuation of such corporate action, shall notify in writing
all record shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in ss. 13.1-734.

ss. 13.1-733. Notice of intent to demand payment.

A. If proposed corporate action creating dissenters' rights under ss.
13.1-730 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (i) shall deliver to the corporation before
the vote is taken written notice of his intent to demand payment for his shares
if the proposed action is effectuated and (ii) shall not vote such shares in
favor of the proposed action.

B. A shareholder who does not satisfy the requirements of subsection A
of this section is not entitled to payment for his shares under this article.

ss. 13.1-734. Dissenters' notice.

A. If proposed corporate action creating dissenters' rights under ss.
13.1-730 is authorized at a shareholders' meeting, the corporation, during the
ten-day period after the effectuation of such corporate action, shall deliver a
dissenters' notice in writing to all shareholders who satisfied the requirements
of ss. 13.1-733.

B. The dissenters' notice shall:

1. State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited;

2. Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;

3. Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before or
after that date;

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4. Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty nor more than sixty days after the date
of delivery of the dissenters' notice; and

5. Be accompanied by a copy of this article.

ss. 13.1-735. Duty to demand payment.

A. A shareholder sent a dissenters' notice described in ss. 13.1-734
shall demand payment, certify that he acquired beneficial ownership of the
shares before or after the date required to be set forth in the dissenters'
notice pursuant to subdivision 3 of subsection B of ss. 13.1-734, and, in the
case of certificated shares, deposit his certificates in accordance with the
terms of the notice.

B. The shareholder who deposits his shares pursuant to subsection A of
this section retains all other rights of a shareholder except to the extent that
these rights are canceled or modified by the taking of the proposed corporate
action.

C. A shareholder who does not demand payment and deposits his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.

ss. 13.1-736. Share restrictions.

A. The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received.

B. The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder except to the
extent that these rights are canceled or modified by the taking of the proposed
corporate action.

ss. 13.1-737. Payment.

A. Except as provided in ss. 13.1-738, within thirty days after receipt
of a payment demand made pursuant to ss. 13.1-735, the corporation shall pay the
dissenter the amount the corporation estimates to be the fair value of his
shares, plus accrued interest. The obligation of the corporation under this
paragraph may be enforced (i) by the circuit court in the city or county where
the corporation's principal office is located, or, if none in this Commonwealth,
where its registered office is located or (ii) at the election of any dissenter
residing or having its principal office in the Commonwealth, by the circuit
court in the city or county where the dissenter resides or has its principal
office. The court shall dispose of the complaint on an expedited basis.

B. The payment shall be accompanied by:

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1. The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the effective date of the corporate
action creating dissenters' rights, an income statement for that year, a
statement of changes in shareholders' equity for that year, and the latest
available interim financial statements, if any;

2. An explanation of how the corporation estimated the fair value of
the shares and of how the interest was calculated;

3. A statement of the dissenters' right to demand payment underss.13.1-
739; and

4. A copy of this article.

ss. 13.1-738. After-acquired shares.

A. A corporation may elect to withhold payment required by ss. 13.1-737
from a dissenter unless he was the beneficial owner of the shares on the date of
the first publication by news media or the first announcement to shareholders
generally, whichever is earlier, of the terms of the proposed corporate action,
as set forth in the dissenters' notice.

B. To the extent the corporation elects to withhold payment under
subsection A of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
offer to pay this amount to each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares and of how the
interest was calculated, and a statement of the dissenter's right to demand
payment under ss. 13.1-739.

ss. 13.1-739. Procedure if shareholder dissatisfied with payment or
offer.

A. A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and demand
payment of his estimate (less any payment under ss. 13.1-737), or reject the
corporation's offer under ss. 13.1-738 and demand payment of the fair value of
his shares and interest due, if the dissenter believes that the amount paid
under ss. 13.1-737 or offered under ss. 13.1-738 is less than the fair value of
his shares or that the interest due is incorrectly calculated.

B. A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection A
of this section within thirty days after the corporation made or offered payment
for his shares.

ss. 13.1-740. Court action.

A. If a demand for payment under ss. 13.1-739 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the circuit court in the city or county described in
subsection B of this section to determine the fair value of the shares and

-6-

accrued interest. If the corporation does not commence the proceeding within the
sixty-day period, it shall pay each dissenter whose demand remains unsettled the
amount demanded.

B. The corporation shall commence the proceeding in the city or county
where its principal office is located, or, if none in this Commonwealth, where
its registered office is located. If the corporation is a foreign corporation
without a registered office in this Commonwealth, it shall commence the
proceeding in the city or county in this Commonwealth where the registered
office of the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.

C. The corporation shall make all dissenters, whether or not residents
of this Commonwealth, whose demands remain unsettled parties to the proceeding
as in an action against their shares and all parties shall be served with a copy
of the petition. Nonresidents may be served by registered or certified mail or
by publication as provided by law.

D. The corporation may join as a party to the proceeding any
shareholder who claims to be a dissenter but who has not, in the opinion of the
corporation, complied with the provisions of this article. If the court
determines that such shareholder has not complied with the provisions of this
article, he shall be dismissed as a party.

E. The jurisdiction of the court in which the proceeding is commenced
under subsection B of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.

F. Each dissenter made a party to the proceeding is entitled to
judgment (i) for the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation or (ii)
for the fair value, plus accrued interest, of his after-acquired shares for
which the corporation elected to withhold payment under ss. 13.1-738.

ss. 13.1-741. Court costs and counsel fees.

A. The court in an appraisal proceeding commenced under ss. 13.1-740
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters did not act in good faith in demanding
payment under ss. 13.1-739.

B. The court may also assess the reasonable fees and expenses of
experts, excluding those of counsel, for the respective parties, in amounts the
court finds equitable:

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1. Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
ofss.ss.13.1-732 through 13.1-739; or

2. Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed did not act in good faith with respect to the rights provided by this
article.

C. If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, the court
may award to these counsel reasonable fees to be paid out of the amounts awarded
the dissenters who were benefited.

D. In a proceeding commenced under subsection A of ss. 13.1-737 the
court shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court finds
that such parties did not act in good faith in instituting the proceeding.

FOLD AND DETACH HERE

REVOCABLE PROXY

MOD-U-KRAF HOMES, INC.
REVOCABLE PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS TO BE

Held on June 21, 2000

-------------

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

The undersigned hereby appoints Dale H. Powell and Edwin J. Campbell and
each of them (with full power to act alone and to designate substitutes) as
attorneys and proxies of the undersigned with authority to vote and act with
respect to all shares of stock of Mod-U-Kraf Homes, Inc., which the
undersigned would be entitled to vote at the special meeting of shareholders
to be held on Wednesday, June 21, 2000 at 10:00 a.m., local time, at Ippy's
Restaurant in the Erath Room located at 1760 North Main Street, Rocky Mount,
Virginia, and any adjournments or postponements thereof, with all the powers
the undersigned would possess if personally present, upon matters noted below
and upon such other matters as may properly come before the meeting.

(When executed, this proxy will be voted in accordance with your
instructions. If you give no instructions, this proxy will be voted FOR the
following Proposal).

The shares represented by this proxy shall be voted as follows:

To consider and vote on a proposal to approve the Agreement and Plan of
Merger dated as of May 1, 2000 among Mod-U-Kraf, Coachmen Industries, Inc. and
a subsidiary of Coachmen, and a related Plan of Merger. As a result of the
merger, Mod-U-Kraf will become a subsidiary of Coachmen, and each outstanding
share of Mod-U-Kraf common stock (excluding shares held by shareholders who
perfect their statutory dissenters' rights under Virginia law) will be
converted into the right to receive $11.75 in cash.

FOR [_] AGAINST [_] ABSTAIN [_]

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE PROPOSAL.
(Please date and sign on the reverse side.)

^ FOLD AND DETACH HERE ^
In addition, Mod-U-Kraf shareholders will be asked to transact any other
business that properly comes before the special meeting. Should the
undersigned be present and elect to vote at the special meeting or at any
adjournment thereof and after notification to the Secretary of Mod-U-Kraf at
the special meeting of the shareholder's decision to terminate this proxy,
then the power of said attorney and proxy shall be deemed terminated and of no
further force and effect.
The undersigned acknowledges receipt from Mod-U-Kraf prior to the execution
of this proxy of notice of the meeting and a proxy statement dated May 26,
2000.
Please sign exactly as name
appears below. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.

Dated: , 2000

---------------------------------
Signature

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Signature
(Please mark, sign, date and
return the proxy promptly using
the enclosed envelope)

This proxy will be voted as directed, but if no instructions are specified,
this proxy will be voted FOR the proposition stated. If any other business is
presented at such meeting, this proxy will be voted by those named in this
proxy in their best judgment. At the present time, the board of directors
knows of no other business to be presented at the meeting.