As filed with the Securities and Exchange Commission on January 31, 1996
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
CAVALIER HOMES, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-0949734
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
Highway 41 North and Cavalier Road
Addison, Alabama 35540
(205) 747-1575
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Barry B. Donnell
719 Scott Avenue, Suite 600
Wichita Falls, Texas 76307
(817) 723-5523
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
B. G. Minisman, Jr., Esq.
BERKOWITZ, LEFKOVITS, ISOM & KUSHNER
A Professional Corporation
1600 SouthTrust Tower
Birmingham, Alabama 35203
(205) 328-0480
Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. X
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
<PAGE>
CALCULATION OF REGISTRATION FEE
+------------------------------------------------------------------------------|
| Title of each class of | Amount to | Proposed maximum |
| securities to be registered | be registered | offering price per |
| | | share(1) |
|------------------------------------------------------------------------------|
| | | |
| Common Stock, par value $.10 per | 55,596 | |
| share................. | shares | $19.563 |
|------------------------------------------------------------------------------+
+------------------------------------------------+
| Proposed maximum |
| aggregate offering Amount of |
| price(1) registration fee |
|------------------------------------------------+
| |
| $1,087,624 $375.03 |
+------------------------------------------------+
(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457(c) under the Securities Act. The registration fee has been
calculated on the basis of the average of the high and low prices reported on
January 29, 1996 on the New York Stock Exchange, which price was $19.563 per
share.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
CAVALIER HOMES, INC.
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(b) OF REGULATION S-K
Item Location in Prospectus
1. Forepart of the Registration Statement Forepart of the Registration
and Outside Front Cover Page of Statement and outside front cover
Prospectus page of Prospectus
2. Inside Front and Outside Back Cover Available Information;
Pages of Prospectus Incorporation of Certain Documents
by Reference; Outside back cover
page of Prospectus
3. Summary Information, Risk Factors The Company; Risk Factors; Outside
and Ratio of Earnings to Fixed Charges back cover page of Prospectus
4. Use of Proceeds Outside front cover page of
Prospectus; Plan of Distribution
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Stockholders
8. Plan of Distribution Outside front cover page of
Prospectus; Plan of Distribution
9. Description of Securities to be Incorporation of Certain Documents
Registered by Reference
10. Interests of Named Experts and Counsel Not Applicable
11. Material Changes The Company
12. Incorporation of Certain Information by Incorporation of Certain Documents
Reference by Reference
13. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
<PAGE>
PROSPECTUS
CAVALIER HOMES, INC.
55,596 Shares of Common Stock
(Par Value $0.10 Per Share)
The shares offered hereby are shares of the common stock, par value
$0.10 per share (the "Common Stock"), of Cavalier Homes, Inc., a Delaware
corporation (the "Company"). This Prospectus may be used by each of the former
stockholders of Wheel House Structures, Inc. ("Wheel House") named herein (the
"Selling Stockholders") to sell (i) up to an aggregate of 55,596 shares of
Common Stock of the Company, which shares were issued to the Selling
Stockholders pursuant to the terms and conditions of an Option and Stock
Exchange Agreement dated August 28, 1995, by and among Wheel House, the Selling
Stockholders and the Company (the "Agreement") and (ii) such additional shares
of Common Stock which may be issued to the Selling Stockholders in connection
with the Company's three-for-two stock split in the form of a 50% stock dividend
payable February 15, 1996 to stockholders of record at the close of business on
January 31, 1996. All proceeds from the sale of shares of Common Stock pursuant
to this Prospectus will inure to the benefit of the Selling Stockholders, and
the Company will not receive any part of the proceeds from the sale of the
shares of Common Stock offered hereby.
The shares of Common Stock offered hereby may be offered for resale by
the Selling Stockholders, in their sole discretion, from time to time in
transactions (which may include block transactions) on the New York Stock
Exchange, Inc. (the "NYSE"), in negotiated transactions, or a combination of
such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. No underwriter is being utilized by the Selling
Stockholders in connection with the offer and sale of the shares of Common Stock
offered hereby. The Selling Stockholders may effect transactions by selling such
shares of Common Stock to or through brokerdealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholders or the purchasers of shares for whom such
broker-dealers may act as agent or to whom they may sell as principal or both
(which compensation, as to a particular broker-dealer, might be in excess of
customary commissions). See "Selling Stockholders" and "Plan of Distribution."
The Company will bear all expenses (other than selling discounts and
commissions and fees and expenses of counsel or other advisors to the Selling
Stockholders) in connection with the registration of the Common Stock being
offered by the Selling Stockholders. See "Plan of Distribution."
The Common Stock is listed on the NYSE under the symbol CAV. On January
29, 1996, the last sale price reported by the NYSE for the Common Stock was
$19.625 per share.
See "Risk Factors" for certain factors that should be considered by
purchasers of the Common Stock offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is February [ ], 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at the following addresses: Midwest Regional Office, Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661-2511; and Northeast
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Common Stock is listed on the NYSE and reports and other
information regarding the Company can also be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the shares of Common Stock of
the Company offered hereby. This Prospectus constitutes a part of the
Registration Statement and does not contain all of the information and
undertakings set forth in the Registration Statement and the exhibits thereto.
Statements contained in this Prospectus as to the contents of any document are
not necessarily complete, and, in each instance, reference is made to the copy
of such document filed as an exhibit to the Registration Statement or
incorporated therein by reference. Each such statement is qualified in its
entirety by such reference. For further information, reference is hereby made to
the Registration Statement and the exhibits thereto. The Registration Statement
and exhibits thereto may be inspected without charge at the Commission's office
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies thereof
may be obtained from the Public Reference Section of the Commission at such
address at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the
Commission (Commission File No. 1-9792) are incorporated herein by reference:
(i) The Company's Annual Report on Form 10-K for the year ended
December 31, 1994;
(ii) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1995, June 30, 1995 and September 29, 1995; and
(iii) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission under the
Exchange Act on December 9, 1987, as amended by the Company's Form 8 dated
December 16, 1987, and as updated (A) in the Registration Statement on Form
S-3, effective June 23, 1993 (Commission File No. 33-63060), to reflect the
increase of the number of shares of authorized Common Stock from 5,000,000
shares to 15,000,000 shares and (B) by the Registration Statement on Form
8-A filed with the Commission under the Exchange Act on December 2, 1994,
reflecting the listing of the Common Stock on the NYSE.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the Common Stock offered hereby shall be
deemed to be incorporated by reference and to be a part of the Prospectus from
the date of the filing of such documents. Any statement contained in a document
incorporated by reference herein or contained herein shall be deemed to be
modified or superseded to the extent that a statement herein or in a document
subsequently incorporated by reference herein shall modify or supersede such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company undertakes to provide, without charge to each person
(including any beneficial owner) to whom this Prospectus is delivered, and upon
written or oral request of such person, a copy of any and all of the information
that has been incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Such a request is to be directed to Mr. Mike
Brinkley, Cavalier Homes, Inc., 719 Scott Avenue, Suite 600, P. 0. Box 5003,
Wichita Falls, Texas 76307 (telephone number: (817) 723-5523).
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
any offer to sell or sale of the securities with respect to which this
Prospectus is issued and, if given or made, such information or representation
must not be relied upon as having been authorized. The delivery of this
Prospectus at any time does not imply that the information herein is correct as
of any time subsequent to its date. This Prospectus does not constitute an offer
to sell to or a solicitation of an offer to buy from any person in any state in
which any such offer or solicitation would be unlawful.
THE COMPANY
General Description
The Company is a Delaware corporation incorporated in 1985, with its
principal executive offices located at Highway 41 North and Cavalier Road,
Addison, Alabama 35540 (telephone number: (205) 747-1575). The Company also
maintains administrative offices at 719 Scott Avenue, Suite 600, Wichita Falls,
Texas 76301 (telephone number: (817) 723-5523). Unless otherwise indicated by
the context, references to the "Company" or to "Cavalier" include Cavalier
Homes, Inc., its subsidiaries and their respective predecessors, if any.
The Company designs and manufactures a wide range of high quality
manufactured homes and markets its homes primarily in the southeastern United
States, with a focus on serving the low-to medium-price manufactured housing
market. During 1994, approximately 78% of the Company's revenues were generated
from sales in its core markets of Alabama, North Carolina, Mississippi, South
Carolina, Texas, Georgia, Louisiana and Tennessee. The Company, through its
wholly owned subsidiaries, currently operates 12 manufacturing facilities, seven
of which are located in Alabama, two in North Carolina and one each in Georgia,
Texas and Pennsylvania. The Company's facilities have an aggregate capacity to
produce approximately 24,000 floor sections per year.
The Company's homes are sold under the Cavalier, Pacesetter, Brigadier,
Knox, Buccaneer, Challenger, Parkwood, Mansion, Olympic, Plantation, Town and
Country, Astro, Riverchase and various other brand names. As of December 31,
1994, the Company's homes were sold through approximately 500 independent
dealers (including 73 independent exclusive dealers) operating approximately 625
retail sales centers located in 32 states. The Company's homes normally include
furniture and appliances and are comprised of one or more floor sections.
Single-section homes range in size from 546 to 1,216 square feet and are sold at
retail prices ranging from approximately $13,000 to $35,000. Multi-section homes
range in size from 880 to 2,394 square feet and are sold at retail prices
ranging from approximately $20,000 to $60,000.
The Company began offering retail installment sale financing in March
1992 through Cavalier Acceptance Corporation ("CAC"), the Company's wholly owned
finance subsidiary, for homes sold to qualifying retail customers of the
Company's independent exclusive dealers. The Company believes that it is the one
of the few major manufactured home producers in the United States offering
retail consumer financing through independent dealers. Consumer installment
sales contracts that are originated by the Company's independent exclusive
dealers and conform to the Company's credit policies are purchased by CAC
without recourse to the dealership. CAC currently offers four conventional loan
programs for use by dealerships, which programs require a down payment by the
consumer ranging from 0% to 20% of the purchase price in cash, trade-in value of
a previously owned manufactured home or appraised value of equity in any real
property pledged as collateral. Repayment terms range from 84 to 240 months,
depending upon the amount financed, the amount of the down payment and the
customer's creditworthiness. The loans typically are secured by a purchase money
security interest in the manufactured home and, in certain instances, a mortgage
on real property pledged as additional collateral. Loans purchased by CAC
generally provide a fixed rate of interest with equal monthly payments. CAC
currently operates in 13 states and serves all of the Company's exclusive
dealerships.
For a more detailed description of the Company, including audited and
unaudited financial information, reference is made to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 and the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995, June 30,
1995 and September 29, 1995, which are incorporated herein by reference.
Recent Developments
In December 1995, the Company received and accepted a written
commitment from its primary lender to (i) extend the term of the Company's
credit facility under a Revolving, Warehouse and Term Loan Agreement from
December 31, 1995 to December 31, 1996, (ii) increase the amount available under
such credit facility from $13 million to $23 million and (iii) reduce the
interest rate applicable to the term loan portion of such facility. The
commitment is subject to the execution and delivery of definitive documents and
to other closing conditions, and it is anticipated that the closing of such
amended credit facility will take place in February 1996. There can be no
assurance, however, that such changes will be effected.
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully by prospective purchasers of the Common
Stock offered hereby.
Manufactured Housing Industry
The manufactured housing industry historically has been cyclical and
seasonal and has experienced wide fluctuations in aggregate sales in the past,
resulting in the failure of many manufacturing concerns. The market for
manufactured homes is affected by many of the same national and regional
economic and demographic factors that affect the broader housing industry. Sales
in the manufactured housing industry are seasonal in nature, with sales of homes
traditionally being weaker in the winter months. Historically, most sectors of
the housing industry, including the manufactured housing industry, have been
affected by, among other things, changes in general economic conditions,
inflation, levels of consumer confidence, employment and income levels, housing
demand, availability of alternative forms of housing, availability of financing
and the level and stability of interest rates. The Manufactured Housing
Institute ("MHI") reported that during the period from 1983 to 1991, aggregate
domestic shipments of manufactured homes declined 42.1% from 295,079 homes to
170,713 homes. The Company believes that the factors responsible for the decline
nationally during this period included, among other things, the economic
weakness and resulting unemployment in the oil, manufacturing and mining
industries, the high levels of repossessed inventory of manufactured homes, the
availability of apartment and other rental housing and the severe contraction in
availability of retail financing caused by the decline of the savings and loan
industry. According to industry statistics, after a ten-year low in shipments of
homes in 1991, the industry has recovered significantly, posting increases in
shipments of 24%, 21% and 20% for 1992, 1993 and 1994, respectively, as compared
to the prior year. Industry statistics for the first three quarters of 1995
indicate a continued trend in the increase of shipments, although at a slower
pace than previous years. The Company attributes the upturn in the industry to
increased consumer confidence, wider acceptance of manufactured housing, a
reduction in the availability of alternative housing, increased availability of
consumer financing and an improvement in the overall economy. However, there can
be no assurance that the manufactured housing industry will continue its upward
growth trend or that it will not experience future declines. There also can be
no assurance that the Company will be able to sustain past levels of sales or to
continue its recent sales growth or profitability.
Availability of Consumer and Dealer Financing
Consumer and dealer financing for manufactured home purchases is
generally provided by third-party lenders. The availability and cost of
financing for manufactured home purchasers and dealers are important to the
Company's sales and are dependent on financial institutions' lending practices,
the strength of the credit markets generally, governmental policies and other
conditions, all of which are beyond the Company's control. In addition, in most
states, manufactured homes are classified legally and by taxing authorities as
personal property rather than real estate. As a result, financing for the
purchase of manufactured homes is characterized by shorter loan maturities and
higher interest rates, and in certain periods such financing is more difficult
to obtain than conventional home mortgages. Although the Company believes that
the business of CAC ultimately may lessen the impact of these factors on the
Company's business, there can be no assurance to this effect, and unfavorable
changes in these factors may have a material adverse effect on the Company's
results of operations or financial condition.
Finance Subsidiary's Limited Operating History
CAC funded its first loan in March 1992. CAC purchased approximately
$7.3 million of retail installment sales contracts covering the Company's homes
during 1994, and approximately $600,000 and $2.6 million of retail installment
sales contracts covering the Company's homes in 1992 and 1993, respectively. The
Company establishes a reserve for losses on such contracts; however, the
establishment of appropriate reserves is an inherently uncertain process, and
there can be no assurance that the ultimate losses realized by CAC will not
exceed the Company's loss reserves and have a material adverse effect on the
Company's results of operations or financial condition. Further, an expansion of
the business and operations of CAC will increase the working capital
requirements of the Company. In addition, although the Company will attempt to
match liabilities and assets of CAC both as to term and rate to reduce loss
exposure from interest rate fluctuations, there can be no assurance that
interest rate fluctuations will not have a material adverse effect upon the
Company's results of operations or financial condition.
CAC's prospects for success must be considered in light of the risks,
uncertainties, expenses and difficulties frequently encountered in the
establishment of a new business in the highly competitive retail consumer
finance industry. The success of CAC's operations will also depend to a great
extent on its management. Although the Company plans to expand the operations of
CAC, due to CAC's limited operating history and the cyclical nature of the
manufactured housing industry, CAC's specific business plans are subject to
change and refinement as the circumstances require. There can be no assurance
that CAC will continue to generate sufficient revenues to maintain profitable
operations. The Company cannot predict whether CAC will be able to expand
successfully, or to what extent and when, if at all, CAC will be able to develop
a sizeable portfolio of high quality loans. Further, if CAC's operations are
unsuccessful, there can be no assurance that such lack of success will not have
a material adverse effect upon the Company's results of operations or financial
condition.
Availability and Pricing of Raw Materials
The Company's operating costs may be significantly affected by the
availability and pricing of certain raw materials, particularly lumber, gypsum,
particle board and insulation. Sudden increases in demand for these construction
materials caused by natural disasters or other market forces can greatly
increase the costs of materials or limit the availability of such materials.
Increases in such costs cannot always be reflected immediately in the Company's
prices and, consequently, may adversely impact the Company's profitability.
Further, a reduction in the availability of raw materials also may affect the
Company's ability to meet or maintain production requirements.
Growth Strategy
The Company's growth strategies are to (i) expand the financing
activities of CAC, (ii) develop the Company's network of exclusive dealerships,
(iii) expand its geographic presence and increase its manufacturing capacity and
(iv) develop the production and distribution of component parts for manufactured
homes. Since 1991, the Company has expanded manufacturing capacity to meet the
increase in demand for its homes. If the manufactured housing industry suffers a
downturn, or the Company otherwise experiences a decline in the demand or growth
in demand for its homes, such a downturn or decline could result in the Company
having significant excess manufacturing capacity and could have a material
adverse effect on the Company's results of operations or financial condition.
The Company's ability to execute its growth strategies will depend on a number
of factors, including general economic and industry conditions, the ability to
sell to additional independent dealers, the availability of semi-skilled workers
in the areas in which the Company's manufacturing facilities are located, the
ability of CAC to be competitive and other factors, many of which are beyond the
control of the Company. There can be no assurance that the Company's growth
strategies will be successful. Contingent Repurchase Obligations
In accordance with customary practice in the manufactured housing
industry, the Company has entered into repurchase and other recourse agreements
with various financial institutions and other credit sources pursuant to which
the Company has agreed, under certain circumstances, to repurchase homes sold to
independent dealers in the event of a default by a dealer in its obligation to
such credit sources. The risk of loss under repurchase agreements is mitigated
by the fact that (i) sales of manufactured homes are spread over a relatively
large number of independent dealers, (ii) the repurchase obligation expires on
individual homes after a reasonable period of time (generally 12 to 18 months
from invoice date) and also declines during such period based on predetermined
amounts and (iii) the Company has been able in most cases to sell homes
repurchased from credit sources in the ordinary course of business without
incurring significant losses. As of September 29, 1995, the Company's contingent
liability under these arrangements was an amount estimated to be approximately
$64 million, based on historical dealer turnover of inventory. Although the
Company has established, based on prior experience and current market
conditions, a reserve for possible repurchase losses of $650,000 as of September
29, 1995, there can be no assurance that the ultimate losses realized by the
Company will not exceed the Company's loss reserve and have a material adverse
effect on the Company's results of operations or financial condition.
Competition
The manufactured housing industry is highly competitive and
characterized by low barriers to entry and severe price competition. Competition
is based primarily on price, product features and quality, reputation for
quality and service, depth of field inventory, delivery capabilities, warranty
repair service, dealer promotions, merchandising and terms of dealer and retail
consumer financing. In addition, the Company competes with other manufacturers,
some of which maintain their own retail sales centers, for quality independent
dealers. According to MHI, as of September 30, 1995, there were 96 companies in
the United States producing manufactured homes from 283 facilities. There are
numerous manufacturers that compete directly with the Company in the states
where the Company's homes are sold. A number of these firms have been operating
longer and have substantially greater financial resources than the Company. In
addition, manufactured homes compete with other forms of low-cost housing,
including site-built, prefabricated and modular homes, apartments, townhouses
and condominiums. As a result of these competitive conditions, the Company may
not be able to sustain past levels of sales or to continue its recent sales
growth or profitability.
Reliance on Key Personnel
The success of the Company's business is highly dependent upon the
personal efforts and abilities of its current executive officers and other key
personnel. The loss of the services of one or more of these individuals could
have a material adverse effect upon the Company's business. The Company does not
have employment or non-competition agreements with any of its executive
officers. In addition, the Company's continued growth, including the expansion
of CAC's business, will depend upon its ability to attract and retain additional
experienced management personnel.
Dependence on Independent Dealers
The Company depends on independent dealers for substantially all retail
sales of its manufactured homes. Typically only one dealer within a given market
area distributes a particular product line of the Company. While the Company
believes that its relations with its independent dealers are generally good and
that its network of exclusive dealerships has contributed to the Company's
recent performance, there can be no assurance that the Company will be able to
maintain these relations, that these dealers will continue to sell the Company's
homes or that the Company will be able to attract and retain quality independent
dealers.
Potential Environmental Liability and Compliance with Regulations
The Company's operations are subject to federal, state and local laws
and regulations relating to the generation, storage, handling, emission,
transportation, disposal and discharge of materials into the environment.
Governmental authorities have the power to enforce compliance with their
regulations, and violations may result in the payment of fines or the entry of
injunctions, or both. Furthermore, the requirements of such environmental laws
and enforcement policies have generally become stricter in recent years. The
Company currently does not believe it will be required under existing
environmental laws and enforcement policies to expend amounts which will have a
material adverse effect on its results of operations or financial condition.
However, the Company is unable to make any assurance that the ultimate cost of
compliance with environmental laws and enforcement policies will not have a
material adverse effect on the Company's results of operation or financial
condition.
Regulation
The Company is subject to a variety of federal, state and local laws
and regulations affecting the production, sale and financing of manufactured
housing. The National Manufactured Home Construction and Safety Standards Act of
1974, and regulations promulgated by the U.S. Department of Housing and Urban
Development ("HUD") thereunder, impose comprehensive national construction
standards for manufactured homes and preempt conflicting state and local
regulations. Failure by the Company to comply with such regulations could expose
the Company to a wide variety of sanctions, including closing one or more of the
Company's manufacturing facilities. Certain HUD regulations with respect to
structural design specifications relating to wind load capacities of
manufactured housing located or sold in areas prone to hurricane-force winds
became effective in July 1994. These regulations require homes sold in
hurricane-prone areas to be able to withstand 110 miles per hour winds. The
Company currently sells homes in locations that are subject to the HUD wind load
regulations. Additional HUD regulations, which became effective in October 1994,
require manufactured homes to meet certain insulation requirements related to
energy efficiency levels. The Company does not believe that the increased cost
associated with these regulations has had a material effect on the Company's
operations to date; however, there can be no assurance that such cost will not
increase significantly in the future. HUD is also reviewing the existing wind
load capacity regulations for all other areas of the United States, and the
Company cannot predict if additional regulations will be adopted or the effect
such regulations would have on the Company or the manufactured housing industry
as a whole. In addition, certain components of manufactured homes are subject to
regulation by the U.S. Consumer Product Safety Commission. Further, a variety of
other federal, state and local laws and regulations apply to the Company,
including, but not limited to, laws and regulations relating to
truth-in-lending, disclosure requirements for consumers, zoning and housing,
non-discrimination, warranties and warranty claims, the protection of human
health and safety and the environment and debt collection techniques, as well as
laws and regulations governing credit transactions in general. There can be no
assurance that the Company will not be adversely affected by a failure to comply
with any laws or regulations applicable to or affecting the Company. Volatility
of Stock Price
The Company's Common Stock is traded on the NYSE. The market price of
the Common Stock may be subject to significant fluctuations in response to
variations in the Company's operating results and other factors affecting the
Company specifically and the stock market and the manufactured housing industry
generally.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership by the Selling Stockholders of the Common Stock of the
Company and the relationship of the Selling Stockholders with Wheel House as of
the date of the Agreement. Effective August 28, 1995, Mr. Masdon resigned his
position as president of Wheel House, and effective January 2, 1996, he resigned
as sole director thereof.
Relationship No. of shares No. of shares
With Wheel beneficially beneficially
House owned before No. of shares owned after
Name as of 8/28/95 offering offered offering
James Masdon President, 22,692 22,692 0
Director and
Shareholder
Max Burleson Shareholder 25,340 25,340 0
Max Sanders Shareholder 7,564 7,564 0
The Selling Stockholders received 55,596 shares of Common Stock being
offered by this Prospectus in connection with the execution of, and the
consummation of the transactions contemplated by the terms of, the Agreement. In
addition to the foregoing, the Selling Stockholders will receive, and this
Prospectus will relate to, additional shares of Common Stock in connection with
the Company's three-for-two stock split in the form of a 50% stock dividend
payable February 15, 1996 to stockholders of record at the close of business on
January 31, 1996. Pursuant to the terms of the Agreement, on August 28, 1995,
the Company delivered to the Selling Stockholders 33,750 shares of Common Stock
in exchange for an option to acquire all of the outstanding capital stock of
Wheel House not already owned by the Company. Effective January 2, 1996, the
Company exercised such option and acquired all of the outstanding capital stock
of Wheel House in consideration for the issuance of 21,846 additional shares of
Common Stock to the Selling Stockholders. The terms of the Agreement provide
that the Company, at its own expense, would register for resale under the
Securities Act such shares of Common Stock issued to the Selling Stockholders.
Each Selling Stockholder is offering all of the shares of Common Stock
beneficially owned by such Selling Stockholder as of the date hereof. Because
the Selling Stockholders may sell all or only a portion of the shares of Common
Stock offered hereby, and because this offering is not being underwritten, the
number of shares of Common Stock that may be owned after the offering, as
reflected in the foregoing table, assumes that the Selling Stockholders will
offer and sell all the Common Stock offered hereby and will not acquire any
other shares of Common Stock of the Company other than in connection with the
stock split described above.
PLAN OF DISTRIBUTION
The Common Stock is listed on the NYSE under the symbol CAV. It is
expected that sales of the shares of Common Stock of the Company hereunder will
be made principally in transactions (which may include block transactions) on
the NYSE, at the market price then prevailing, although sales also may be made
in privately negotiated transactions, or a combination of such methods of sale,
and may also be made at fixed prices which may be changed, at prices related to
such prevailing market prices, or at negotiated prices. The Company understands
that the shares of Common Stock being offered and sold by the Selling
Stockholders will not be offered or sold through any underwriter. Sales of
shares of Common Stock effected on the NYSE may be effected through licensed
broker-dealers who will act as agent for the Selling Stockholders. Such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or the purchasers of shares for whom
such broker-dealers may act as agent or to whom they may sell as principal or
both (which compensation, as to a particular broker-dealer, might be in excess
of customary commissions). The Company will not receive any part of the proceeds
from the sale of Common Stock offered hereby.
The Company is paying all of the expenses of registering the shares of
Common Stock of the Company offered hereby under the Securities Act (other than
selling discounts, concessions and commissions and fees and expenses of counsel
and other advisors to the Selling Stockholders), including filing, printing,
legal, accounting and miscellaneous expenses in connection with this offering.
The Selling Stockholders and any broker executing selling orders on
behalf of the Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, in which event commissions received by any such
broker may be deemed to be underwriting commissions under the Securities Act. To
the Company's knowledge, there are no agreements, arrangements or understandings
between the Selling Stockholders and any broker or dealer with respect to the
sale of the Common Stock offered hereby.
Under applicable rules and regulations of the Commission under the
Exchange Act, any person engaged in a distribution of securities may not
simultaneously engage in market making activities with respect to such
securities for certain time periods prior to the commencement of such
distribution. In addition and without limiting the foregoing, the Selling
Stockholders and any person participating in the distribution of the shares of
Common Stock offered hereby will be subject to applicable provisions of the
Exchange Act and the rules and regulations of the Commission thereunder,
including without limitation Rules 10b-6 and 10b-7, which provisions may limit
the timing of purchases and sales of shares of Common Stock by the Selling
Stockholders. All of the foregoing may affect the marketability of such shares.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby has been
passed upon by Berkowitz, Lefkovits, Isom & Kushner, A Professional Corporation,
1600 SouthTrust Tower, Birmingham, Alabama 35203.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
<PAGE>
No dealer, salesman or any
other person has been authorized to
give any information or to make any
representations, other than those
contained in this Prospectus, and, if
given or made, such other information
or representations must not be relied
upon as having been authorized by the
Company. This Prospectus does not
constitute an offer or solicitation
(i) by anyone in any state in which
such offer or solicitation is not
authorized, or in which the person
making the offer or solicitation is
not qualified to do so, or (ii) to any
person to whom it is unlawful to make
such offer or solicitation. The CAVALIER HOMES, INC.
delivery of this Prospectus at any
time does not imply that the
information herein is correct as of
any time subsequent to its date. 55,596 Shares
Common Stock
TABLE OF CONTENTS $0.10 Par Value
Page
Available Information 2 PROSPECTUS
Incorporation of Certain 2
Documents by Reference February [ ], 1996
The Company 3
Risk Factors 4
Selling Stockholders 8
Plan of Distribution 9
Legal Matters 10
Experts 10
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses, all of which will
be borne by the Company, in connection with the distribution of the securities
being registered. All amounts shown are estimates except the Commission
registration fee.
Item Amount
SEC Registration fee $ 375.03
Printing expenses 250.00
Legal fees and expenses 2,500.00
Accounting fees and expenses 1,000.00
Miscellaneous 374.97
--------
Total $4,500.00
========
Item 15. Indemnification of Directors and Officers
(a) Article VII of the By-laws of the Registrant provides for
indemnification of directors and officers, in certain instances. The provisions
of said Article are as follows:
SECTION 1. Indemnification in Actions Arising Out of Capacity as
Officer, Director, Employee or Agent. The corporation shall indemnify
any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact
that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
SECTION 2. Indemnification in Actions by or in Right of Corporation.
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall
be made in respect to any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless
and only to the extent that the Delaware Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court
shall deem proper.
SECTION 3. Indemnification When Successful on Merits or Otherwise. To
the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in Sections 1 and 2 of
this Article VII, or in defense of any claim issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
SECTION 4. Determination of Meeting Applicable Standard. Any
indemnification under Sections I and 2 of this Article VII (unless
ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standard of
conduct set forth in Sections I and 2 of this Article VII. Such
determination shall be made (a) by a majority vote of the directors
who were not parties to such action, suit or proceeding, even though
less than a quorum, or (b) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written
opinion, or (c) by the stockholders.
SECTION 5. Payment of Expenses in Advance of Disposition of Action.
Expenses incurred by an officer or director in defending a civil or
criminal action, suit, or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit, or proceeding
as authorized by the board of directors in the specific case upon
receipt of an undertaking by or on behalf of such director or officer
to repay such amount unless it shall ultimately be determined that he
is entitled to be indemnified by the corporation as authorized in this
Article VII. Such expenses incurred by other employees and agents may
be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
SECTION 6. Nonexclusivity of Article. The indemnification provided by
this Article VII shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person. The indemnification provided by this
Article VII shall not be exclusive of any powers, rights, agreements
or undertakings which may be legally permissible or authorized by or
under any applicable law but, notwithstanding any other provisions of
this Article VII, the indemnification authorized and provided by this
Article VII shall be applicable only to the extent that such
indemnification shall not duplicate indemnity or reimbursement which
such person has received or shall receive otherwise than under this
Article VII.
SECTION 7. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this Article VII or
otherwise.
SECTION 8. Constituent Corporations. For purposes of this Article VII,
references to "the corporation" shall include, in addition to this
corporation, any constituent corporation (including any constituent of
a constituent) absorbed by this corporation in a consolidation or
merger which, if its separate existence had continued, would have had
power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in
the same position under the provisions of this Article VII with
respect to the resulting or surviving corporation as he would have
with respect to such constituent corporation if its separate existence
had continued.
SECTION 9. Definitions. For purposes of this Article VII, the phrases
"other enterprises," "fines," "serving at the request of the
corporation" and "not opposed to the best interests of the
corporation" shall, in addition to the normal meanings of said
phrases, be deemed to include the meanings ascribed to said phrases in
Section 145(i) of the General Corporation Law of the State of Delaware
or any successor provision thereto.
(b) In addition to the foregoing provisions of the Registrant's
By-laws, directors, officers and controlling persons of the Registrant may be
indemnified by the Registrant pursuant to the provisions of Section 145 of the
Delaware General Corporation Law.
(c) The Registrant maintains officers' and directors' liability
insurance.
Item 16. Exhibits
The following is a list of all exhibits filed as a part of this
Registration Statement, including those which are incorporated herein by
reference.
Exhibit Description
2(a) Option and Stock Exchange Agreement by and Among Wheel House
Structures, Inc., Shareholders of Wheel House Structures, Inc. and
Cavalier Homes, Inc. dated August 28, 1995**
NOTE: The Registrant hereby undertakes to furnish supplementally to
the Commission a copy of any of the schedules to the foregoing
agreement, which are identified on the list attached to said agreement
on page II - 59 hereof, but which are omitted in accordance with Item
601 of Regulation S-K.
4(a) Articles four, six, seven and eight of the Registrant's Restated
Certificate of Incorporation (incorporated by reference to Exhibit
3(a) to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993)*
4(b) Article II, Sections 1 through 11; Article III, Sections I and 2;
Article IV, Sections 1 and 2; Article VI, Sections 1 through 6;
Article VIII, Sections 1 through 3; Article IX, Section I of the
Registrant's By-Laws (incorporated by reference to Exhibit 3(b) to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1993)*
5 Opinion of Berkowitz, Lefkovits, Isom & Kushner, A Professional
Corporation**
23(a) Consent of Deloitte & Touche LLP **
23(b) Consent of Berkowitz, Lefkovits, Isom & Kushner, A Professional
Corporation (included in Exhibit 5)**
* Incorporated herein by reference as indicated.
** Filed herewith.
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (i) and (ii) above shall not
apply if the information required to be included in a post-effective
amendment by such paragraphs is contained in periodic reports filed by
the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the undersigned Registrant pursuant to the foregoing provisions, or
otherwise, the undersigned Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Addison, State of Alabama, on January 31, 1996.
CAVALIER HOMES, INC.
By: /s/ Jerry F. Wilson
--------------------------
Jerry F. Wilson
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-3 has been signed below by the following
persons, in the capacities and on the dates indicated.
Name Title Date
/s/ Barry B. Donnell Chairman of the Board January 31, 1996
- ------------------------------ and Director
Barry B. Donnell
/s/ Jerry F. Wilson President, Chief Executive January 31, 1996
- ------------------------------ Officer and Director
Jerry F. Wilson (Principal executive officer)
/s/ David A. Roberson Secretary-Treasurer and January 31, 1996
- ------------------------------ ChiefFinancial Officer
David A. Roberson (Principal financial and
accounting officer)
/s/ Thomas A. Broughton, III Director January 31, 1996
- ------------------------------
Thomas A. Broughton, III
/s/ John W Lowe Director January 31, 1996
- ------------------------------
John W Lowe
/s/ Lee Roy Jordan Director January 31, 1996
- ------------------------------
Lee Roy Jordan
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
2(a) Option and Stock Exchange Agreement by and
among Wheel House Structures, Inc., Shareholders
of Wheel House Structures, Inc. and Cavalier
Homes, Inc. dated August 28, 1995 II-9
5 Opinion of Berkowitz, Lefkovits, Isom &
Kushner, A Professional Corporation II-60
23(a) Consent of Deloitte & Touche LLP II-62
23(b) Consent of Berkowitz, Lefkovits, Isom &
Kushner, A Professional Corporation
(included in Exhibit 5) ---
<PAGE>
EXHIBIT 2(a)
<PAGE>
OPTION AND STOCK EXCHANGE AGREEMENT
BY AND AMONG
WHEEL HOUSE STRUCTURES, INC.
SHAREHOLDERS OF WHEEL HOUSE STRUCTURES, INC.
AND
CAVALIER HOMES, INC.
August 28, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE I
GRANT OF OPTION 2
1.1 Grant of Option 2
1.2 Exercise of Option 2
1.3 Consideration for Option 2
ARTICLE II
EXCHANGE OF SHARES 3
2.1 Exchange 3
2.2 Directors and Officers 3
2.3 Consideration For Exchange 4
2.4 Registration Statement 4
2.5 Guarantee 5
2.6 Closing 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WHEEL HOUSE
AND THE SHAREHOLDERS 7
3.1 Corporate Status; Qualification 7
3.2 Capital Stock 7
3.3 No Breach, Consents 8
3.4 Authorization and Binding Effect 9
3.5 Financial Statements 9
3.6 Absence of Undisclosed Liabilities 9
3.7 Taxes 10
3.8 Title to and Condition of Assets 11
3.9 Real Property 11
3.10 Compliance with Law 14
3.11 Environmental Matters 14
3.12 Ownership of Essential Assets 15
3.13 Contracts 16
3.14 Inventories 16
3.15 Accounts Receivable 17
3.16 Contract Claims and Product Warranty 17
3.17 ERISA Matters 17
3.18 Insurance 20
3.19 Employees 20
3.20 Subsequent Events 21
3.21 Disclosure. 22
3.22 Litigation 23
3.23 Consents and Approvals 23
3.24 No Burdensome Contracts 23
3.25 No Finders 23
3.26 Repurchase and Guaranty Obligations 23
3.27 Dealership Arrangements 24
3.28 Intellectual Property. 24
3.29 Joint Ventures, etc. 25
3.30 Conflict of Interest 25
3.31 Relationships With Suppliers, Customers
and Dealers 25
3.32 Conduct of Business 25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CAVALIER 27
5.1 Organization 27
5.2 No Breach 27
5.3 No Finders 27
5.4 Authorization and Validity of Agreement 27
5.5 Shares to be Issued 28
5.6 Disclosure. 28
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
OF WHEEL HOUSE AND THE SHAREHOLDERS 28
6.1 Conduct of the Business of Wheel House 28
6.2 Defaults 31
6.3 Current Information; Notice 31
6.4 Access to Properties, Personnel and Records;
Confidentiality 31
6.5 No Other Bids 32
6.6 Disposition of Shares 33
6.7 Environment Assessments 33
6.8 Title Matters 33
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS 33
7.1 Necessary Action 33
7.2 Termination of Options 34
7.3 Releases of Shareholders 34
ARTICLE VIII
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF CAVALIER 34
8.1 Warranties True 34
8.2 Performance of Wheel House and the
Shareholders 34
8.3 Certificate Respecting Satisfaction of
Conditions 34
8.4 No Loss or Calamity 34
8.5 Good Standing 35
8.6 Absence of Adverse Facts 35
8.7 Consents Under Agreements 35
8.8 Regulatory Approvals 35
8.9 Nonsolicitation Agreements 35
8.10 Shareholder Actions 35
8.11 Environmental Matters 35
8.12 Releases 36
8.13 Real Property Matters 36
8.14 Delivery of Certificates 36
8.15 Resignations of Officers and Directors 36
8.16 Termination of Options 36
8.17 Loan Agreement 36
8.18 Termination of Shareholders' Agreement 36
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF WHEEL HOUSE AND THE SHAREHOLDERS 36
9.1 Warranties True 37
9.2 Timely Exercise 37
9.3 Certificate Respecting Satisfaction of
Conditions 37
9.4 Good Standing 37
9.5 Regulatory Approvals 37
ARTICLE X
DELIVERIES AT CLOSING 37
10.1 Deliveries By Wheel House and Shareholders 37
10.2 Deliveries by Cavalier. 38
ARTICLE XI
TERMINATION, WAIVER AND AMENDMENT 39
11.1 Termination 39
11.2 Effect of Termination 40
11.3 Waiver and Amendment 40
ARTICLE XII
INDEMNIFICATION 40
12.1 Indemnification for Benefit of Cavalier 40
12.2 Determination of Accounts Receivable 42
12.3 Indemnification by Cavalier 42
12.4 Procedure for Indemnity 42
12.5 Right of Set-Off by Cavalier Indemnitees 43
ARTICLE XIII
NOTICES AND GENERAL PROVISIONS 44
13.1 Notices 44
13.2 Representations and Warranties Survive the
Closing 45
13.3 Expenses 45
13.4 Entire Understanding and Amendment 45
13.5 Appointment of Shareholders' Representative 45
13.6 Headings 46
13.7 Parties Bound 46
13.8 Applicable Law 46
13.9 Counterparts 46
13.10 Severability 46
13.11 Incorporation of Exhibits 46
13.12 Public Announcements 46
13.13 Litigation Costs 47
13.14 Remedies Non Exclusive 47
13.15 Waiver of Jury Trial 47
<PAGE>
OPTION AND STOCK EXCHANGE AGREEMENT
THIS OPTION AND STOCK EXCHANGE AGREEMENT (the "Agreement") is
entered into this 28th day of August, 1995, by and among Wheel House STRUCTURES,
INC., an Alabama corporation ("Wheel House"), JAMES H. MASDON, MAX BURLESON and
MAX SANDERS, individually as a "Shareholder" and collectively the
"Shareholders"); and CAVALIER HOMES, INC., a Delaware corporation ("Cavalier").
W I T N E S S E T H:
WHEREAS, Wheel House is in the business of designing,
manufacturing and selling at wholesale manufactured homes (such business,
together with any other business being conducted by Wheel House at any time
prior to the Closing Date (as hereinafter defined), being hereinafter referred
to as the "Business");
WHEREAS, all of the issued and outstanding shares of the
capital stock of Wheel House are owned as follows:
Name Number of Shares
Cavalier Homes, Inc. 2,650
James H. Masdon 3,000
Max Burleson 3,350
Max Sanders 1,000
(the shares of capital stock of Wheel House owned by the Shareholders being
hereinafter referred to as the "Shares");
WHEREAS, the Shareholders desire to grant to Cavalier the
option to purchase the Shares, upon the terms and conditions hereinafter set
forth; and
WHEREAS, the parties desire to structure the acquisition of
the Shares by Cavalier pursuant to the exercise of such option as a stock for
stock exchange under Sections 368(a)(1)(B) of the Internal Revenue Code of 1986,
as amended (the "Code"), which exchange shall be upon the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereby agree as follows:
<PAGE>
ARTICLE I
GRANT OF OPTION
1.1 Grant of Option. For the consideration and subject to the terms and
conditions set forth in this Agreement and based upon the representations,
warranties and indemnities made herein, the Shareholders hereby grant to
Cavalier the right, privilege and option to acquire all of the Shares owned by
the Shareholders in a stock for stock exchange (the "Option").
1.2 Exercise of Option.
(a) The Option shall be exercisable by Cavalier at any time
during the period commencing on the date hereof and ending at 11:59 p.m.
Birmingham, Alabama time on March 15, 1996 (the "Option Period").
(b) Cavalier shall exercise the Option by giving the
Shareholders' Representative (as defined in Section 13.5 hereof) written notice
of exercise (the "Exercise Notice") within the Option Period, which notice shall
specify a date of closing of the acquisition of the Shares, which date shall be
more than two (2) business days and not more than sixty (60) calendar days from
the date of such Exercise Notice. In the event Cavalier fails to deliver the
Exercise Notice to the Shareholders' Representative within the Option Period,
the Option shall be deemed to have lapsed; provided, however, that if the
Exercise Notice is delivered within the Option Period, then the exercise of the
Option shall be effective notwithstanding that the Closing (as herein defined)
is to occur following the expiration of the Option Period.
1.3 Consideration for Option.
(a) In consideration of the grant of the Option by the
Shareholders, contemporaneously herewith, Cavalier has delivered to the
Shareholders thirty-three thousand seven hundred fifty (33,750) shares of its
$0.10 par value common stock ("Common Stock"). Such shares of Common Stock shall
hereinafter be referred to as the "Option Shares." Cavalier has delivered to
each Shareholder the number of shares of Common Stock as follows:
Name Number of Shares
James H. Masdon 13,775
Max Burleson 15,383
Max Sanders 4,592
Each certificate evidencing the above shares of Common Stock shall bear the
legend described in Section (e) of Article IV hereof.
(b) Each of the Shareholders agrees that until the
registration of the Registration Shares (as hereinafter defined) by Cavalier as
provided in Section 2.4 of this Agreement, he shall not
<PAGE>
sell, transfer, encumber or otherwise dispose of any of the Registration Shares.
(c) The parties acknowledge that, contemporaneously herewith,
the Shareholders have executed Assignments Separate From Certificate in blank
(the "Assignments Separate"), that such Assignments Separate are being held by
Cavalier, and that Cavalier shall hold the same until the Closing or, in the
event the Option is not exercised, until the termination of the Option Period.
In the event the Option is not exercised, Cavalier shall promptly return the
Assignments Separate to the Shareholders.
ARTICLE II
EXCHANGE OF SHARES
2.1 Exchange. (a) In the event Cavalier exercises the Option in a
timely fashion, then, for the consideration described in Section 2.3 below and
subject to the terms and conditions set forth in this Agreement and based upon
the representations, warranties and indemnities made herein, the Shareholders
shall deliver, or cause to be delivered, the Shares to Cavalier and Cavalier
shall acquire the Shares from the Shareholders at the Closing.
(b) At Closing, the Shareholders shall deliver to Cavalier,
free and clear of all liens, charges, encumbrances and restrictions,
certificates evidencing the Shares, duly endorsed to Cavalier or accompanied by
duly-executed stock powers, with all transfer fees and taxes paid by the
Shareholders.
2.2 Directors and Officers. The current officers and directors of Wheel
House shall deliver to Cavalier their resignations as officers and directors of
Wheel House, effective as of the Closing Date.
2.3 Consideration For Exchange. In the event Cavalier exercises the
Option, the consideration required to be delivered by Cavalier for the Shares
shall be (i) the Option Shares and (ii) the Additional Shares (as hereinafter
defined).
(a) Each of the Shareholders shall be entitled to receive
(subject to the fractional share provisions of Section 2.3(b) of this Agreement)
his Pro Rata Portion (as herein defined) of the Additional Shares. For purposes
of this Agreement, the respective Pro Rata Portions of the Shareholders are as
follows:
James H. Masdon 40.816%
Max Burleson 45.578%
Max Sanders 13.605%
For purposes of this Agreement and subject to the fractional share provisions of
Section 2.3(b) of this Agreement, the Additional Shares shall be 46,250 shares
of Common Stock; provided,
<PAGE>
however, that if the product of (i) 80,000 multiplied by (ii) the Closing Per
Share Value (as hereinafter defined) is less than $1,045,000, then the number of
Additional Shares shall be equal to (A) $1,045,000 divided by the Closing Per
Share Value less (B) 33,750 and, provided further, however, that if the product
of (i) 80,000 multiplied by the Closing Per Share Value is greater than
$1,155,000, then the number of Additional Shares shall be equal to (A)
$1,155,000 divided by the Closing Per Share Value less (B) 33,750. In no event,
however, shall the number of such Additional Shares be less than zero (0). The
foregoing adjustment shall hereinafter be referred to as the "Final Price
Adjustment."
For purposes of this Agreement, the Closing Per Share Value
shall be the weighted average closing sales price of shares of Common Stock on
the exchange on which such shares of Common Stock are then listed for the five
(5) trading days most immediately preceding the Closing Date.
(b) Notwithstanding any other provision of this Agreement,
Cavalier shall pay, in cash, to each Shareholder who would otherwise have been
entitled to receive a fraction of a share of Common Stock, an amount equal to
such fractional part of such share of Common Stock multiplied by the Measuring
Price (as hereinafter defined) or the value determined under Section 2.5(b) of
this Agreement, as the case may be. No such Shareholder will be entitled to
dividends, voting rights or any other rights as a shareholder in respect of any
such fractional share.
2.4 Registration Statement. As soon as practicable following the
Closing or the expiration of the Option Period in the event the Option is not
exercised, Cavalier shall prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (or other
applicable form) with respect to the Option Shares and Additional Shares, if
applicable (such Option Shares and Additional Shares being hereinafter referred
to collectively as the "Registration Shares"). Such registration statement and
all amendments and supplements thereto are hereafter referred to as the
"Registration Statement." Cavalier shall use its good faith reasonable efforts
to cause such Registration Statement to become effective at the earliest
practicable time and to remain effective. In addition, Cavalier shall use its
good faith reasonable efforts to obtain, prior to the sale of any such
Registration Shares following the effective date of the Registration Statement
such "blue sky" permits and approvals as may be required to permit the
Shareholders to offer and sell the Registration Shares received pursuant to this
Agreement in the manner contemplated by the Registration Statement; provided,
however, that Cavalier shall not be required to obtain any such permit or
approval under the securities or blue sky laws of any state or jurisdiction if,
in the reasonable opinion of counsel to Cavalier, Cavalier would be required in
connection therewith to (i) consent to general service of process in any state
or jurisdiction, (ii) qualify to do business in any state or jurisdiction where
it would not be otherwise required to so qualify or (iii) subject itself to
taxation in any such state or jurisdiction. The Shareholders further agree that,
in connection with the preparation and filing of the Registration Statement,
they will furnish to Cavalier such information concerning the Shareholders and
the distribution of their Registration Shares as Cavalier may from time to time
request, that such information shall be true and correct in all respects without
omission of any material fact necessary to make the information not false or
misleading and that the Shareholders will cooperate with Cavalier in all matters
relating to the registration of such
<PAGE>
Registration Shares. All expenses of Cavalier and the Shareholders in
connection with the Registration Statement (including attorneys' fees and
expenses) shall be borne by Cavalier.
2.5 Guarantee.
(a) In the event that a Shareholder resells all or a portion
of the Registration Shares delivered pursuant to this Agreement in one or more
transactions on any exchange on which Cavalier has Common Stock listed on or
prior to the date which is ninety (90) days following the effective date of the
Registration Statement described in Section 2.4 of this Agreement (the
"Guarantee Period") at a per share price (the "Exchange Price") that is less
than the Measuring Price, Cavalier will deliver to the selling Shareholder such
number of shares of Common Stock (subject to the fractional share provisions of
Section 2.3(b) of this Agreement) as is determined by taking (i) the excess of
the Measuring Price over the Exchange Price times (ii) the number of
Registration Shares sold divided by (iii) the per share value of shares of
Common Stock determined pursuant to Section 2.5(b) below; provided, however,
that in determining the number of shares of Common Stock delivered by Cavalier
in connection with this Section 2.5, there shall be taken into account the total
amount of gain (determined as the difference between the Measuring Price and the
price at which such Registration Shares are sold) realized by the selling
Shareholder in connection with a sale of Registration Shares in one or more
transactions on any exchange on which Cavalier has Common Stock listed on or
prior to the expiration of the Guarantee Period, at a per share price that is
greater than the Measuring Price (the adjustment described in this Section 2.5
being hereinafter referred to as the "Exchange Price Adjustment").
Example: Assume that the Measuring Price is $13.75 and that
during the Guarantee Period a Shareholder sells five (5)
shares of Common Stock for $12.75 and five (5) shares of
Common Stock for $14.25. In determining the Exchange Price
Adjustment, the losses (i.e., the five (5) sales for $1 less
than the Measuring Price) would be netted against the gains
(i.e., the five (5) sales for $.50 more than the Measuring
Price) with the result being a net loss of $2.50. If the
closing sales price on the last day of the Guarantee Period
for shares of Common Stock is $2 per share, then Cavalier will
be required to deliver to such Shareholder one (1) share of
Common Stock and $.50 in cash.
Each selling Shareholder entitled to receive an Exchange Price Adjustment shall
provide to Cavalier written notice within ten (10) days following the expiration
of the Guarantee Period which written notice shall indicate that sale of
Registration Shares has occurred together with a schedule of all sales of
Registration Shares made by such selling Shareholder and the selling price of
Registration Shares received by the selling Shareholder's broker in such
transactions.
The selling Shareholder shall provide reasonable verification
of the selling price of the Registration Shares and such other documents and
instruments as Cavalier may reasonably request. Cavalier shall make only one
delivery of additional shares of Common Stock to each selling
<PAGE>
Shareholder entitled to an Exchange Price Adjustment in accordance with this
Section 2.5, and shall make delivery of shares of Common Stock on or before the
date which is forty (40) days following the expiration of the Guarantee Period.
For purposes of this Agreement, the Measuring Price shall be
$13.75, unless the Final Price Adjustment is applicable, in which case the
Measuring Price shall be the Closing Per Share Value.
(b) For purposes of the Exchange Price Adjustment and the
calculation of the number of additional shares of Common Stock to be delivered
in connection therewith, the value of shares of Common Stock shall be the
closing sales price of such Common Stock on the exchange on which shares of
Common Stock are then listed on the last day of the Guarantee Period (or on the
most recent trading date most immediately preceding the last day of the
Guarantee Period, if the applicable stock exchange is closed on the last day of
the Guarantee Period).
(c) If, at any time prior to the expiration of the Guarantee
Period, there is an increase or decrease or other change in the total number of
shares of Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, conversion, exchange of shares or the like, then,
as of the date of such increase, decrease or other change, there shall be an
equitable adjustment of the terms of this Agreement to take such increase,
decrease or other change into account.
2.6 Closing. The closing of the stock for stock exchange contemplated
hereby (the "Closing") shall take place at the offices of Berkowitz, Lefkovits,
Isom & Kushner, A Professional Corporation, in Birmingham, Alabama, at 10:00
a.m., Birmingham time, on the date specified in the Exercise Notice or such
other place, time and date as the parties hereto may agree in writing or as may
be extended under Section 11.1(c) or (d) below. (the date that the Closing
occurs shall hereinafter be referred to as the "Closing Date"). At such Closing,
the appropriate parties to this Agreement will deliver such documents and take
such actions as required at the Closing by the terms of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WHEEL HOUSE
AND THE SHAREHOLDERS
Wheel House and the Shareholders, jointly and severally,
represent and warrant to, and covenant with Cavalier as follows:
3.1 Corporate Status; Qualification. Wheel House is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Alabama, with requisite corporate power and authority to own, lease and operate
all of its properties and assets and to conduct its business as such business is
now being conducted and has been conducted at all times prior to the date
hereof. Wheel House is duly licensed or qualified to transact business as a
foreign corporation and is in good
<PAGE>
standing in each jurisdiction in which ownership of its properties or the nature
of its business makes such qualification or license necessary. A list of those
states where Wheel House is qualified to do business as a foreign corporation is
attached to this Agreement as Exhibit 3.1(a). A list of those states where Wheel
House has sold its products during the period from January 1, 1991 to June 30,
1995 is attached to this Agreement as Exhibit 3.1(b).
3.2 Capital Stock.
(a) The authorized capital stock of Wheel House consists of
(i) 20,000 shares of common stock, $.50 par value, of which 10,000 shares are
validly issued, outstanding, fully paid and nonassessable and free of preemptive
rights and (ii) 5,000 shares of preferred stock, $1.00 par value, none of which
is issued and outstanding. No shares are held in Wheel House's treasury. All of
such issued shares are owned as set forth on Exhibit 3.2(a)(i) hereto or held as
treasury shares. Set forth on Exhibit 3.2(a)(i) hereto is a list of the
shareholders owning all of the issued and outstanding shares of capital stock of
Wheel House and the number of shares (along with the relevant certificate
numbers) owned by each Shareholder. Wheel House has no commitment, obligation or
agreement of any kind to issue or sell any additional capital stock of Wheel
House. As of the date hereof, except as reflected on Exhibit 3.2(a)(ii) hereto,
there are no outstanding convertible securities, options, warrants or other
rights, issued or outstanding, with respect to the capital stock of Wheel House
or which are convertible into or exchangeable or exercisable for any shares of
Wheel House's capital stock and there are no contracts, agreements,
understandings, commitments, arrangements or restrictions of any kind by which
Wheel House is bound to issue any additional shares or bound to redeem or
repurchase any outstanding shares of its capital stock or securities convertible
into or exchangeable for its capital stock. Set forth on Exhibit 3.2(a)(ii)
hereto is a list of the holders of all outstanding options to purchase shares of
the capital stock of Wheel House together with the number of options held by
each such holder.
(b) True and complete copies of the Articles of Incorporation
and the Bylaws of Wheel House currently in effect have been delivered to
Cavalier prior to the execution and delivery of this Agreement. The minute book
of Wheel House contains true and complete records of all meetings and other
corporate actions of the directors and stockholders of Wheel House, and all
committees of the board of directors, and have been delivered to Cavalier prior
to the execution and delivery of this Agreement.
(c) Wheel House has no ownership interest (or any agreement to
purchase any such ownership interest), direct or indirect, in the capital stock
of any other corporation.
3.3 No Breach, Consents. Except as disclosed on Exhibit 3.3 hereto, the
execution, delivery and performance of this Agreement by Wheel House and the
Shareholders, and the consummation of the transactions contemplated by this
Agreement (including, without limitation, the exercise of the Option and the
transfer of the ownership of the Shares pursuant thereto) will not:
(i) conflict with or result in any breach or violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
give rise to a right of termination, cancellation or
<PAGE>
acceleration of the maturity of any debt or obligation under, result in the
creation or imposition of any lien upon any property or assets of Wheel House
under, or result in the loss of a benefit under, any provision of any loan or
other agreement (including, without limitation, any of the Bond Documents (as
hereinafter defined)), instrument, permit, concession, franchise, license,
judgment, order, injunction, decree, statute, law, ordinance, rule or regulation
applicable to Wheel House, its properties or assets;
(ii) terminate, delay or give any party thereto the right to
terminate, delay, amend, abandon, or refuse to perform any provision of any
agreement or instrument to which Wheel House is a party (including, without
limitation any of the Bond Documents);
(iii) accelerate or give any party thereto the right to
accelerate or modify the time within which, or the terms under which, Wheel
House is to perform any such agreement or instrument; or
(iv) require the consent of any other person or entity.
3.4 Authorization and Binding Effect. All requisite corporate action
required to be taken by Wheel House or the Shareholders to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby has been taken and no other actions or
proceedings are necessary under Wheel House's Articles of Incorporation, Bylaws,
by law or otherwise to authorize the execution of this Agreement, the
performance by Wheel House of its obligations hereunder and the consummation by
Wheel House of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Wheel House and the Shareholders and
constitutes a valid and binding agreement enforceable against Wheel House and
the Shareholders in accordance with the terms hereof.
3.5 Financial Statements. Wheel House has previously furnished to
Cavalier unaudited financial statements, including balance sheets and statements
of operations as of and for the fiscal years ended March 31, 1994 and March 31,
1995 and for the months ended May 31, 1995 and June 30, 1995 (the "Financial
Statements"). The Financial Statements have been prepared from the books and
records of Wheel House and in accordance with generally accepted accounting
principles, consistently applied, are true, correct and complete in all
respects, and fairly present the financial position and the results of
operations of Wheel House as of the dates and for the periods indicated. The
Financial Statements are attached hereto as Exhibit 3.5.
3.6 Absence of Undisclosed Liabilities. Except as disclosed on Exhibit
3.6 hereto, and except to the extent reserved against in the Financial
Statements, Wheel House does not have any debts, liabilities or obligations of
any nature, whether accrued, absolute, contingent or otherwise, whether due or
to become due, and whether known or unknown, and neither Wheel House nor any of
the Shareholders knows of any basis for the assertion against Wheel House of any
debt, liability or obligation. The reserves reflected in the Financial
Statements are reasonable, adequate and appropriate.
<PAGE>
3.7 Taxes. For all tax periods ended prior to the date of this
Agreement, Wheel House has filed all federal, state, local and other tax returns
required by law to be filed on or before the due dates of such returns (as
extended by any valid extensions of time) ("Tax Returns") and has paid or made
provisions for all taxes of every kind and description (including, without
limitation, all net income, gross income, gross receipts, sales, use, lease, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, property or other taxes,
customs, duties, fees, assessments or charges, together with any interest,
penalties, additions to tax or additional amounts imposed by any taxing
authority, domestic or foreign) ("Taxes") which were due or will become due as
of and for all periods through the Closing Date. No claim has ever been made by
an authority in a jurisdiction where Wheel House does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction. There are no liens or
security interests on any of Wheel House's assets that arose in connection with
any failure (or alleged failure) to pay any Taxes. Wheel House has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party. All Tax Returns filed by Wheel House correctly
reflected all facts regarding the income, business, assets, operations,
activities and status of Wheel House and all other information required to be
shown thereon. Wheel House has complied in all respects with all applicable
laws, rules and regulations relating to the filing of Tax Returns with respect
to, and the payment of, Taxes. The provisions for Taxes reflected in the
Financial Statements are adequate, and the provisions for Taxes to be reflected
in subsequent financial statements and the books and records of Wheel House as
of the Closing Date will be adequate, to provide for all Taxes of Wheel House,
for all periods through the Closing Date and for the period ended on the Closing
Date, as the case may be. Except as disclosed on Exhibit 3.7 hereto, since
December 31, 1989, the Tax Returns of Wheel House have not been audited by the
Internal Revenue Service or any state or local taxing authority. Except as
disclosed on Exhibit 3.7 hereto, no federal, state, local or foreign audits,
administrative proceedings, court proceedings or ruling requests are presently
pending with respect to any Taxes or Tax Returns with respect thereto. Wheel
House has not filed a consent pursuant to Section 341(f) of the Code or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by
Wheel House. No property of Wheel House is property that Wheel House is required
to treat as being owned by another person pursuant to the provisions of Section
168(f)(6) of the Code, or is "tax-exempt use property" within the meaning of
Section 168(h) of the Code, or is subject to a lease, other than a "true" lease
for federal income tax purposes. Wheel House is not required to include in
income any adjustment pursuant to Section 481(a) of the Code by reason of a
voluntary change in accounting method initiated by Wheel House, nor does Wheel
House or the Shareholders have any knowledge that the Internal Revenue Service
has proposed any adjustment or change in accounting methods. Wheel House is not
currently under any contractual obligation to indemnify any person with respect
to Taxes. No person who is a not a United States citizen, and no corporation or
other entity which was not organized within the United States owns beneficially
more than 5% of the outstanding shares of Wheel House and therefore no
withholding of tax pursuant to Section 1445 of the Code is required. Wheel House
is not a United States Real Property Holding Corporation as defined in Section
897 of the Code. Wheel House is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Code Section 280(G). No consent extending the statute of limitations has
been filed by or on behalf of Wheel House with respect to any liability for
Taxes for any year.
<PAGE>
3.8 Title to and Condition of Assets. Except as disclosed on Exhibit
3.8 hereto, Wheel House has good and marketable title to all of its assets, in
fee simple absolute as to real property, whether reflected on the Financial
Statements or otherwise, whether real, personal or mixed, tangible or
intangible, free and clear of any mortgage, pledge, security interest, lien,
claim, encumbrance, condition, easement, privilege, right-of-way, impairment,
covenant, or other restriction, except for liens for Taxes not yet due and
payable. Wheel House has heretofore furnished Cavalier with a true and complete
list and brief description of all machinery and equipment owned or leased by
Wheel House or used in connection with its normal operations. All of the assets
owned or leased by Wheel House or used in connection with the operation of its
business, are in good operating condition and repair, normal wear and tear
excepted. Wheel House has performed regular maintenance on its equipment and
structures.
3.9 Real Property. Prior to the date of this Agreement, Wheel House has
furnished Cavalier with a true and complete list and legal description of all
real property owned, leased or used in the Business by Wheel House (the
"Property"). With respect to the Property:
(a) Wheel House has fee simple absolute title with respect to
those items of Property which it owns, subject only to the matters disclosed on
Exhibit 3.8 to this Agreement.
(b) Wheel House has good leasehold interests in the parcels of
Property which it leases and no lease respecting any such parcel of Property
contains any provision which materially interferes with the present use or
enjoyment by Wheel House of such parcel of Property.
(c) All public utilities required for the operation of the
Business either enter the Property through adjoining public roads or public
rights of way, or as they pass through adjoining private land, do so in
accordance with valid, permanent and irrevocable easements granted to or running
in favor of Wheel House as record owner of the Property or the applicable public
utility; and there is adequate permanent vehicular access to and from the
Property by public roadways.
(d) Wheel House has no knowledge of any fact or condition
which would or could result in the termination or reduction of the current
access to or from the Property to existing roads or the sewer or other utility
services presently serving the Property.
(e) No third party has any leasehold or possessory interest in
any portion of the Property.
(f) No notice of violation of any applicable, federal, state
or local statute, law, ordinance, rule, regulation, order or requirement, or of
any covenant, condition, restriction or easement, affecting the Property or with
respect to the use or occupancy of the Property, has been given to Wheel House
(or, to its knowledge, any of its lessors) by any governmental authority having
jurisdiction over the Property or by any other person entitled to enforce the
same.
<PAGE>
(g) There is no (i) intended public improvement which may
involve any charge being levied or assessed or which may result in the creation
of any lien upon the Property, (ii) intended or proposed federal, state or local
statute, ordinance, order, requirement, law or regulation (including, but not
limited to, zoning changes) which may adversely affect the current or proposed
use of the Property, or (iii) suit, action, claim or legal, administrative,
arbitration or other proceeding (including, without limitation, any proceeding
for condemnation) or governmental investigation pending, threatened or
contemplated against or affecting the Property or the use thereof of any part.
(h) There are no encroachments onto the Property of any
improvements on any adjoining property, and except as set forth in Exhibit
3.9(h), no improvement on the Property encroaches on any adjoining property or
any easements or rights-of-ways on, under or over the Property.
(i) Except as set forth in Exhibit 3.9(i), Wheel House is not
in breach of any, and is currently complying in all respects with all laws,
regulations, covenants, conditions, restrictions, easements and similar matters
affecting the Property.
(j) The Property is properly zoned for its current use or
uses, and there are presently no laws, statutes, ordinances or building or use
restrictions applicable to any parcel of the Property which prohibit the use of
such parcel of Property for such purpose or purposes.
(k) All improvements which affect the present use of the
Property are in conformity with all applicable municipal and other legal
requirements. No variances or other waivers were obtained or are required to
assure such conformity and such improvements do not constitute legal
non-conforming improvements under any applicable municipal or other legal
requirements. All improvements, structures, plumbing, electrical, heating, air
conditioning and mechanical systems and facilities located on the Property are
now and at the Closing will be in good repair and operable condition, and Wheel
House and each of the Shareholders is unaware of any latent defects regarding
such improvements. The roof on the building or buildings located on the Property
is now, and at the Closing shall be, in reasonably good operating condition and
free of any leakage.
(l) Wheel House is not and as of the Closing Date will not be
in default under the debt instruments encumbering the Property or any other
agreement, including, without limitation, any of the documents relating to the
issuance of industrial development revenue bonds by the Industrial Development
Board of the City of Haleyville, Alabama ("the Issuer") pursuant to that certain
Mortgage and Indenture dated as of March 1, 1995 between the Issuer and
SouthTrust Bank of Marion County (the "Bond Documents") a complete list of which
is attached hereto as Exhibit 3.9(l), to which Wheel House is or has been a
party with respect to the Property.
(m) No notices or requests have been received by Wheel House
from any insurance company issuing any policy of insurance covering the Property
requesting the performance by Wheel House of any work, restoration or repair
with respect to the Property with which compliance has not been fully made. Any
such notices or requests received prior to the Closing shall be fully complied
with by Wheel House at its expense prior to Closing.
<PAGE>
(n) Except as set forth on Exhibit 3.9(n) hereto, there are no
unpaid bills or claims in connection with the construction of or any repairs to
the Property (including all buildings and improvements thereon), nor shall there
be on the Closing Date.
(o) There are no mine shafts under the Property, and there are
no latent defects regarding the Property such as sinkholes, burial grounds or
toxic waste dumps or other conditions (including the presence of asbestos or
similar materials in any buildings or improvements located thereon) which would
make the development or operation of the Property for its intended purposes
impracticable or extraordinarily expensive.
(p) There are no persons or entities legally entitled to file
a mechanic's, materialmen's, furnisher's, laborer's or similar lien against the
Property, nor is Wheel House or any of the Shareholders aware of any
circumstances which would give rise to any such claims.
(q) There is no dispute concerning the property lines with
respect to any portion of the Property, and no party other than Wheel House is
in possession of any portion of the Property.
3.10 Compliance with Law. Except as set forth on Exhibit 3.10 to this
Agreement, Wheel House is in compliance in all respects with all laws and
regulations applicable to its operations and its properties. Wheel House is not,
and has not at any time been, in default under any order of any court,
governmental authority or arbitration board or tribunal to which it is or was
subject, nor is it or has it been in violation of any laws, ordinances,
governmental rules or regulations to which it is or was subject. Wheel House
possesses all licenses, permits, franchises and other governmental
authorizations necessary to the ownership of its properties or to the conduct of
the business of Wheel House, as it is now being conducted and as it has been
conducted at all times in the past and all such items are valid and in full
force and effect. Wheel House has not received any written or oral notice, and
there is no investigation or review pending or, to the best knowledge of Wheel
House, threatened by any governmental entity, with respect to (i) any alleged
violation by Wheel House of any law, ordinance, regulation or order of a
governmental entity or (ii) any alleged failure to have all permits required to
be obtained to conduct its business as it is now being conducted and as it has
been conducted at all times in the past.
3.11 Environmental Matters.
(a) Except as set forth in Exhibit 3.11(a), Wheel House has
obtained all permits, licenses and other authorizations which are required with
respect to the operation of the business of Wheel House, as it is now being
conducted and as it has been conducted at all times the past under all federal,
state and local statutes, ordinances, rules and regulations, and all formal and
informal interpretations thereof, relating to human health and safety, pollution
or protection of the environment, including, without limitation, those related
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants,
<PAGE>
chemicals or industrial toxic or hazardous substances or wastes, or to
occupational health, disease and safety (such statutes, ordinances, rules,
regulations, and interpretations, and any codes and plans issued thereunder, as
the same may be or may have been in effect from time to time, being hereinafter
referred to as "Environmental Laws").
(b) Wheel House is, and at all times in the past has been, in
compliance in all respects with all Environmental Laws and with the terms and
conditions of all required permits, licenses and authorizations, and is in, and
at all times in the past has been, in compliance in all respects with all other
provisions, limitations, restrictions, terms, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any of the Environmental Laws or any such permits, licenses, and authorizations,
or contained in any order, judgment, injunction, notice or demand letter issued,
entered or approved thereunder.
(c) Except as set forth in Exhibit 3.11(c), with respect to
the Property and the operation of the business of Wheel House, as it is now
being conducted and as it has been conducted at all times in the past, there are
no past or present events, conditions, circumstances, activities, practices,
incidents, releases, actions or plans which are now in existence, or which
occurred during Wheel House's ownership of the Property or operation of its
business or, to the best knowledge of the officers of Wheel House and the
Shareholders, prior to Wheel House's ownership of the Property, which may
interfere with or prevent compliance or continued compliance in all respects
with the Environmental Laws, or with any order, decree, judgment, injunction,
notice or demand letter issued, entered or approved thereunder, or which may
give rise to any liability under any Environmental Law or under the common law,
or which could form the basis of or for any claim, action, demand, suit,
proceeding, hearing, notice of violation, study or investigation, clean-up or
remedial action under any Environmental Law or under the common law, and no such
events, activities, practices, releases, actions or plans are now planned to be
undertaken by Wheel House in connection with the operation of its business.
(d) Neither Wheel House nor, to the best knowledge of Wheel
House and the Shareholders, any prior owner or user of the Property, has
generated, processed, treated, sold or transported any toxic, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, asbestos (other than asbestos in a non-friable condition
or asbestos which is properly encapsulated), polychlorinated biphenyls and urea
formaldehyde ("Hazardous Substance"); except as set forth in Exhibit 3.11(d),
there are no amounts of any Hazardous Substance present at, on or under any
property now owned or leased by Wheel House; there are no underground storage
tanks which contain or at any time contained Hazardous Substances, active or
abandoned, at any property now owned or leased by Wheel House; and no Hazardous
Substance has been released (as defined in 42 U.S.C. ss.9601(22)) in any amount
at, on or under any property at any time owned or leased by Wheel House.
3.12 Ownership of Essential Assets. There is no material asset (i) used
by Wheel House in the conduct of the Business as it is now being conducted, or
(ii) without which Wheel House could not conduct its Business as presently
conducted which is not owned by Wheel House or as to which Wheel House has the
exclusive right to use.
<PAGE>
3.13 Contracts. Exhibit 3.13 contains a list or brief description of
all material written and oral agreements, contracts, or leases to which Wheel
House is a party, or by which any of its property or assets is bound, including,
without limitation, real property leases, personal property leases,
noncompetition agreements, supply agreements, dealer agreements, sales
distributorship and agency agreements, purchase and/or sales agreements,
employment agreements, mortgages, security agreements, guaranties and license
agreements (collectively, the "Contracts"). For purposes of this Section 3.13, a
"material" agreement shall mean an agreement which provides for the purchase or
sale of supplies, equipment, goods or other materials or the provision of
management, consulting or other services and which may require an annual,
aggregate expenditure of $5,000 or more or an aggregate expenditure of $15,000
or more over the entire term of the agreement. Each Contract listed or described
in Exhibit 3.13 is a valid, binding and enforceable obligation of Wheel House,
in full force and effect as of the date hereof, and will continue in full force
and effect following the consummation of the transactions contemplated by this
Agreement without the breach of any terms or conditions thereof or the
forfeiture or impairment of any rights thereunder and without the consent,
approval or act or the making of any filing with, any other person or party,
except for those listed on Exhibit 3.13, which shall be obtained by Wheel House
prior to the Closing. Wheel House has performed all obligations required to be
performed by it to date under the Contracts, is not (with or without the lapse
of time or the giving of notice, or both) in breach or default thereunder, and
is not alleged to be in breach or default in any respect thereunder. Each of the
Contracts is a valid, binding and enforceable obligation of the other parties
thereto and is in full force and effect as of the date hereof and each of the
other parties to the Contracts has performed all obligations required to be
performed by each of such other parties under the Contracts and is not (with or
without the lapse of time or the giving of notice, or both) in breach or default
thereunder except as disclosed in Exhibit 3.13 hereto. True and complete copies
of each of the written Contracts, together will all amendments thereto and
correspondence with respect thereto, have heretofore been delivered to Cavalier.
3.14 Inventories. (a) The inventories of raw materials, supplies,
work-in-progress, inventories in transit, inventories under order and finished
goods of Wheel House, as reflected on the Financial Statements and the books and
records of Wheel House as of the Closing Date, consist and will consist of
products of a quantity and quality usable or saleable, as the case may be, in
the ordinary and regular course of Wheel House's business. Such inventories are
reflected in the Financial Statements and will be reflected in the subsequent
financial statements in accordance with generally acceptable accounting
principles.
(b) Since June 30, 1995, there has not been any write down of the value
of any inventory (including write downs by reason of shrinkage or mark-down) or
write-off as uncollectible of any notes or accounts receivable by Wheel House,
except for write downs and write offs (net of previously recorded reserves) in
the ordinary course of business and consistent with past practice.
(c) As of June 30, 1995, the aggregate of all contracts or commitments
for the purchase of materials by Wheel House does not exceed $500,000, all of
which contracts and commitments were made in the ordinary course of business and
consistent with past practice. Between such date and the date of this Agreement,
Wheel House has not entered into or made any contract or commitment for the
purchase of materials other than in the ordinary course of business and
consistent
<PAGE>
with past practice. Except as set forth on Exhibit 3.14, there has been no
adverse change in the business relationship of Wheel House with any supplier of
such materials.
3.15 Accounts Receivable. The accounts receivable of Wheel House as
reflected on the Financial Statements include only receivables arising from bona
fide sales in the conduct of the ordinary course of business of Wheel House and
are in all respects true, genuine and collectible in accordance with their
terms, and represent bona fide and undisputed obligations of the respective
debtors. No payment pursuant to any of said receivables is contingent upon
performance of any obligation or contract, past or future, and all such
receivables are free of all security interests and encumbrances. No defense,
counterclaim, offset or adjustment exists as to any such receivable.
3.16 Contract Claims and Product Warranty. Except as disclosed on
Exhibit 3.16 hereof, all finished products manufactured by Wheel House on or
prior to the Closing Date have been and will be manufactured in all respects in
conformity with all applicable laws, contractual commitments and all express or
implied warranties. Except to the extent of any reserves therefor reflected on
the books and records of Wheel House as of the Closing Date (which reserves
shall be established and maintained in accordance with generally accepted
accounting principles and shall be in an amount consistent with past practices
and prior periods), Wheel House shall not have any liability of any kind for any
defects or non-conformity with respect to finished goods manufactured on or
prior to the Closing Date or work-in-process as of the Closing Date.
3.17 ERISA Matters.
(a) Exhibit 3.17(a) hereto contains a description of all
plans, funds, programs, agreements, arrangements, commitments or policies
(whether written or oral), which are or have ever been maintained or
participated in by Wheel House or which pertain to the present or former
employees (including retirees) of Wheel House and which are currently in effect
or as to which Wheel House has any ongoing liability or obligation whatsoever,
and which constitute (i) "pension plans" (as defined ss.3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")); (ii) deferred
compensation, early retirement, incentive, profit-sharing, thrift, stock
ownership, stock appreciation right, bonus, stock option, stock purchase or
other non-qualified benefit commitments, arrangements or plans; or (iii)
"welfare plans" (as defined in ERISA ss.3(1)) (all of such agreements,
arrangements, commitments, policies and understandings shall be referred to
collectively as the "Employee Benefit Plans"). A copy of each of the written
Employee Benefit Plans and a copy of each determination letter issued by the
Internal Revenue Service, if any, with respect to any such pension plan have
been delivered to Cavalier prior to the date hereof. Except as otherwise set
forth in Exhibit 3.17(a) hereto, all of the Employee Benefit Plans are currently
in effect. Wheel House has never maintained, sponsored, contributed to or been
required to make contributions to a defined benefit plan (within the meaning of
ss.414(j) of the Code) or a multiemployer plan (within the meaning of ERISA
ss.3(37)(A)). Wheel House is not, and has never been, a member of a controlled
group of corporations (within the meaning of ss.414(b) of the Code). Wheel House
is not, and has never been, a member of a controlled group of trades or
businesses (within the meaning of ss.414(b) of the Code), a group of trades or
business under common control (within the meaning of ss.414(c) of the Code) or
an affiliated service group (within the meaning of ss.414(m) of the Code).
<PAGE>
(b) With respect to each Employee Benefit Plan, except as
otherwise set forth in Exhibit 3.17(b) hereto:
(i) Such Employee Benefit Plan is, and at all times has been,
operated and administered in compliance with the requirements of all applicable
statutes, orders or governmental rules or regulations currently in effect
including, without limitation, ERISA and the Code.
(ii) There is no prohibited transaction (as defined in ERISA
ss.406 or Code ss.4975) nor any other transaction relating to such Employee
Benefit Plan in connection with which Wheel House, any of its affiliates (as
defined below) or any fiduciary of such Employee Benefit Plan is or could be
subject to either a civil penalty assessed pursuant to ERISA ss.502, a tax
imposed by Code ss.4975 or liability for a breach of fiduciary responsibility
under ERISA. No employers other than Wheel House participate in the Employee
Benefit Plans.
(iii) No action, suit, grievance, arbitration or other manner
of litigation or claim with respect to such Employee Benefit Plan or its assets
(other than routine claims for benefits made in the ordinary course of such
Employee Benefit Plan's administration with respect to which such Employee
Benefit Plan's administrative review procedures have not been exhausted) are
pending or to the knowledge of Wheel House or any of the Shareholders,
threatened or imminent, against or with respect to such Employee Benefit Plan,
Wheel House or any fiduciary (as defined in ERISA ss.3(21)) of such Employee
Benefit Plan (including any action, suit, grievance, arbitration or other manner
of litigation or claim regarding conduct which allegedly interferes with the
attainment of rights under such Employee Benefit Plan), and to the knowledge of
Wheel House or any of the Shareholders, there is no basis for any such action,
suit, grievance, arbitration or other manner of litigation or claim.
(iv) Neither Wheel House nor any of the Shareholders has any
knowledge of any facts which would or could give rise to any action, suit,
grievance, arbitration or other manner of litigation or claim with respect to
such Employee Benefit Plan.
(v) No Employee Benefit Plan which is a "welfare plan" (as
defined in ERISA ss.3(1)) provides medical, death or other benefits (whether or
not insured) to employees or their dependents beyond their retirement or other
termination of service (other than (1) as required by statute or (2) pursuant to
a conversion privilege from group coverage to individual coverage upon
retirement or separation from service).
(vi) The consummation of the transactions contemplated by this
Agreement will not, alone or in conjunction with any other transaction or event,
(1) entitle any employee of Wheel House to severance pay, unemployment
compensation or similar payment or (2) accelerate the time of payment, vesting
or increase the amount of any compensation due to any employee of Wheel House.
(vii) If such Employee Benefit Plan provides medical benefits
to any present or former employees of Wheel House, such Employee Benefit Plan
has been operated in compliance with all requirements of ERISA ss.ss.601 through
609 and either Code ss.162(i)(2) and (k) of the Code and the regulations
promulgated thereunder (prior to 1989) or Code ss.4980B and the regulations
promulgated
<PAGE>
thereunder (after 1988), relating to the continuation of coverage under certain
circumstances in which the coverage would otherwise cease, and Exhibit 3.17(b)
hereto sets forth a true and complete list of all former employees of Wheel
House and their respective beneficiaries who are receiving or who are eligible
to elect to receive continuation coverage under each such Employee Benefit Plan
pursuant to the foregoing provisions of ERISA and the Code.
(viii) There has been no failure to file on a timely basis any
report or return required to be filed by law with respect to such Employee
Benefit Plan.
(ix) All disclosures required by law to be made to
participants in such Employee Benefit Plan have been made on a timely basis.
(x) No representation or communication, oral or written, with
respect to participation, eligibility for benefits, vesting, benefit accrual or
coverage under such Employee Benefit Plan has been made by Wheel House or any
trustee, fiduciary, officer, director, employee or other agent of Wheel House to
any of their employees or to any beneficiary of such employees which (1) is not
in accordance with the terms and conditions of such Employee Benefit Plan and
(2) could have any material adverse economic consequences to Wheel House or such
Employee Benefit Plan.
(xi) Such Employee Benefit Plan has been operated in
accordance with such provisions, if any, of the Code as may be applicable to
obtain the federal income tax consequences intended for such Employee Benefit
Plan.
(c) Except as otherwise set forth in Exhibit 3.17(c) hereto,
each Employee Benefit Plan which is an "pension plan" (as defined in ERISA
ss.3(2)) and its related trust, if any, are qualified under Code ss.401(a) and
exempt from tax under Code ss.501(a) and have been determined by the Internal
Revenue Service ("IRS") to be so qualified and nothing has occurred since the
most recent such determination by the IRS which has or could adversely affect
the qualified status of such Employee Benefit Plan and the tax exempt status of
its related trust, if any.
3.18 Insurance. Wheel House has casualty, liability, workers'
compensation and other insurance in such amounts as are adequate and reasonable
and against risks which are customary in relation to the character and location
of its properties and the nature of its business. All such policies are listed
on Exhibit 3.18 hereto, all premiums due with respect to such policies have been
paid and all such policies are in full force and effect. Wheel House has
received no notice of cancellation of any coverage with respect to any such
insurance. True and complete copies of all such policies have been provided to
Cavalier prior to the Closing Date.
3.19 Employees. Wheel House is not a party to any collective bargaining
agreements, and no union represents or claims to represent any employees of
Wheel House. Except as otherwise disclosed on Exhibit 3.19 hereto, (a) Wheel
House has no written or oral employment contracts, commission or bonus
arrangements with any of its employees, officers, or directors; (b) Wheel House
has no outstanding loans to any of its current or former employees, officers or
directors; and (c) Wheel House has no severance or termination pay liabilities
or other fringe benefit obligations to any
<PAGE>
of its current or former employees, officers or directors, except to the extent
disclosed in the Financial Statements. There is no pending or threatened dispute
between or involving Wheel House on the one hand, and any employee or former
employee or group of employees of Wheel House or any union representing or
claiming to represent any employees or former employees of Wheel House, on the
other hand. Wheel House is in compliance with all applicable laws respecting
employment and employment practices and wages and hours, and is not engaged in
any unfair labor practice; there is no unfair labor practice complaint against
Wheel House or pending before the National Labor Relations Board; there is no
labor strike, dispute, slowdown, stoppage or other labor difficulty actually
pending or threatened against or affecting Wheel House nor has Wheel House ever
experienced any such strike, dispute, slowdown, stoppage or other labor
difficulty; no representation questions exists respecting the employees of Wheel
House; and no labor or employee grievance against Wheel House is pending before
any governmental entity and no claim therefor exists.
3.20 Subsequent Events. Except as described in Exhibit 3.20 to this
Agreement, since June 30, 1995, there has not been:
(a) any adverse change in the business organization,
personnel, financial condition, properties, business operations, condition or
prospects of Wheel House;
(b) any disposition or issuance by Wheel House of any of its
capital stock, or of any option or right or privilege to acquire any of its
capital stock, or any acquisition, redemption, repurchase or retirement by Wheel
House of any of its capital stock, or any dividend or any declaration or payment
of any dividend or other distribution on or with respect to its capital stock;
(c) any sale, mortgage, pledge, grant, dividend or other
disposition or transfer of any asset or interest owned or possessed by Wheel
House which is reflected on the Financial Statements or acquired since said
date, other than sales of inventories of finished goods in the ordinary and
regular course of business consistent with past practices and prior periods;
(d) any expenditure or commitment by Wheel House for the
acquisition of assets of any kind, other than inventories of raw materials and
miscellaneous supplies acquired in the ordinary and regular course of business
consistent with past practices and prior periods;
(e) any damage, destruction or loss of such character as to
interfere with the continued operation of any part of the business of Wheel
House (whether or not such loss was insured against), or adversely affecting the
property, business or prospects of Wheel House;
(f)any change made or authorized in the Articles of
Incorporation or Bylaws of Wheel House;
(g) any loans or advances by or to Wheel House, other than
renewals or extensions of existing indebtedness and uses of lines of credit;
(h) any cancellation or payment by Wheel House of any
indebtedness owing to it, or any cancellation or settlement by Wheel House of
any claims against others;
<PAGE>
(i) any failure by Wheel House to operate its business other
than in the ordinary course of business, any change from past practices in the
manner of building or depleting inventories, incurring or collecting
receivables, or incurring or paying trade payables or accrued liabilities;
(j) any failure to maintain the books and records of Wheel
House in accordance with generally accepted accounting principles, consistent
with past practices, or any write-down of assets shown on the books and records
of Wheel House, or the establishment of any reserves or accruals in an amount or
nature that is not consistent with past practices or prior periods;
(k) any change in accounting practices;
(l) any termination of any contract;
(m) any waiver of any right of substantial value;
(n) any incurrence, assumption or guarantee by Wheel House of
any indebtedness for money borrowed other than for money borrowed in the
ordinary course of business consistent with past practice;
(o) any (i) grant of any severance or termination pay to any
director, officer or key employee of Wheel House, (ii) entering into of any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any director, officer or key employee of
Wheel House, (iii) increase in benefits payable under existing severance or
termination pay policies or (iv) increase in compensation, bonus or other
benefits payable to directors, officers or key employees of Wheel House not
applicable to employees of Wheel House generally; or
(p) any agreement or commitment by or on behalf of Wheel
House to do or to take any of the actions referred to in the foregoing
subparagraphs (a) through (o).
3.21 Disclosure. No statement, representation or warranty made by Wheel
House or the Shareholders in this Agreement, or in any statement, document,
certificate or other information furnished or to be furnished to Cavalier
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements made therein not misleading in light of the circumstances under which
they were made.
3.22 Litigation. Except as set forth on Exhibit 3.22 hereto, there is
no suit, action, claim, proceeding or investigation against or involving Wheel
House or any of its properties or rights, pending or, to the best of Wheel
House's knowledge, threatened (including, without limitation, any suit, action,
proceeding or investigation pursuant to Title 11 of the Civil Rights Act of
1964, the Americans With Disabilities Act, the Age Discrimination in Employment
Act, or any other federal,
<PAGE>
state or local law regulating employment), nor is Wheel House or any of the
Shareholders aware of any facts which might result in any such suit, action,
claim, proceeding or investigation. There is no judgment, decree, injunction,
rule or order of any governmental entity, court or arbitrator outstanding
against Wheel House. Wheel House is not in violation of any term of any
judgment, decree, injunction or order outstanding against it.
3.23 Consents and Approvals. Except as set forth on Exhibit 3.23
hereto, no license, permit, qualification, order, consent, authorization,
approval or waiver of, or registration, declaration or filing with, or
notification to, any court, arbiter, administrative agency, commission or
official or other governmental or regulatory authority or instrumentality,
domestic or foreign, is required to be made or obtained by or with respect to
Wheel House in connection with the execution and delivery of this Agreement by
Wheel House and the Shareholders, the performance by Wheel House and the
Shareholders of their obligations hereunder and the consummation of the
transactions contemplated hereby.
3.24 No Burdensome Contracts. Wheel House is not a party to any
contract that might adversely affect the financial condition, properties,
business operations, condition or prospects of Wheel House. No purchase
commitments are in excess of, and no sales commitments are below, the normal
requirements of Wheel House in the conduct of its business consistent with past
practice and prior periods, nor are any such commitments at an excessively high
or low price or on other than an arms length basis.
3.25 No Finders. No finder, broker or other person acting pursuant to
the authority of Wheel House or the Shareholders is entitled to any commission
or finder's fee in connection with the transactions contemplated by this
Agreement.
3.26 Repurchase and Guaranty Obligations. Exhibit 3.26(a) hereto
contains a list or brief description of (i) all repurchase agreements to which
Wheel House is a party to or by which any of its property or assets is bound and
(ii) all guaranties and other agreements of Wheel House relating to any
obligations to which any dealer who sells products for Wheel House is a party or
by which any of the property or assets of Wheel House is bound. True and
complete copies of such repurchase agreements and guaranties and other
agreements have heretofore been delivered to Cavalier. Exhibit 3.26(b) hereto
sets forth a complete list of all repurchase agreements between Wheel House and
lenders with whom Wheel House's dealers have outstanding obligations which Wheel
House may be called upon to stand behind pursuant to such repurchase agreements.
Except as set forth on Exhibit 3.26(b) hereto, all such dealers are current with
respect to payments of such obligations and no payment dates with respect to
such obligations have been extended by any such lenders.
3.27 Dealership Arrangements. Wheel House has dealership arrangements
with those dealers identified in Exhibit 3.27 hereto and has written agreements
with such dealers pursuant to dealership agreements to the extent specified in
such exhibit (the "Dealership Agreements"). True and complete copies of the
Dealership Agreements have heretofore been delivered to Cavalier. Except as
disclosed on Exhibit 3.27 hereto, neither Wheel House nor any of the
Shareholders has any reason to believe that any of said dealers have ceased to
sell or otherwise deal in the products of the
<PAGE>
Business. To Wheel House's knowledge, no such dealer is experiencing financial
difficulties or will cease to do business with Wheel House or Cavalier following
the Closing Date, and Wheel House's relationship with its dealers will not be
adversely affected by the transactions contemplated by this Agreement. During
the twelve (12) month period ending on the date of this Agreement, no dealer
ceased purchasing inventory from Wheel House to any measurable extent, except as
reflected on Exhibit 3.27 hereto.
3.28 Intellectual Property. Exhibit 3.28 to this Agreement contains a
true and complete list of all patents, trademarks, service marks, trade names,
brand names, documented processes, documented know-how, trade secrets,
copyrights and other intangible assets of Wheel House, and all pending
applications therefor, owned or used by or licensed to or by Wheel House
("Intangible Assets"). No licenses, sublicenses, covenants or agreements have
been granted or entered into by Wheel House in respect of such Intangible
Assets, except those described on Exhibit 3.28 hereto. Wheel House validly owns
and has the exclusive right to use the mark "Wheel House" and validly owns all
of the other Intangible Assets and all such rights and licenses are valid and in
good standing, and free and clear of all liens and encumbrances of any nature
whatsoever and have not been challenged in any way or involved in any
interference proceeding. The operations of Wheel House; the manufacture, use,
and sale by Wheel House of its products; the use of Wheel House's products by
its customers for the purpose for which sold; and the use or publication by
Wheel House of its patents, trademarks, service marks, trade names, brand names,
and advertising, technical, or other literature do not involve infringement or
claimed infringement of any United States patent, trademark, service mark, trade
name or copyright. No shareholder, director, officer, or employee of Wheel House
owns, directly or indirectly, in whole or in part, any patents, trademarks,
service marks, trade names, brand names or copyrights or applications therefor
that Wheel House is presently using or the use of which is necessary for the
business of Wheel House as now conducted. None of the officers of Wheel House,
none of the Shareholders and none of Wheel House's employees has entered into
any agreement regarding know-how, trade secrets, assignment of rights in
inventions, or prohibition or restriction of competition or solicitation of
customers, or any other similar restrictive agreement or covenant, whether
written or oral, with any person, firm, association, corporation or business
organization or enterprise other than Wheel House.
3.29 Joint Ventures, etc. Wheel House does not have any interest
(including an interest as a creditor) in any partnership, joint venture,
association, sole proprietorship, limited liability company or other entity.
3.30 Conflict of Interest. Except as set forth on Exhibit 3.30, none of
the Shareholders, officers, directors, or employees of Wheel House, directly or
indirectly,
(a) has any contractual relationship with Wheel House
respecting its Business or operations; or
(b) has any interest that relates to (A) any entity which does
business with or competes, directly or indirectly, with Wheel House or (B) any
property, asset or right which is used by Wheel House in the conduct of its
Business.
<PAGE>
3.31 Relationships With Suppliers, Customers and Dealers. Neither the
execution of this Agreement nor the consummation of the transactions
contemplated hereby will cause any supplier, vendor, distributor, customer,
dealer or other third party to cancel its relationship with Wheel House
following the Closing Date.
3.32 Conduct of Business. During the 1994 calendar year and through the
date of this Agreement, Wheel House has sold its inventory and collected the
accounts receivable of the Business only in the ordinary course of business,
consistent with past practice and has not conducted any liquidation, clearance,
or distress sale in which a material amount of inventory has been sold at a
price reflecting less than a normal profit margin.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS
Each of the Shareholders hereby severally represents and
warrants to, and covenants with, Cavalier as follows:
(a) Such Shareholder is the owner of, and has good title to,
the number of Shares set forth next to such Shareholder's name on Exhibit
3.2(a)(i) to this Agreement, free and clear of pledges, assignments, liens or
other encumbrances (other than the Shareholders' Agreement dated December 11,
1992 among Wheel House and its Shareholders (the "Shareholders' Agreement")),
and such Shares are not subject to any options, warrants or rights of others. At
the Closing, such Shareholders will have all power and authority necessary to
transfer their Shares pursuant to this Agreement without obtaining the consent
of any third party or governmental agency which has not already been obtained.
(b) Such Shareholder will not sell, transfer or otherwise
dispose of any of his Shares between the date hereof and the earlier of the
Closing Date or the expiration of the Option Period, if the option is not
exercised, without obtaining the prior written approval of Cavalier.
(c) No provision of any agreement or instrument to which such
Shareholder is a party or by which such Shareholder is bound will be violated by
the execution and delivery of this Agreement or the performance of any agreement
or condition herein contained required to be per formed or satisfied by such
Shareholder.
(d) This Agreement, when duly executed and delivered by such
Shareholder, will constitute the valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms.
(e) Each Shareholder is acquiring the shares of Common Stock
issued or to be issued pursuant to this Agreement for investment and for his own
account and not with a view to any distribution thereof in violation of the
Securities Act of 1933, as amended (the "1933 Act"), or any
<PAGE>
applicable state securities law, and such shares of Common Stock will not be
sold, transferred or hypothecated by such Shareholder except in accordance with
the terms hereof (including, without limitation, the terms of Section 1.3(b)
hereof) and then only if an exemption from registration is available under the
1933 Act and any applicable state securities law or if such shares of Common
Stock are registered or qualified thereunder. The Shareholders acknowledge that
each certificate evidencing shares of Common Stock issued to the Shareholders
pursuant hereto shall bear the following legend:
The shares represented by this certificate are being issued
pursuant to the Option and Stock Exchange Agreement dated
August 28, 1995 among Wheel House Structures, Inc.; James H.
Masdon, Max Burleson and Max Sanders; and Cavalier Homes, Inc.
(the "Agreement"), have not been registered under the
Securities Act of 1933 and have been acquired for investment.
They may not be sold or transferred except in compliance with
the terms of the Agreement and then only if there exists an
effective registration statement for the shares under the
Securities Act of 1933 or an opinion of counsel that
registration is not required under said Act.
(f) Each Shareholder acknowledges that (i) he has such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of an investment in the shares of Common Stock
and (ii) has received and reviewed copies of the 1994 Annual Report of Cavalier,
the Annual Report of Cavalier on Form 10-K for the fiscal year ended December
31, 1994, the quarterly reports of Cavalier on Form 10-Q for all fiscal quarters
ended since December 31, 1994, the proxy statement of Cavalier with respect to
the 1994 annual meeting of shareholders, the 1994 annual report to shareholders,
and (iii) has had the opportunity of reviewing all other reports filed by
Cavalier with the Securities and Exchange Commission during the fiscal year. By
virtue of the foregoing and the process of negotiating this Agreement and the
transactions contemplated herein, such Shareholder has had access to such
information relating to Cavalier as would be disclosed in a registration
statement for the registration of shares of Common Stock under the 1933 Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CAVALIER
Cavalier represents and warrants to, and covenants with, Wheel
House and the Shareholders as follows:
5.1 Organization. Cavalier is a corporation, duly organized, validly
existing, and in good standing under the laws of Delaware. Cavalier has all
requisite corporate power to own its property and conduct its business as now
conducted.
5.2 No Breach. Except as set forth on Exhibit 5.2 hereto, the
execution, delivery andperformance of this Agreement by Cavalier will not result
in a breach of or constitute a default under the Certificate of Incorporation or
Bylaws of Cavalier or any agreement or other document to or by which Cavalier is
a party or is bound or by which its property or assets are bound.
<PAGE>
5.3 No Finders. No finder, broker or other person acting pursuant to
the authority of Cavalier is entitled to any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
5.4 Authorization and Validity of Agreement. The execution and delivery
of this Agreement by Cavalier and the performance by Cavalier of its obligations
hereunder have been duly authorized by the Board of Directors of Cavalier. This
Agreement, when duly executed and delivered by Cavalier, will constitute the
valid and binding obligation of Cavalier enforceable in accordance with its
terms.
5.5 Shares to be Issued. The shares of Common Stock to be issued and
delivered pursuant to this Agreement shall be duly and validly issued, fully
paid and nonassessable, and shall represent voting common stock of Cavalier.
5.6 Disclosure. No statement, representation or warranty made by
Cavalier in this Agreement, or in any statement, document, certificate or other
information furnished or to be furnished to Wheel House and the Shareholders
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements made therein not misleading in light of the circumstances under which
they were made.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
OF WHEEL HOUSE AND THE SHAREHOLDERS
Wheel House and the Shareholders hereby, jointly and severally,
covenant and agree with Cavalier as follows:
6.1 Conduct of the Business of Wheel House. During the period from the
date hereof to the earlier of the Closing or the expiration of the Option
Period, if the Option is not exercised by Cavalier, and except with the prior
written approval of Cavalier, Wheel House will conduct its business and engage
in transactions only in the ordinary course, consistent with past and current
practices and prior periods. Wheel House will use its best efforts to (A)
preserve its business organization intact; (B) preserve the goodwill of its
customers and others with whom business relationships exist; (C) retain the
services of its key officers and employees; and (D) maintain satisfactory
relationships with landlords, dealers, suppliers, vendors, employees and others
having a business relationship with Wheel House. Without limiting the generality
of the foregoing, Wheel House shall not, and the Shareholders shall not take any
action to permit Wheel House to do so,
<PAGE>
without the prior written approval of Cavalier, and unless otherwise expressly
permitted herein,
(i) propose or adopt any amendments to Wheel House's Articles
of Incorporation or Bylaws;
(ii) change the number of shares of the authorized, issued or
outstanding capital stock of Wheel House, including any issuance, purchase,
redemption, split, combination or reclassification thereof, or issue or grant
any option, warrant, call, commitment, subscription, right or agreement to
purchase relating to the authorized or issued capital stock of Wheel House, or
declare, set aside or pay any dividend or other distribution in cash or in kind
with respect to the outstanding capital stock of Wheel House;
(iii) incur any liabilities or obligations, whether directly
or indirectly, or by way of guaranty, and whether or not evidenced by any note,
bond, debenture, or similar instrument, except in the ordinary course of
business consistent with past practices and prior periods;
(iv) except as described on Exhibit 6.1(iv) hereto, make any
capital expenditures individually in excess of $2,500 or in the aggregate in
excess of $10,000;
(v) pay any bonuses to any executive officer of Wheel House;
enter into any new or amend in any respect any existing employment agreement
with any person; adopt any new or amend in any respect any existing Employee
Benefit Plan, except as may be otherwise required by law; grant any increase in
compensation or benefits of any kind to its employees, officers or directors,
except regularly scheduled general increases in the ordinary course of business
and consistent with past practices and policies; or effect any change in any
respect in retirement benefits to any class of employees or officers, except as
otherwise required by law;
(vi) sell, mortgage, pledge, grant any security interest in,
or otherwise dispose of or encumber any asset owned by Wheel House, other than
sales occurring in the ordinary and regular course of business consistent with
past practices and prior periods;
(vii) increase or deplete inventories, incur or collect
receivables, or incur or pay trade payables or accrued liabilities in any manner
other than consistent with past practices and prior periods, and in the ordinary
course of business;
(viii) cancel without payment or satisfaction in full, waive
or extend the time for performance of, any notes, loans, or other obligations
inuring to the benefit of Wheel House;
(ix) make any modification of or amendment to any of the
contracts or agreements listed or described in Exhibits 3.13, 3.17, 3.19, 3.26
and 3.27 to this Agreement;
(x) fail to maintain in full force and effect all insurance
now carried by Wheel House;
<PAGE>
(xi) institute any changes in management policy of a
significant nature;
(xii) take any action or fail to take any action that, if
taken or omitted, would be required to be disclosed under the provisions of
Section 3.20 of this Agreement;
(xiii) organize any subsidiary, acquire any capital stock or
other equity securities of any corporation or acquire any entity or ownership
interest in any business;
(xiv) pay, discharge or satisfy any claim or liability, other
than the payment, discharge or satisfaction in the ordinary course of business
and consistent with past practice with respect to liabilities reflected or
reserved against in the Financial Statements or incurred in the ordinary course
of business;
(xv) prepay any obligation having a fixed maturity date of
more than ninety (90) days from the date of such obligation;
(xvi) write down the value of any inventory or write off as
uncollectible any notes or accounts receivable, except in the ordinary course of
business and consistent with past practice;
(xvii) dispose of or permit to lapse any right to use any
patent, trademark, trade name, copyright or other item of intangible property or
disclose to any person any patent, trademark, trade secret or any other
proprietary right or information not theretofore a matter of public knowledge;
(xviii) grant or extend any power of attorney or act as a
guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise in
respect of the obligations of any person or entity;
(xix) do any act, omit to do any act, or permit any act or
omission to act which would cause a breach of any contract, agreement or
commitment to which Wheel House is a party;
(xx) fail to comply in all respects with all laws applicable
to Wheel House and its properties, assets, operations, business and employees;
(xxi) fail to prepare and file all Tax Returns with respect to
Taxes and any amendments thereto required to be filed by Wheel House; or
(xxii) make any agreement or commitment by or on behalf of
Wheel House to do or take any of the actions referred to in the foregoing
subparagraphs (i) through (xxi).
6.2 Defaults. During the period from the date hereof to the earlier of
the Closing or the expiration of the Option Period, if the Option is not
exercised by Cavalier, Wheel House and the Shareholders shall give prompt
written notice to Cavalier of (a) any notice or other communication given by any
party to an agreement to which Wheel House is a party or to which it is subject
which is received or given by Wheel House subsequent to the date of this
Agreement and which alleges a default or gives notice of an event that with
notice or lapse of time, or both, would constitute a
<PAGE>
default under any such agreement; (b) any notice or other communication from any
party to any such agreement alleging that the consent of such party is or may be
required in connection with the transactions contemplated by this Agreement; (c)
any fact or occurrence that becomes known to Wheel House or the Shareholders
which would cause any of the representations or warranties of Wheel House or the
Shareholders set out herein to be untrue, incorrect, inaccurate or misleading in
any respect; and (d) any breach by Wheel House or the Shareholders of any
representation, warranty, covenant or agreement by Wheel House or the
Shareholders hereunder.
6.3 Current Information; Notice. During the period from the date hereof
to the earlier of the Closing or the expiration of the Option Period, if the
Option is not exercised by Cavalier, Wheel House will cause one or more
designated representatives to confer on a regular and frequent basis with
representatives of Cavalier and to report the general status of the ongoing
operations of Wheel House. Wheel House will promptly notify Cavalier of (i) any
change in the normal course of business or the operations or the properties of
Wheel House, (ii) any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) affecting Wheel
House or the institution or the threat of litigation, claims, or causes of
action involving Wheel House, and will keep Cavalier fully informed of such
events. Between the date hereof and the earlier of the Closing Date or the
expiration of the Option Period, if the Option is not exercised by Cavalier,
Wheel House shall also furnish to Cavalier daily status reports along with
monthly unaudited financial statements and annual audited financial statements.
6.4 Access to Properties, Personnel and Records; Confidentiality. (a)
During the period from the date hereof to the earlier of the Closing or the
expiration of the Option Period, if the Option is not exercised by Cavalier,
Wheel House shall permit Cavalier and its agents and employees full access,
during normal business hours and upon reasonable notice, to the properties of
Wheel House (including, without limitation, access to conduct all environmental
studies and tests, surveys, and the opportunity to review all safety procedures
and all manufacturing, marketing and other operations of Wheel House), and shall
disclose and make available (together with the right to copy) to Cavalier and to
its internal auditors, attorneys, accountants and other representatives, all
books, electronic data, papers and records relating to the assets, stock,
properties, operations, obligations and liabilities of Wheel House, including
but not limited to, all books of account (including the general ledger), tax
records, minute books of directors' and shareholders' meetings, organizational
documents, bylaws, contracts and agreements, filings with any regulatory
authority, documents relating to assets, titles, abstracts, plans affecting
employees, securities transfer records and stockholder lists, and any other
assets, business activities or prospects in which Cavalier may have a reasonable
interest, and Wheel House shall use its best efforts to provide Cavalier and its
respective representatives access to the workpapers of Wheel House's
accountants. The foregoing rights granted to Cavalier shall not, whether or not
and regardless of the extent to which the same are exercised, and Cavalier's
investigation of Wheel House shall not, affect in any way the representations,
warranties, covenants and agreements made in this Agreement by Wheel House or
the Shareholders.
(b) All written information furnished by Wheel House pursuant
hereto shall be treated as the sole property of Wheel House until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, Cavalier shall return to Wheel House all documents
<PAGE>
containing such information and shall use reasonable efforts to keep
confidential all such information unless disclosure of same is required by law.
The obligation to keep such information confidential shall not apply to any
information which (i) the party receiving the information can establish was
already in its possession prior to the disclosure thereof by Wheel House and the
Shareholders; (ii) was then generally known to the public; (iii) became known to
the public through no fault of Cavalier; or (iv) was disclosed to Cavalier by a
third party unaffiliated with Wheel House who was not bound by an obligation of
confidentiality to Wheel House.
(c) All non-public information furnished by Cavalier pursuant
hereto shall be treated as the sole property of Cavalier prior to and after the
consummation of the transactions contemplated hereby, and if such transactions
shall not occur, Wheel House shall return to Cavalier all documents or other
materials containing, reflecting or referring to such information and shall use
reasonable efforts to keep confidential all such information unless disclosure
of same is required by law. The obligation to keep such information confidential
shall not apply to the same extent set forth in subparagraph (b) of this Section
6.4.
6.5 No Other Bids. During the period from the date hereof to the
earlier of the Closing or the expiration of the Option Period, if the Option is
not exercised by Cavalier, neither Wheel House, acting through any director or
officer or other agent, nor any of the Shareholders, shall, nor shall they
authorize or permit any officer, director or employee of, or any investment
banker, attorney, accountant or other representative retained by, Wheel House or
any Shareholder to, solicit, encourage (including by way of furnishing
information) or respond favorably to any solicitations or inquiries from, or
otherwise enter into negotiations or reach any agreement with, any person,
corporation or other entity regarding the sale of any shares of capital stock
(or other securities) or assets of Wheel House the acquisition of any of its
securities (whether or not issued or outstanding), or the merger, consolidation
or reorganization of Wheel House with any other corporation or entity. Wheel
House and/or the Shareholders shall promptly advise Cavalier orally and in
writing of any such inquiries or proposals received by Wheel House or the
Shareholders after the date hereof. Wheel House and the Shareholders shall
immediately cease and cause to be terminated any existing discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing.
6.6 Disposition of Shares. During the period from the date hereof to
the earlier of the Closing or the expiration of the Option Period, if the Option
is not exercised by Cavalier, the Shareholders shall not sell, transfer, pledge,
encumber or otherwise dispose of the Shares or enter into any agreement,
commitment or understanding to do any of the foregoing.
6.7 Environment Assessments. The parties acknowledge that Cavalier has
obtained an updated Phase I environmental assessment of the Property and an
assessment of the environmental compliance of Wheel House's operations. Wheel
House and the Shareholders, at the Shareholders' expense, agree to take or cause
to be taken any further environmental assessments requested by Cavalier and to
perform all remedial and other action (including the application for a storm
water permit and any other environmental permit) requested by Cavalier with
respect to such environmental assessments.
<PAGE>
6.8 Title Matters. The parties acknowledge that Wheel House has
delivered to Cavalier a title policy and survey respecting the Property. Wheel
House and the Shareholders agree to use their good-faith reasonable efforts to
address any problems in connection with said title policy and survey which are
identified by Cavalier. At Closing, Wheel House shall deliver a final title
policy which shall be in form and substance satisfactory to Cavalier, in its
sole discretion. Wheel House and the Shareholders shall take or cause to be
taken, at the expense of the Shareholders, all action to correct any defects in
the title of any property owned or leased by Wheel House.
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
7.1 Necessary Action. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use reasonable efforts promptly
to take, or cause to be taken, all actions and to do, or cause to be done, all
things reasonably necessary, proper or advisable under applicable agreements,
laws and regulations, or otherwise, including, without limitation, attempting to
obtain all necessary consents and waivers and regulatory approvals, to
consummate and make effective the transactions contemplated by this Agreement.
7.2 Termination of Options. Wheel House and the Shareholders shall take
all steps necessary to terminate, at or prior to the Closing, any options,
plans, programs or policies authorizing the granting or exercise of stock
options.
7.3 Releases of Shareholders. Cavalier shall use its good-faith
reasonable efforts to obtain, prior to Closing, the releases of the Shareholders
from any personal guarantees of Wheel House obligations executed by them.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF CAVALIER
The obligation of Cavalier to consummate the exchange of
shares contemplated by this Agreement is subject to the fulfillment (unless
specifically waived in writing by Cavalier subsequent to the execution and
delivery of this Agreement) of each of the following conditions precedent at or
before the Closing Date:
8.1 Warranties True. All representations and warranties of Wheel House
and the Shareholders contained in this Agreement or in any certificate or
document delivered pursuant to the provisions hereof will be true and correct on
and as of the Closing Date as if made on the Closing Date.
<PAGE>
8.2 Performance of Wheel House and the Shareholders. Wheel House and
the Shareholders shall have performed all covenants, obligations, and agreements
required to be performed by them under this Agreement on or prior to the Closing
Date.
8.3 Certificate Respecting Satisfaction of Conditions. Wheel House and
the Shareholders shall have delivered to Cavalier a certificate dated as of the
Closing Date as to the satisfaction of the matters described in Sections 8.1 and
8.2 hereof, and such certificate shall be deemed to constitute additional
representations, warranties, covenants and agreements of Wheel House and the
Shareholders under this Agreement.
8.4 No Loss or Calamity. Wheel House shall not have suffered, at or
prior to the Closing Date, on account of any cause whatsoever, any loss which
adversely affects the value of its assets or the operations, financial condition
or prospects of the Business.
8.5 Good Standing. There shall have been delivered to Cavalier
evidence, whether in the form of telegrams, certificates or otherwise,
satisfactory to Cavalier, to establish that Wheel House is in good standing in
the State of Alabama and in each other jurisdiction where it is or should be
qualified to do business as a foreign corporation.
8.6 Absence of Adverse Facts. There shall not have occurred any fact,
condition or event, and Cavalier shall not have discovered any fact, condition
or event, that relates to or involves Wheel House or the Shareholders and which,
in the opinion of Cavalier, would (i) be at variance with one or more of the
warranties, representations, covenants or agreements of Wheel House or the
Shareholders set forth in this Agreement, (ii) have an adverse, or may be
reasonably foreseen to have an adverse effect upon Wheel House or the
consummation of the transactions contemplated by this Agreement, (iii) be
adverse to the interests of Cavalier, (iv) make proceeding with the transactions
contemplated by this Agreement inadvisable, or (v) entitle Cavalier to terminate
this Agreement under the provisions of Section 11.1 (d) hereof.
8.7 Consents Under Agreements. There shall have been obtained the
consent or approval of each person whose consent or approval shall be required
in order to consummate all of the transactions contemplated by this Agreement,
and to permit the succession by Wheel House following the Closing to any
obligation, right or interest of Wheel House under any loan or credit agreement,
note, mortgage, indenture, lease, license, or other agreement or instrument,
except those for which failure to obtain such consents and approvals would not,
in the reasonable opinion of Cavalier, individually or in the aggregate, have an
adverse effect on Wheel House or upon the consummation of the transactions
contemplated by this Agreement.
8.8 Regulatory Approvals. There shall have been obtained the consent or
approval or the waiver thereof of all third parties or governmental agencies
whose consent or approval is necessary to consummate the transactions
contemplated hereby, including, without limitation, all of the required consents
listed on Exhibit 3.23 hereto.
8.9 Nonsolicitation Agreements. None of the Shareholders shall have
breached any of the provisions of the Nonsolicitation Agreements entered into by
them contemporaneously herewith.
<PAGE>
8.10 Shareholder Actions. The Shareholders of Wheel House shall have
taken all actions necessary to authorize and approve the transactions
contemplated by this Agreement.
8.11 Environmental Matters. Cavalier shall be satisfied, in its sole
discretion, that any and all actions required by Section 6.7 hereof, if any,
have been taken and that the representations and warranties set forth in Section
3.11 of this Agreement are true and correct.
8.12 Releases. Each of the Shareholders shall have delivered to Wheel
House releases, in form and substance reasonably satisfactory to Cavalier and
its counsel, releasing Wheel House, Cavalier and their respective officers,
directors, employees, agents and representatives from any and all suits, causes
of action and other claims that such Shareholders may have up through the
Closing other than claims pursuant to this Agreement.
8.13 Real Property Matters. Cavalier shall be satisfied, in its sole
discretion, with the form and substance of all title policies and surveys
relating to the Property and that all actions required by Section 6.8 of this
Agreement have been taken.
8.14 Delivery of Certificates. The Shareholders shall have delivered to
Cavalier the certificates evidencing all of the Shares.
8.15 Resignations of Officers and Directors. Cavalier shall have
received the resignations, effective on the Closing Date, of each officer and
director of Wheel House.
8.16 Termination of Options. Wheel House shall have terminated all
option plans or programs authorizing the granting or exercise of options to
acquire shares of the capital stock of Wheel House so that, at Closing, there
will be no outstanding options to acquire shares of the capital stock of Wheel
House.
8.17 Loan Agreement. Wheel House and Cavalier Acceptance Corporation
shall have executed a Loan Agreement in form and substance satisfactory to
Cavalier in its sole discretion (the "Loan Agreement") and Wheel House shall not
have breached any of the provisions thereof.
8.18 Termination of Shareholders' Agreement. The parties acknowledge
that, contemporaneously herewith, they have executed an agreement which provides
that the Shareholders Agreement shall terminate, effective the Closing Date, in
the event the Closing does occur. As an additional condition to Closing, such
agreement shall be in full force and effect and shall not have been modified or
amended without Cavalier's prior written consent.
<PAGE>
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF WHEEL HOUSE AND THE SHAREHOLDERS
The obligation of Wheel House and the Shareholders to
consummate the transactions contemplated hereby is subject to the fulfillment
(unless specifically waived in writing by Wheel House and the Shareholders,
subsequent to the execution and delivery of this Agreement) of each of the
following conditions precedent at or before the Closing Date:
9.1 Warranties True. All representations and warranties of Cavalier
contained in this Agreement or in any certificate or document delivered pursuant
to the provisions hereof will be true and correct on and as of the Closing Date
as if made on the Closing Date.
9.2 Timely Exercise. Cavalier shall have delivered the Exercise Notice
in a timely fashion as provided in Section 1.2 hereof.
9.3 Certificate Respecting Satisfaction of Conditions. Cavalier shall
have delivered to Wheel House and the Shareholders' Representative (as defined
herein) a certificate dated as of the Closing Date as to the satisfaction of the
matters described in Section 9.1 hereof, and such certificate shall be deemed to
constitute additional representations, warranties, covenants, and agreements of
Cavalier under this Agreement.
9.4 Good Standing. There shall have been delivered to Wheel House and
the Shareholders' Representative evidence, whether in the form of telegrams,
certificates or otherwise, satisfactory to Wheel House and the Shareholders'
counsel to establish that Cavalier is in good standing in the State of Delaware.
9.5 Regulatory Approvals. There shall have been obtained the consent or
approval or the waiver thereof of all third parties or governmental agencies
whose consent or approval is necessary to consummate the transactions
contemplated hereby, including, without limitation, all of the required consents
listed on Exhibits 3.23 and 5.2 hereto.
ARTICLE X
DELIVERIES AT CLOSING
10.1 Deliveries By Wheel House and Shareholders. At the Closing, Wheel
House and the Shareholders shall deliver (or cause to be delivered) the
following to Cavalier:
(a) certificates evidencing all of the Shares and all
instruments evidencing the Options;
<PAGE>
(b)the certificate described in Section 8.3 of this Agreement;
(c) the good standing certificates described in Section 8.5 of
this Agreement;
(d) the consents and regulatory approvals or waivers described
in Sections 8.7 and 8.8 of this Agreement, respectively, if any, or a
certificate of an officer of Wheel House that no such consents, approvals or
waivers are required;
(e) copies of resolutions of the Board of Directors of Wheel
House approving this Agreement and the transactions contemplated hereby,
certified as true and correct by the Secretary of Wheel House;
(f) the releases described in Section 8.12 of this Agreement;
(g) the resignations of Wheel House's officers and directors
described in Section 8.15 of this Agreement;
(h) evidence of the termination of all option plans and
programs as described in Section 8.16 of this Agreement; and
(i) the Termination Agreement described in Section 8.18 of
this Agreement.
10.2 Deliveries by Cavalier. At the Closing, Cavalier shall deliver the
following to Wheel House and the Shareholders:
(a) certificates representing the Additional Shares;
(b)the certificate described in Section 9.3 of this Agreement;
(c) the good standing certificates described in Section 9.4 of
this Agreement;
(d) the regulatory consents, approvals or waivers described in
Section 9.5 of this Agreement, if any, or a certificate of an officer of
Cavalier that no such consents, approvals or waivers are required; and
(e) copies of resolutions of the Board of Directors of
Cavalier approving this Agreement and the transactions contemplated hereby,
certified as true and correct by the Secretary of Cavalier.
<PAGE>
ARTICLE XI
TERMINATION, WAIVER AND AMENDMENT
11.1 Termination. This Agreement shall be terminated immediately in the
event the Option Period expires without Cavalier exercising the Option. In
addition, this Agreement may be terminated in any of the following ways:
(a) at any time as of or prior to the Closing Date, by the
mutual consent in writing of Cavalier and Wheel House;
(b) by Cavalier at any time as of or prior to the Closing
Date, if there has been any material breach of any representation, warranty,
agreement, undertaking or covenant of Wheel House or any of the Shareholders
contained herein or in any other agreement among Cavalier or its affiliates, on
the one hand, and Wheel House and the Shareholders on the other, including,
without limitation, the Loan Agreement;
(c) as of the Closing Date, by either Cavalier on the one hand
or Wheel House and the Shareholders, on the other hand, in writing, if the
conditions made for the benefit of either shall not have been met on or prior to
the Closing Date; provided, however, that in the event either Cavalier or Wheel
House and the Shareholders, as the case may be, shall have the right to
terminate this Agreement under this subparagraph (c), then such party which is
entitled to terminate may (unless the other party is also entitled to terminate
and does not so elect), at its option elect, on or prior to such date and from
time to time thereafter, to extend the Closing Date in order to permit the
failed condition or conditions on which such party is entitled to rely to be met
and cured; or
(d) by Cavalier if (i) there shall be any actual or threatened
causes of action, investigations or proceedings relating to Wheel House or the
transactions contemplated by the Agreement, including, without limitation,
challenging the validity or legality of this Agreement, or the consummation of
the transactions contemplated by this Agreement, seeking damages in connection
with the transactions contemplated by this Agreement, or seeking to restrain or
invalidate the transactions contemplated by this Agreement; (ii) there shall
have occurred, or it is reasonable to foresee that there will occur, any adverse
change in the financial condition properties, business, operations, condition or
prospects of Wheel House; (iii) there shall have occurred or Cavalier shall have
discovered or determined there exists any fact, occurrence or development,
whether actual or threatened, which, in Cavalier's sole judgment makes
proceeding with the transactions contemplated by this Agreement inadvisable;
(iv) Cavalier, in its sole discretion, is not satisfied for any reason with the
results of its due diligence review and its examination of all assets and
liabilities of Wheel House and the Condition of the Business; (v) Cavalier is
not satisfied for any reason with any environmental compliance matter relating
to the Property, or (vi) Cavalier is not satisfied for any reason with the title
insurance policies and surveys described in Section 6.8 of this Agreement;
provided, however, that in any of such events, Cavalier may, in its discretion
elect, upon the occurrence of any such events or from time to time thereafter,
to extend the Closing Date in order to allow Cavalier further time to decide
whether to terminate the Agreement on account of such events.
<PAGE>
11.2 Effect of Termination. In the event of the termination of this
Agreement, it shall terminate and become void, without liability on behalf of
any party, and have no effect, except as otherwise provided herein, and except
that a termination of this Agreement shall not relieve any party from liability
for any breach by such party of any representation, warranty, covenant or
agreement made by such party herein.
11.3 Waiver and Amendment. Any term or provision of this Agreement may
be waived in writing at any time by the party which is entitled to the benefits
thereof, and any term or provision of this Agreement can be amended or
supplemented at any time. Notwithstanding the foregoing, this Agreement may not
be amended except by a written instrument signed on behalf of each party hereto.
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification for Benefit of Cavalier. Wheel House (in the event
the Closing does not occur) and each of the Shareholders, jointly and severally
agree to defend, indemnify and hold harmless (a) Cavalier and its successors and
assigns; (b) Wheel House (if the Closing does occur) and its successors and
assigns; (c) the respective officers, directors, agents, representatives and
employees of Cavalier and Wheel House (if the Closing does occur), and (d) the
successors, assigns, heirs, administrators, executors, and personal
representatives of the foregoing (collectively, the "Cavalier Indemnitees") from
and against any loss, liability, damage and expense (including, without
limitation, attorneys' fees) (collectively "Cavalier's Damages") incurred by any
Cavalier Indemnitee arising out of or resulting from:
(i) any inaccuracy in, breach of or misrepresentation in any
of the representations, warranties, covenants or agreements made by Wheel House
or the Shareholders herein, or in any Exhibit hereto or in any other agreement
to which Cavalier and Wheel House or any of the Shareholders are parties
(including, without limitation, the Nonsolicitation Agreements described in
Section 8.9 of this Agreement);
(ii) any inaccuracy in, breach of or misrepresentation in any
certificate or other document required to be delivered hereunder at the Closing
by Wheel House or the Shareholders in accordance with any provision of this
Agreement;
(iii) any claim by or liability to any person claiming any
commission or finder's fee pursuant to authorization from Wheel House or the
Shareholders in connection with the transactions contemplated by this Agreement;
(iv) any claim against or liability of Wheel House for the
payment of Taxes of any kind or nature, including, without limitation,
withholding taxes, and any related interest, penalty or fine, whether to the
federal or any state or local government, agency or instrumentality,
attributable to taxable periods ending on or before the Closing Date, except to
the extent such Taxes have been reserved against in the Financial Statements;
<PAGE>
(v) any claim against or liability of Wheel House that relates
to or arises out of liabilities, transactions or occurrences affecting Wheel
House or its assets arising out of facts or circumstances occurring on or prior
to the Closing Date, except liabilities reflected or reserved against on the
Financial Statements;
(vi) those proceedings set forth in Exhibit 3.22 and any other
claim, suit, litigation, administrative proceeding, arbitration or other
proceeding of any kind in which any Cavalier Indemnitee becomes involved,
whether alone or in conjunction with others, that relates to Wheel House or the
business conducted by Wheel House at any time prior to the Closing, and that
arises out of facts or circumstances occurring on or prior to the Closing Date,
except to the extent those proceedings are reflected or reserved against in the
Financial Statements;
(vii) any claim or liability, whether primary, secondary,
individual, joint, several, or otherwise, allocable to periods prior to the
Closing Date, for the payment of any contribution, withdrawal liability,
interest, penalty or settlement of claim relating to any Employee Benefit Plan
maintained by Wheel House or to which Wheel House contributes or is obligated to
contribute for the benefit of one or more employees of Wheel House, or for the
payment of any fines, interest or penalties on account of the failure to make
any filings with respect to any Employee Benefit Plan with any governmental
entity or agency (including, without limitation, on account of the matters
specified in Exhibit 3.17(b) hereto), except to the extent such liability has
been reserved against in the Financial Statements;
(viii) any claim against or liability of Wheel House arising
under or in connection with any Environmental Law, including, without
limitation, any cost of cleanup, remediation or response action under any
Environmental Law, and any failure to obtain any license, permit or approval
under or to comply with any Environmental Law, to the extent the same relates to
facts and circumstances occurring on or prior to the Closing Date;
(ix) any failure following the Closing Date of any of the
accounts receivable that were reflected on the Financial Statements, which are
reflected on the books and records of Wheel House as of the dates hereof and/or
as of the Closing Date, to be collected in cash to the extent of the full face
amount thereof within one year from the Closing Date, without regard to any
reserves for doubtful accounts that may have been or be established with respect
thereto; or
Wheel House and the Shareholders hereby agree that the indemnities set forth in
Sections 12.1(i) through (ix) above are cumulative and not exclusive, and that a
Cavalier Indemnitee shall not be required to elect one over the other. The
Shareholders each further waive any rights of contribution, subrogation or
indemnity any or all of them may have against Wheel House on account of any of
the foregoing matters.
12.2 Determination of Accounts Receivable. On the Closing Date,
Cavalier and the Shareholders shall mutually agree, in writing, upon a schedule
of the accounts receivable of Wheel House outstanding on the Closing Date.
<PAGE>
12.3 Indemnification by Cavalier. Cavalier agrees to defend, indemnify
and hold harmless Wheel House (in the event the Closing does not occur), the
Shareholders and their respective successors and assigns (the "Shareholder
Indemnities") from and against any loss, liability, damage and expense
(including, without limitation, attorney's fees) incurred by a Shareholder
Indemnitee arising out of or resulting from:
(i) any inaccuracy in, breach of or misrepresentation in
any of the representations, warranties or covenants made herein by Cavalier;
(ii) any inaccuracy in, breach of or misrepresentation in
any certificate of other document required to be delivered hereunder at the
closing by Cavalier;
(iii) any claim by or liability to any person claiming any
commission or finder's fee pursuant to authorization from Cavalier in connection
with the transactions contemplated by this Agreement; or
(iv) any of the personal guarantees of the Shareholders of
Wheel House obligations which are listed in Exhibit 12.3 hereto.
In addition, Cavalier hereby releases James H. Masdon and Jeanette M. Masdon
from any indemnification obligations owed by them to Cavalier relating to
warranty expenses or repurchase agreements which indemnification obligations
arise out of that certain Preferred Stock Purchase Agreement dated December 11,
1992 to which Cavalier, James H. Masdon and Jeanette M. Masdon are parties.
12.4 Procedure for Indemnity. Prompt notice of any matter that a
Indemnitee believes to involve a breach of a representation, warranty or
covenant and an estimate of the dollar amount of the loss or potential loss
which has resulted or may result from such breach shall be given to the party
that committed the alleged breach; provided, however, that failure to give
notice as provided herein shall not relieve any other party of any obligations
hereunder. Cavalier and the Shareholders' Representative will consult promptly
concerning the subject matter of any notice sent pursuant to this Section 12.4
and each shall provide the other with any information it may have regarding such
claim; provided however, that the grant of the foregoing rights shall not delay,
hinder or in any way interfere with or reduce the absolute right of an
Indemnitee to defend, compromise, settle or otherwise handle the defense of any
claim as provided in this Section 12.4. Promptly after an Indemnitee becomes
aware of any claim, demand, action, proceeding, event or condition with respect
to which a claim for indemnification may be made pursuant to this Article XII,
such Indemnitee shall, if a claim in respect thereof is to be made against any
party (the "Indemnitor") and such party has not already received notice as
provided above, give written notice to the Indemnitor of the nature of the
matter for which a right to indemnification is claimed (an "Indemnification
Claim"); provided, however, that the failure of any Indemnitee to give notice as
provided herein shall not relieve the Indemnitor of any obligations. In case any
such Indemnification Claim involves a claim, demand, action, or proceeding by a
third
<PAGE>
party (a "Third Party Claim"), the Indemnitee may, following notice and
consultation with the Indemnitor (i) defend against any such claim or litigation
in such manner as it may deem appropriate and (ii) compromise or settle such
litigation or claim on such terms as it, in its reasonable discretion, deems to
be appropriate. Each Indemnitor shall cooperate fully with the Indemnitee in
connection with any such defense, compromise or settlement. The Indemnitor shall
promptly reimburse the Indemnitee for the amount of all liabilities, damage,
costs of settlement, fees, costs and expenses, including attorney's fees,
incurred by the Indemnitee in connection with the defense of such litigation. If
no settlement of any such claim is made, the Indemnitor will satisfy any
judgment rendered with respect to such claim or in litigation before the
Indemnitee is required to do so, and will pay all costs and expenses, including
attorney's fees, incurred by the Indemnitee with respect thereto.
12.5 Right of Set-Off by Cavalier Indemnitees. In the event that any
Cavalier Indemnitee is entitled to be indemnified for an amount of Cavalier
Damages hereunder, the Cavalier Indemnitee is authorized, but is not obligated,
at any time and from time to time, to set-off and apply such amount against any
and all deliveries of Common Stock or payments required to be made by Cavalier
to such Shareholder, including, without in any way limiting the generality of
the foregoing, under the provisions of this Agreement or under any of the
Nonsolicitation Agreements referred to in Section 8.9 hereof.
ARTICLE XIII
NOTICES AND GENERAL PROVISIONS
13.1 Notices. All notices, requests, waivers and other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be deemed to have been duly given or delivered when delivered
personally, deposited in the United States mail by registered or certified mail,
return receipt requested, postage prepaid and properly addressed, or when
delivered by a nationally recognized courier at the following addresses:
If to Wheel House or the Shareholders' Representative:
James H. Masdon
P.O. Box 486
Haleyville, Alabama 35565
<PAGE>
If to Cavalier:
Cavalier Homes, Inc.
719 Scott Avenue, 6th Floor
Post Office Box 5003
Wichita Falls, Texas 76307
Attn: Barry Donnell, Chairman
with a copy to:
Harold B. Kushner, Esq.
Berkowitz, Lefkovits, Isom & Kushner
A Professional Corporation
1600 SouthTrust Tower
Birmingham, Alabama 35203
and
John W Lowe, Esq.
Lowe, Mobley & Lowe
1210 21st Street
Post Office Box 576
Haleyville, Alabama 35565
or at such alternate addresses as any party shall have specified by notice in
writing to the other parties given in the manner provided herein.
13.2 Representations and Warranties Survive the Closing.
Notwithstanding any investigation made by or on behalf of any party to this
Agreement, the representations and warranties made under and in connection with
this Agreement shall be true and correct on and as of the Closing Date with the
same effect as if made on and as of such date and shall survive the Closing (or
the expiration of the Option Period and the lapse of the Option, as the case may
be) and consummation of all the transactions contemplated hereby and shall be
unaffected by any investigation made by or on behalf of any party.
13.3 Expenses. The parties will pay their respective expenses incurred
in connection with the transactions contemplated by this Agreement, whether or
not the transaction is consummated.
13.4 Entire Understanding and Amendment. This Agreement constitutes the
entire understanding and agreement and supersedes all prior agreements, both
written and oral, among the parties hereto with respect to the subject matter
hereof. The parties may, in a writing signed and duly authorized by all of them,
or signed, in the case of the Shareholders, by the Shareholders' Representative
(as defined in Section 13.5), amend this Agreement at any time.
<PAGE>
13.5 Appointment of Shareholders' Representative. James H. Masdon is
hereby fully and exclusively authorized, empowered and directed to serve as sole
representative and agent of each of the Shareholders (the "Shareholders'
Representative"), to take any and all actions, including, without limitation,
any actions required under the indemnification provisions of Article XII of this
Agreement, any consents required under Section 13.12 of this Agreement and the
execution and delivery of any documents, and make any and all decisions and
determinations, which may be required or permitted to be taken or made by the
Shareholders, to perform all of the obligations of the Shareholders required to
be performed hereunder, and to execute, deliver and perform on behalf of the
Shareholders any and all amendments hereto. Any such action, including, without
limitation, the execution and delivery of any documents, any decision or
determination taken or made by the Shareholders' Representative, and any such
amendment, shall be absolutely and irrevocably binding on each Shareholder as if
such Shareholder had personally taken such action (or executed and delivered
such document) or made such decision or determination in his or her individual
(or, as applicable, trustee or executor) capacity. The Shareholders'
Representative shall have only the rights, power and authority granted in this
Section 13.5. Notwithstanding any other provision of this Agreement, (i) with
respect to those matters expressly covered by this Section 13.5, each of the
Shareholders hereby irrevocably relinquishes such Shareholder's right to act
independently and other than through the Shareholders' Representative, and (ii)
no Shareholder shall have any right by virtue or by availing of any provision in
this Agreement, any such rights being irrevocably and exclusively delegated to
the Shareholders' Representative who, acting in accordance with the terms
hereof, shall be the sole party entitled to avail himself of the provision of
this Agreement. All actions taken, notices given or received and documents
executed by the Shareholders' Representative pursuant to the authority granted
hereunder may be relied upon by Cavalier, and Cavalier shall not be required to
make any inquiry regarding such actions, notices or documents. The power granted
to the Shareholders' Representative under this Section 13.5, being coupled with
an interest, may not be revoked.
13.6 Headings. The headings as to the contents of particular articles,
sections or paragraphs contained in this Agreement are inserted for convenience
only and shall not be deemed part of this Agreement or as a limitation on the
scope of the particular articles, sections or paragraphs to which they refer.
13.7 Parties Bound. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
executors, administrators, personal representatives, heirs and legatees;
provided, however, that none of the parties hereto may assign or delegate this
Agreement without the prior written consent of every other party hereto.
13.8 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Alabama, without regard
to any principles regarding conflicts of laws.
13.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
13.10 Severability. In the event any provision or portion of this
Agreement is deemed to be invalid or unenforceable, in whole or in part, for any
reason, the remainder thereof shall not be invalidated or rendered unenforceable
or otherwise adversely affected.
13.11 Incorporation of Exhibits. This Agreement shall be deemed to have
incorporated by reference all of the exhibits referred to herein to the same
extent as if such exhibits were fully set forth herein. Each reference to "this
Agreement" or "the Agreement" shall be construed to include each Exhibit.
13.12 Public Announcements. No public announcement or other publicity
regarding this Agreement or the transactions contemplated hereby shall be made
or released by any party hereto without the prior written consent of the other
parties hereto, except that Cavalier shall be permitted to issue a press release
if (i) Cavalier determines, in good faith, that such issuance is required by law
or by the rules or regulations of the exchange upon which Cavalier Common Stock
is then listed or (ii) Wheel House consents thereto.
13.13 Litigation Costs. In the event that it becomes necessary for any
party hereto to initiate litigation for the purpose of enforcing any of its
rights hereunder or for the purpose of seeking damages for any violation hereof,
then, in addition to any and all other judicial remedies that may be granted,
the prevailing party shall be entitled to recover attorneys' fees and all other
costs sustained by it in connection with such litigation.
13.14 Remedies Non Exclusive. In addition to and not in derogation of
any specific remedy provided for herein or any remedy the parties may otherwise
have at law, in the event of any controversy concerning any provision of this
Agreement, the same shall be enforceable in a court of equity or by temporary or
permanent injunction or any other legal or equitable remedy, without the
necessity of showing actual damages or furnishing a bond or other security. Such
remedy shall, however, be cumulative and not exclusive, and shall be in addition
to any other remedy the aggrieved party may have.
13.15 Waiver of Jury Trial. Each of the parties hereto, knowingly,
voluntarily and intentionally waives any rights it may have to a trial by jury
in respect of any litigation arising out of, under or in connection with this
Agreement or any agreement among the parties referred to herein or contemplated
hereby. This provision is a material inducement for the parties to enter into
this Agreement.
[Signature on following page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first above written.
WHEEL HOUSE STRUCTURES, INC.
By: ____________________________
Its _______________________
THE SHAREHOLDERS:
---------------------------------
James H. Masdon
---------------------------------
Max Burleson
---------------------------------
Max Sanders
CAVALIER HOMES, INC.
By: ______________________________
Its _________________________
<PAGE>
LIST OF EXHIBITS
Exhibit 3.1(a) States in which Wheel House Qualified
Exhibit 3.1(b) States Where Products Sold
Exhibit 3.2(a)(i) Shares
Exhibit 3.2(a)(ii) Options
Exhibit 3.3 No Breach; Consents
Exhibit 3.5 Financial Statements
Exhibit 3.6 Undisclosed Liabilities
Exhibit 3.7 Taxes
Exhibit 3.8 Title and Condition of Assets
Exhibit 3.9(h) Real Property
Exhibit 3.9(i) Compliance Affecting Property
Exhibit 3.9(l) Bond Documents
Exhibit 3.9(n) Unpaid Bills
Exhibit 3.10 Compliance with Law
Exhibit 3.11(a) Compliance with Environmental Laws
Exhibit 3.11(c) Past Compliance With Environmental Laws With
Respect to Property and Conduct of Business
Exhibit 3.11(d) Hazardous Substance
Exhibit 3.13 Contracts
Exhibit 3.14 Inventories
Exhibit 3.16 Contract Claims and Product Warranty
Exhibit 3.17(a) Benefit Plans
Exhibit 3.17(b) Employee Benefit Plan Compliance
Exhibit 3.17(c) Pension Plan Compliance
Exhibit 3.18 Insurance
Exhibit 3.19 Employee Matters
Exhibit 3.20 Subsequent Events
Exhibit 3.22 Litigation
Exhibit 3.23 Consents and Approvals
Exhibit 3.26(a) Repurchase Agreements
Exhibit 3.26(b) Active Repurchase Agreements
Exhibit 3.27 Dealership Agreements
Exhibit 3.28 Intellectual Property
Exhibit 3.30 Conflicts of Interest
Exhibit 5.2 No Breach
Exhibit 6.1(iv) Capital Expenditures
Exhibit 8.9 Form of Nonsolicitation Agreement
Exhibit 12.3 Guarantees
<PAGE>
EXHIBIT 5
<PAGE>
BERKOWITZ, LEFKOVITS, ISOM & KUSHNER
A Professional Corporation
1600 SouthTrust Tower
Birmingham, Alabama 35203
(205) 328-0480
January 31, 1996
Board of Directors
Cavalier Homes, Inc.
Highway 41 North and Cavalier Road
Addison, Alabama 35540
Gentlemen:
We have acted as counsel to Cavalier Homes, Inc., a Delaware corporation (the
"Company"), in connection with the registration by the Company of 55,596 shares
of Common Stock, par value $0.10 per share (the "Common Stock"), pursuant to a
Registration Statement on Form S-3 filed by the Company with the Securities and
Exchange Commission (the "Commission"). This opinion is being delivered to you
pursuant to item 601(b)(5) of Regulation S-K promulgated by the Commission. In
so acting, we have examined the above-referenced Registration Statement,
together with originals or copies of such corporate records, agreements,
documents and other instruments, and of certificates or comparable documents of
public officials and of officers or other representatives of the Company, and we
have made such inquiry of such officers and representatives, as we have deemed
relevant and necessary for the purposes of the opinion set forth herein.
Based upon the foregoing, we are of the opinion that the shares of Common Stock
to be offered and sold pursuant to the Registration Statement have been duly
authorized and constitute validly issued, fully paid and non-assessable shares
of Common Stock of the Company.
We hereby consent to the use of this opinion as an exhibit to the
above-referenced Registration Statement, and to the reference to our firm under
the caption "Legal Matters" in the Prospectus which constitutes a part of such
Registration Statement.
This opinion is being rendered solely for the purpose described above and is not
to be used or relied upon by any other person and, except as provided in the
preceding paragraph, may not be disclosed, quoted, filed with any governmental
agency or otherwise referred to without our written consent.
Very truly yours,
Berkowitz, Lefkovits, Isom & Kushner
<PAGE>
EXHIBIT 23(a)
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Cavalier Homes, Inc. on Form S-3 of our report dated March 3, 1995, appearing in
the Annual Report on Form 10-K of Cavalier Homes, Inc. for the year ended
December 31, 1994, and to the reference to us under the heading "Experts" in the
Prospectus, which is a part of this Registration Statement.
Deloitte & Touche LLP
Birmingham, Alabama
January 31, 1996
