CAVALIER HOMES INC, S-3DPOS, 1998-09-29

CAVALIER HOMES INC
S-3DPOS, 1998-09-29
MOBILE HOMES

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<PAGE> 1
As filed with the Securities and Exchange Commission on September 29, 1998
Registration No. 333-48111

===============================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

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

POST-EFFECTIVE AMENDMENT NO. 1
TO
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
(256) 747-0044
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

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

David A. Roberson
Highway 41 North and Cavalier Road
Addison, AL 35540
(256) 747-0044
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

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

Copies to:
John B. Grenier, Esq.
BRADLEY ARANT ROSE & WHITE LLP
2001 Park Place, Suite 1400
Birmingham, Alabama 35203
(205) 521-8000

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

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. [X]

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. [ ]

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> 2

CALCULATION OF REGISTRATION FEE

NOTE: This Post-Effective Amendment No. 1 reflects the decision by the
Board of Directors of Cavalier Homes, Inc. (the "Company") to terminate the
optional cash payment feature of the Amended and Restated Dividend Reinvestment
and Stock Purchase Plan of the Company effective immediately, until further
notice of the Board of Directors of the Company. The dividend reinvestment
feature of this plan, which has been renamed the Amended and Restated Dividend
Reinvestment Plan, has not been changed. The registration fee for the shares of
Common Stock to be offered pursuant to this plan was paid at the time of the
filing of Cavalier Homes, Inc.'s Registration Statement on Form S-3 (Reg. No.
333-48111) to which this Post-Effective Amendment No. 1 relates.

<PAGE> 3

PROSPECTUS

CAVALIER HOMES, INC.

AMENDED AND RESTATED DIVIDEND REINVESTMENT PLAN
300,000 SHARES OF COMMON STOCK

This Prospectus relates to 300,000 shares of common stock, par value
$0.10 per share (the "Common Stock"), of Cavalier Homes, Inc., a Delaware
corporation (the "Company"), to be issued pursuant to the Company's Amended and
Restated Dividend Reinvestment Plan. The Company previously issued 200,000
shares of Common Stock under its original Dividend Reinvestment and Stock
Purchase Plan pursuant to a Prospectus dated December 19, 1996. The Company then
amended and restated the Dividend Reinvestment and Stock Purchase Plan to make
certain administrative changes to such plan and also to add 300,000 shares to be
issued in accordance with this plan, which number of shares is subject to
adjustment in the event of certain stock splits, stock dividends,
reclassifications or similar distributions effected by the Company. Effective
September 1, 1998, the Company's Board of Directors amended this plan to
eliminate its optional cash payment feature, and renamed the plan as the Amended
and Restated Dividend Reinvestment Plan. A copy of the Amended and Restated
Dividend Reinvestment Plan, as amended to eliminate the optional cash payment
feature, is set forth as Appendix A to this Prospectus, and is referred to in
the remainder of this Prospectus as the "Plan." The Plan continues to provide
holders of Common Stock with an opportunity to invest cash distributions on
shares of Common Stock in additional shares of Common Stock without payment of
any trading fee or service charge. Shares of Common Stock for the Plan
will be purchased directly from the Company. No open market purchases of shares
of Common Stock are permitted for the Plan. The Plan is administered by The
Chase Manhattan Bank, with certain administrative support provided by
ChaseMellon Shareholder Services, L.L.C. (collectively with The Chase Manhattan
Bank, the "Plan Agent").

Stockholders may begin participating in the Plan by completing an
Authorization Card and returning it to the Plan Agent. Participants may
terminate their participation at any time. Stockholders who do not wish to
participate in the Plan need not take any action and will continue to receive
their cash dividends, if, as and when declared, as usual. It is suggested that
this Prospectus be retained for future reference.

The Plan does not represent a change in the Company's dividend policy
or a guarantee of future dividends. Dividends will continue to depend on
earnings, financial requirements and other factors. The Company reserves the
right to terminate the Plan at any time.

The price per share for the additional shares of Common Stock purchased
from the Company with reinvested cash distributions will be 95% of the Market
Price (as defined in the Plan) on the Investment Date (as defined in the Plan).

SEE "RISK FACTORS" AT PAGE 3 OF THIS PROSPECTUS 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 SEPTEMBER 29, 1998.

<PAGE> 4

AVAILABLE INFORMATION

The Company is subject to the information 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"). The reports, proxy and information
statements and other information filed by the Company with the Commission can be
inspected and copied at the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at 13th Floor, 7 World Trade
Center, New York, New York 10048, and at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of the material can be obtained from the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
also maintains a Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding issuers of securities
that file electronically with the Commission. The Company's Common Stock is
listed on the New York Stock Exchange, Inc. (the "NYSE"). The reports, proxy and
information statements and other information can also be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.

The Company has filed with the Commission a Registration Statement (of
which this Prospectus is a part) on Form S-3 under the Securities Act of 1933,
as amended (the "Securities Act") with respect to the securities offered hereby
(the "Registration Statement"). This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the content of any contract or
other document are not necessarily complete, and in each instance reference is
made to the copy of the contract or other document filed as an exhibit to the
Registration Statement, each statement being qualified in all respects by that
reference and the exhibits to the Registration Statement. For further
information regarding the Company and the Common Stock offered hereby, reference
is hereby made to the Registration Statement and the exhibits to the
Registration Statement which may be obtained from the Commission at its
principal office in Washington, D.C., upon payment of fees prescribed by the
Commission.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission
(Commission File No. 1-9792) are incorporated herein by reference:

(1) The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 (including the portions of the
Company's Proxy Statement for its Annual Meeting of
Stockholders held May 20, 1998 that are incorporated by
reference therein) (File No. 1-9792).

(2) The Company's Current Report on Form 8-K dated January 15,
1998 (as amended by Form 8-K/A dated March 16, 1998 and by
Form 8-K/A dated March 17, 1998) (File No. 1-9792).

(3) The Company's Quarterly Report on Form 10-Q for the quarters
ended March 27, 1998 and June 26, 1998 (File No. 1-9792).

(4) The description of the Company's shares of common stock
("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-A dated December 16, 1987, and as updated (A) in the
Registration Statement on Form S-3, effective June 23, 1993
(File No. 1-9792), to reflect the increase of the number of
shares of authorized Common Stock from 5,000,000 shares to
15,000,000 shares, (B) by the Registration Statement on Form
8-A filed with the Commission under the Exchange Act on
December 2, 1994 (File No. 1-9792), reflecting the listing of
the Common Stock on the NYSE, (C) under the caption "Proposed
Amendment to Certificate of Incorporation" in the Company's
Proxy Statement dated March 25, 1997 (File No. 1-9792) to
reflect the increase of the number of shares of authorized
Common Stock from 15,000,000 to 50,000,000, and (D) under the
caption "Description of Cavalier Capital Stock" in the
Company's Registration Statement on Form S-4, filed with the
Commission on December 2, 1997 (Reg. No. 333-41319).

<PAGE> 5

(5) The description of the Preferred Stock Purchase Rights
contained in the Company's Registration Statement on Form 8-A
filed with the Commission under the Exchange Act on October
29, 1996 (File No. 1-9792), and as amended by the Company's
Form 8-A filed on November 11, 1996 (File No. 1-9792).

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 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. Michael R. Murphy, Cavalier Homes, Inc.,
Highway 41 North and Cavalier Road, Addison, Alabama 35540 (telephone number:
(256) 747-0044).

No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference 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 or that there has been
no change in the business or affairs of the Company since such 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.

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:

UNCERTAINTIES IN INTEGRATING BUSINESS OPERATIONS AND ACHIEVING BENEFITS OF THE
BELMONT MERGER

On December 31, 1997, Crimson Acquisition Corp., a Mississippi
corporation and a wholly owned subsidiary of the Company, merged with and into
Belmont Homes, Inc., a Mississippi corporation and also a producer of
manufactured housing ("Belmont"), and Belmont became a wholly owned subsidiary
of the Company. For a more detailed description of Belmont and this transaction,
reference is made to the Company's Current Reports on Form 8-K dated August 20,
1997, December 11, 1997 and January 15, 1998 (as amended by Form 8-K/A dated
March 16, 1998 and by Form 8-K/A dated March 17, 1998), and the Company's
Registration Statement on Form S-4 filed with the Commission on December 2, 1997
(Reg. No. 333-41319). The acquisition of Belmont will require the consolidation
of functions and the integration of departments, systems and procedures, which
will present significant management challenges. There can be no assurance that
such actions will be successfully accomplished as rapidly as currently expected,
if at all. Moreover, although the primary purpose of such actions will be to
realize direct cost savings and other operating efficiencies, synergies and
benefits, there can be no assurance of the extent to which or whether such cost
savings, efficiencies, synergies or benefits will be achieved.

CYCLICAL AND SEASONAL NATURE OF THE MANUFACTURED HOUSING INDUSTRY

The manufactured housing industry is cyclical and seasonal and has
experienced wide fluctuations in aggregate sales in the past, resulting in the
failure of many manufacturing concerns. Consequently, the Company can give no
assurance that the industry will not have a change in its cycle, which could
have a material adverse effect on the Company's results of operations or
financial condition. 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. Historically, most sectors of the home building
industry, including the manufactured housing industry, have been affected by,
among

<PAGE> 6

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. Sales in the manufactured housing industry are also
seasonal in nature, with sales of homes traditionally being stronger in April
through October and weaker during the first and last part of the calendar year.

The Manufactured Housing Institute ("MHI") reported that during the
period from 1983 to 1991, aggregate domestic shipments of manufactured homes
declined 42% from 295,079 homes to 170,713 homes. According to industry
statistics, after a twenty-eight-year low in shipments of homes in 1991, the
industry recovered significantly, posting increases in shipments of 24%, 21%,
20%, 12% and 7% for 1992, 1993, 1994, 1995 and 1996, respectively. However,
industry statistics reflect a decrease in home shipments of 2.8% for 1997 when
compared to 1996. The manufactured housing industry has, over the past several
years, experienced increases in both the number of retail dealers and
manufacturing capacity, which the Company believes is currently resulting in
slower retail turnover, higher dealer inventories and increased price
competition. The duration and extent of these developments, and their
corresponding impact on the future results of operations and financial condition
of the Company, is uncertain at this time. In addition, while seasonality was
not a significant factor in the Company's business during the period of 1992
through 1996 when industry shipments were steadily increasing, the decline in
shipments in 1997 and the developments mentioned above may signal a return to
the industry's more traditional seasonal patterns. As a whole, the industry
appears to have improved year-to-date through July 1998, with MHI reporting that
industry shipments increased over the same period in 1997 by approximately 4.6%.

LIMITATIONS ON ABILITY TO PURSUE GROWTH STRATEGY

The Company's growth strategies are to (i) expand its financial
services activities, (ii) expand the production and distribution of component
parts for manufactured housing, (iii) expand its independent dealer network, and
(iv) pursue additional acquisitions. The Company may also pursue the acquisition
or establishment of retail sales centers and the development of manufactured
housing communities and franchise dealerships. The Company has recently acquired
two retail sales centers. Since 1991, the Company has expanded manufacturing
capacity to meet the increase in demand for its manufactured homes. Downturns in
shipments in the manufactured housing industry, or a decline in the demand or
growth in demand for the Company's homes, could have a material adverse effect
on the Company. The Company's ability to execute its strategy will depend on a
number of factors, including general economic and industry conditions, its
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 the Company's finance subsidiary,
Cavalier Acceptance Corporation ("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 strategy will be successful. Further, if the Company's
growth strategy is 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.

UNCERTAINTIES REGARDING RETAIL FINANCING ACTIVITIES

The Company engages in the business of purchasing retail installment
finance loans that have been originated by the Company's independent exclusive
dealers. The Company maintains a reserve for estimated credit losses on
installment sale contracts owned by CAC to provide for future losses based on
the Company's historical loss experience, current economic conditions and
portfolio performance. 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 and financial
condition. There also can be no assurance that volatility or a significant
change in interest rates will not materially affect CAC's and the Company's
business, results of operations or financial condition.

The Company's strategy currently includes the continued expansion of
the financial services segment of its business. Accordingly, the Company may
incur additional debt, or other forms of financing, in order to continue to fund
such growth. The Company may also engage in other transactions, such as selling
or securitizing portions of its installment loan portfolio, that are designed to
facilitate the ability of CAC to purchase and/or originate an increased volume
of loans and to reduce the Company's exposure to interest rate fluctuations and
installment loan losses. In February 1998, the Company entered into such a
transaction pursuant to an agreement with another lender providing for the
periodic resale of a portion of CAC's loans that meet established criteria. In
March of 1998, CAC sold a large portion of its portfolio pursuant to this
agreement, and plans to continue to sell parts of its portfolio under this
agreement

<PAGE> 7

on a periodic basis in the future. No assurance can be given that additional
sales will indeed be made under this agreement, however, or that CAC and the
Company will be able to realize the expected benefits from the agreement.
Further, there can be no assurance that possible additional financing, or the
aforementioned transactions involving the Company's installment loan portfolio,
will be available on terms acceptable to the Company. If they are not, the
Company may be forced to curtail the expansion of its financial services
business and to alter its strategies.

LIMITATIONS ON AVAILABILITY OF CONSUMER AND DEALER FINANCING

Consumer financing for manufactured home purchases is generally
provided by third-party lenders. The availability and cost of financing for
manufactured home purchasers and dealers is important to the Company's sales and
is 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. Unfavorable changes in these factors
may have a material adverse effect on the Company's results of operations or
financial condition.

POTENTIAL UNAVAILABILITY AND INCREASES IN PRICES 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 costs cannot always be reflected immediately in prices and,
consequently, may adversely impact profitability. Further, a reduction in the
availability of raw materials also may affect a company's ability to meet or
maintain production requirements.

CONTINGENT REPURCHASE AND GUARANTY OBLIGATIONS

It is a customary practice in the manufactured housing industry to
enter into repurchase and other recourse agreements with lending institutions
which have provided wholesale floor plan financing to dealers. Substantially all
of the Company's sales are made to dealers located primarily in the southeast,
southwest and midwest regions of the United States pursuant to repurchase
agreements with lending institutions. These agreements generally provide for
repurchase of the Company's products from the lending institutions for the
balance due them in the event of repossession upon a dealer's default. 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 price the Company is obligated to pay under such repurchase
agreements generally declines over the period of the agreement and also declines
during such period based on predetermined amounts; and (iii) the Company has
been in many cases able to resell homes repurchased from credit sources in the
ordinary course of business without incurring significant losses. While the
Company has established a reserve for possible repurchase losses, there can be
no assurance that the Company will not incur material losses in excess of such
reserves in the future.

COMPETITIVE NATURE OF THE INDUSTRY

The production and sale of manufactured homes is a highly competitive
industry, characterized by low barriers to entry and severe price competition.
Competition is based primarily on price, product features and quality,
reputation for service and quality, 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. In addition, manufactured homes compete with
other forms of low-cost housing, including site-built, prefabricated and modular
homes, apartments, townhouses and condominiums. The Company faces direct
competition from numerous manufacturers, many of which possess greater
financial, manufacturing, distribution and marketing resources. As a result of
these competitive conditions, the Company may not be able to sustain past levels
of sales or profitability.

<PAGE> 8

RELIANCE ON EXECUTIVE OFFICERS

The success of the Company's business is highly dependent upon the
personal efforts and abilities of the current executive officers of the Company.
Specifically, the success of the Company is highly dependent on the efforts of
its Chairman of the Board, Barry B. Donnell, its President and Chief Executive
Officer, David A. Roberson, and its Vice President, Chief Financial Officer and
Secretary-Treasurer, Michael R. Murphy. 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. 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. The industry has
recently been experiencing a trend of increasing competition for quality
independent dealers, and many manufacturers, some of which had previously not
owned their own retail sales centers, have begun aggressive programs to
establish their own retail sales centers and/or to purchase independent dealers,
including some of the Company's independent dealers. In response to this trend,
the Company has recently acquired two retail sales centers, and may continue to
pursue the acquisition or establishment of such centers. The Company may also
participate in the development of manufactured housing communities and franchise
dealerships. While the Company believes that its relations with its independent
dealers are generally good, the Company's relationships with its dealers are
cancelable on short notice by either party, and 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 ADVERSE EFFECTS OF REGULATIONS

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, as amended, 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 to comply with such regulations could expose the
Company to a wide variety of sanctions, including closing one or more
manufacturing facilities. HUD has promulgated regulations with respect to
structural design and wind loads and energy conservation. The Company's
operations were not materially affected by the regulations; however, HUD has
these matters under continuous review and it cannot be predicted what effect (if
any) additional regulations promulgated by HUD 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. The Company's manufactured homes are also subject to local zoning
and housing regulations. A number of states require manufactured home producers
to post bonds to ensure the satisfaction of consumer warranty claims. A number
of states have adopted procedures governing the installation of manufactured
homes. Utility connections are subject to state and local regulation.

The Company is also subject to the Magnuson-Moss Warranty Federal Trade
Commission Improvement Act, which regulates the descriptions of warranties on
products. The description and substance of the Company's warranties are also
subject to a variety of state laws and regulations.

A variety of federal laws affect the financing of manufactured homes,
including the financing activities conducted by CAC. The Consumer Credit
Protection Act (Truth-in-Lending) and Regulation Z promulgated thereunder
require substantial disclosures to be made in writing to a consumer with regard
to various aspects of the particular transaction, including the amount financed,
the annual percentage rate, the total finance charge, itemization of the amount
financed and other matters and also set forth certain substantive limitations on
permissible contract terms. The Equal Credit Opportunity Act and Regulation B
promulgated thereunder prohibit credit discrimination against any credit
applicant based on certain prohibited bases, and also require that certain
specified notices be sent to credit applicants whose applications are denied.
The Federal Trade Commission has adopted or proposed various trade regulation
rules to specify and prohibit certain unfair credit and collection practices and
also to preserve consumers' claims and defenses.

<PAGE> 9

The Government National Mortgage Association ("GNMA") specifies certain credit
underwriting requirements in order for installment manufactured home sale
contracts to be eligible for inclusion in a GNMA program. HUD also has
promulgated substantial disclosure and substantive regulations and requirements
in order for a manufactured home installment sale contract to qualify for
insurance under the Federal Housing Authority ("FHA") program, and the failure
to comply with such requirements and procedures can result in loss of the FHA
guaranty protection. In addition, the financing activities of CAC may also
become subject to the disclosure requirements of the Home Mortgage Disclosure
Act. In addition to the extensive federal regulation of consumer credit matters,
many states have also adopted consumer credit protection requirements that may
impose significant requirements for consumer credit lenders. For example, many
states require that a consumer credit finance company such as CAC obtain certain
regulatory licenses or permits in order to engage in such business in that
state, and many states also set forth a number of substantive contractual
limitations regarding provisions that permissibly may be included in a consumer
contract, as well as limitations upon the permissible interest rates, fees and
other charges that may be imposed upon a consumer. Failure by the Company or CAC
to comply with the requirements of federal or state law pertaining to consumer
credit could result in the unenforceability of the particular contract for the
affected consumer, civil liability to the affected customers, criminal liability
and other adverse results.

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.

COMPLIANCE WITH ENVIRONMENTAL LAWS

The Company's operations are subject to federal, state and local laws
and regulations relating to the generation, storage, handling, emission,
transportation and discharge of materials into the environment. In addition,
third parties and governmental agencies in some cases have the power under such
laws and regulations to require remediation of environmental conditions and, in
the case of governmental agencies and entities, to impose fines and penalties.
The requirements of such laws and enforcement policies have generally become
more strict in recent years. Accordingly, the Company can give no assurance that
it will not be required to incur response costs, remediation expenses, fines,
penalties or other similar damages, expenses or liabilities, or to incur
operational shut-downs, business interruptions or similar losses, associated
with compliance with environmental laws and enforcement policies that either
individually or in the aggregate would have a material adverse effect on the
Company's results of operations or financial condition.

LITIGATION

The Company and its subsidiaries are engaged in various legal
proceedings that are incidental to and arise in the course of its business.
Certain of the cases filed against the Company and its subsidiaries and
companies engaged in businesses similar to it allege, among other things, breach
of contract and warranty, product liability, personal injury and fraudulent,
deceptive or collusive practices in connection with their businesses. These
kinds of suits are typical of suits that have been filed in recent years, and
they sometimes seek certification as class actions, the imposition of large
amounts of compensatory and punitive damages and trials by jury. The outcome of
many of the cases in which the Company is involved or may in the future become
involved cannot be predicted with any degree of reliability, and the potential
exists for unanticipated material adverse judgments against the Company and its
respective subsidiaries.

In addition, a suit has been filed by three former shareholders (the
"Plaintiffs") of Belmont Homes, Inc., an Alabama corporation which originally
owned the initial Belmont manufacturing facility ("BHIA"), against BHIA, Belmont
(as a successor in interest of BHIA), certain other corporate entities
(collectively, the "Other Corporations"), the Estate of Jerold Kennedy (the
former President and Chief Executive Officer of Belmont), J. M. Page, and
certain other unnamed and unidentified individual officers, employees, agents
and directors of BHIA, Belmont and the Other Corporations, alleging breach of
fiduciary duties, misrepresentation, deceit, suppression and civil conspiracy.
The suit, which was originally filed in the Circuit Court of Madison County,
Alabama (Case Number CV 97-2297), was transferred to the Circuit Court of
Franklin County, Alabama on May 6, 1998. The Plaintiffs state that they owned a
majority of the stock in BHIA and sold such stock in February of 1989. In
addition to certain other allegations, the Plaintiffs claim that Mr. Kennedy,
along with others who allegedly conspired with him, misrepresented and omitted
certain facts to them regarding his attempts to hire a production manager, that
Belmont later hired the production manager, and that the Plaintiffs would not
have sold their stock in BHIA in the absence of these alleged misrepresentations
and omissions. In their complaint, the Plaintiffs request an unspecified amount
of compensatory and punitive damages and/or equitable relief, including a
constructive trust. The Company is aware that these same plaintiffs have also
filed a separate claim

<PAGE> 10

against the Estate of Mr. Kennedy in the probate court of Franklin County,
Alabama (Case Number 97-051), alleging essentially the same facts and seeking
substantial compensatory damages and punitive damages and a constructive trust
over the stock in the various Belmont entities owned by Mr. Kennedy's estate.
The Company believes that the Plaintiffs' claims against Belmont are without
merit and intends to vigorously contest such claims. The outcome of this
litigation and its effect on the Company cannot presently be determined,
however, and the possibility exists for an adverse resolution of the litigation
which could have a material adverse effect on the results of operations and
financial condition of the Company in the quarter and year in which any such
adverse resolution occurs.

VOLATILITY OF STOCK PRICE

The Company's Common Stock is traded on the NYSE. The market price of
the Company's 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.

THE COMPANY

GENERAL DESCRIPTION

The Company, through its wholly owned subsidiaries and their respective
divisions, designs, produces and sells manufactured homes and markets its homes
in over 30 states through more than 800 independent dealers operating over 1,000
sales centers, including more than 200 independent exclusive dealer locations.
The Company currently operates 23 manufacturing facilities. Through CAC, the
Company also makes installment sale financing available to qualifying retail
customers of its exclusive dealers. The principal executive offices of the
Company are located at Highway 41 North and Cavalier Road, Addison, Alabama
35540, and its telephone number is (256) 747-0044.

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, 1997, the Company's Current
Report on Form 8-K dated January 15, 1998 (as amended by Form 8-K/A dated March
16, 1998 and Form 8-K/A dated March 17, 1998), and the Company's Quarterly
Reports on Form 10-Q for the quarters ended March 27, 1998 and June 26, 1998,
and subsequent reports filed by the Company pursuant to Section 13(a) of the
Exchange Act after the date of this Prospectus and prior to the termination of
the offering of the Common Stock offered hereby, which are incorporated herein
by reference.

DESCRIPTION OF THE PLAN

The following, in question and answer form, is a summary description of
the provisions of the Plan. This description should be read in conjunction with,
and is qualified in its entirety by reference to, the Plan, a copy of which is
attached to this Prospectus as Appendix A. Capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the Plan.

PURPOSE

1. WHAT IS THE PURPOSE OF THE PLAN? The purpose of the Plan is to
provide holders of shares of Common Stock with an opportunity to reinvest cash
dividends in additional shares of Common Stock without payment of any trading
fee, service charge or other expense. Shares of Common Stock for the Plan will
be purchased directly from the Company. No shares of Common Stock will be
purchased for the Plan in the open market. The Company will receive the proceeds
from the sale of shares of Common Stock under the Plan and will use such
proceeds for general corporate purposes.

ADMINISTRATION

2. WHO ADMINISTERS THE PLAN FOR PARTICIPANTS? The Plan Agent
administers the Plan for Participants, keeps records, sends statements of
account to Participants and performs other duties relating to the Plan. The
current Plan Agent is The Chase Manhattan Bank, with certain administrative
support provided by ChaseMellon Shareholder Services,

<PAGE> 11

L.L.C. (collectively with The Chase Manhattan Bank, the "Plan Agent").
ChaseMellon Shareholder Services, L.L.C. also serves as transfer agent for the
shares of Common Stock. Should the Plan Agent resign, or be asked to resign,
another agent will be asked to serve.

ADVANTAGES

3. WHAT ARE THE OPTIONS AVAILABLE TO STOCKHOLDERS? Participants in the
Plan may purchase additional shares of Common Stock by having the cash dividends
on all, or part, of their shares of Common Stock automatically reinvested.

4. WHAT ARE THE ADVANTAGES OF THE PLAN? No trading fees, service
charges or other expenses are paid by Participants in connection with purchases
under the Plan; provided, however, that if shares of Common Stock are registered
in the name of a nominee or broker, such nominee or broker may charge a
commission or fee. Full investment of dividends is possible under the Plan
because the Plan permits fractional shares, as well as whole shares, of Common
Stock to be purchased and credited to the Participant's account. Regular
statements of account provide simplified record keeping. All purchases will be
credited to the Participant's Noncertificated Share account on the records of
the Company maintained by the Plan Agent.

The price of shares of Common Stock purchased under the Plan with
reinvested cash dividends is 95% of the Market Price (as defined in the Plan)
for such shares on the applicable Investment Date (as hereinafter defined).

PARTICIPATION

5. WHO IS ELIGIBLE TO PARTICIPATE? All holders of record of shares of
Common Stock are eligible to participate in the Plan. Beneficial owners whose
shares of Common Stock are registered in names other than their own (for
instance, in the name of a broker, bank nominee or other record holder) may
participate in the Plan by making arrangements with their broker or bank to
participate on their behalf through the Depository Trust Company Dividend
Reinvestment Service. Brokers and nominees owning shares of Common Stock held at
the Depository Trust Company may participate in the Plan through that service.
The Company reserves the right to refuse to permit a broker, bank nominee or
other record holder to participate in the Plan if the terms of such
participation would, in the Company's sole judgment, result in excessive cost or
burden on the Company. In addition, the Company may refuse participation in the
Plan to stockholders residing in states whose securities laws make the offer or
sale of shares of Common Stock offered pursuant to the Plan impracticable or
inadvisable.

6. HOW DOES A STOCKHOLDER JOIN THE PLAN? In order to participate in the
Plan, an eligible stockholder must properly complete the Authorization Card
furnished by the Plan Agent and return it to ChaseMellon Shareholder Services,
L.L.C., P.O. Box 3339, South Hackensack, New Jersey 07606-1939. An Authorization
Card and postage-paid envelope are enclosed with this Prospectus and additional
cards may be obtained at any time by stockholders by written or oral request to
the Plan Agent at the foregoing address. Telephone requests or general inquiries
may be made by calling (800) 851-9677.

7. WHAT DOES THE AUTHORIZATION CARD PROVIDE? The Authorization Card
provides for the purchase by stockholders of additional shares of Common Stock
through the following investment options offered under the Plan:

FULL DIVIDEND REINVESTMENT - Directs the Plan Agent to reinvest cash
dividends with respect to all shares of Common Stock owned by the
Participant (including whole and fractional shares acquired under the
Plan) in accordance with the Plan.

PARTIAL DIVIDEND REINVESTMENT - Directs the Plan Agent to remit cash
dividends on the number of shares of Common Stock specified on the
Authorization Card and to invest in additional shares of Common Stock
any dividends paid on the remaining shares of Common Stock owned by the
Participant.

<PAGE> 12

Cash dividends on shares of Common Stock credited to the Participant's
account under the Plan are automatically reinvested to purchase additional
shares of Common Stock. Stockholders who do not wish to participate in the Plan
will receive cash dividends in the usual manner, if, as and when declared.

8. IS PARTIAL PARTICIPATION POSSIBLE UNDER THE PLAN? A stockholder who
desires the dividends on only some full shares of Common Stock to be reinvested
under the Plan may indicate such number of shares of Common Stock on the
Authorization Card under the heading "Partial Dividend Reinvestment." Cash
dividends will continue to be paid on the remaining shares of Common Stock.

9. WHEN MAY A STOCKHOLDER JOIN THE PLAN? If an Authorization Card
specifying "Full Dividend Reinvestment," or "Partial Dividend Reinvestment" is
properly completed and received by the Plan Agent at least five business days
prior to the record date established for the payment of the next dividend,
reinvestment will commence with that dividend payment. The record dates for
dividend payments on the Common Stock are generally on or about the 30th day of
January, April, July and October of each year. If the Authorization Card is
received subsequent to five business days prior to the record date, reinvestment
of the dividends (or designated portion thereof) will not start until payment of
the next following dividend. If the Authorization Card is received in between
any dividend record date and the Investment Date (the date on which a dividend
is paid, which the Company anticipates to be on or about the 15th day of
February, May, August and November each year), that dividend will be paid in
cash and the stockholder's initial dividend reinvestment will begin with the
next dividend. The Investment Date is also the Dividend Payment Date.

COSTS

10. ARE THERE ANY EXPENSES TO PARTICIPANTS IN CONNECTION WITH PURCHASES
UNDER THE PLAN? No. Participants will incur no trading fees, service or other
charges for purchases made under the Plan. Any costs of administration of the
Plan will be borne by the Company. Participants may incur certain costs in
connection with their withdrawal from the Plan if they direct the Plan Agent to
sell their shares of Common Stock.

PURCHASES

11. HOW MANY SHARES OF COMMON STOCK WILL BE PURCHASED FOR PARTICIPANTS?
The number of shares of Common Stock to be purchased will be determined by the
amount of the Participant's dividends being reinvested and the price of the
shares of Common Stock. Each Participant's account in the Plan will be credited
with the number of shares of Common Stock, including fractional shares computed
to four (4) decimal places, equal to the amount of the dividends to be
reinvested divided by the applicable purchase price of the shares of Common
Stock.

12. HOW WILL THE PURCHASE PRICE OF SHARES OF COMMON STOCK BE
DETERMINED? It is intended that the price of the shares of Common Stock to be
purchased will be at a 5% discount from the Market Price. The shares of Common
Stock are traded on the NYSE. The price at which the shares of Common Stock will
be purchased will be the higher of 95% of the average of the daily high and low
sale prices of the Company's Common Stock on the NYSE on the four trading days
including and preceding the Investment Date or 95% of the average of the high
and low sale prices of the Company's Common Stock on the NYSE on the Investment
Date. In the event there is no trading in the shares of Common Stock, or if for
any reason the Company and the Plan Agent have difficulty in determining the
price of shares of Common Stock to be purchased under the Plan, the Company, on
consultation with the Plan Agent, will use such other public reports or sources
as the Company deems appropriate to determine the Market Price and the
appropriate 5% discount. If the reinvestment price involves a fraction, it will
be expressed in one-sixteenth of a point with a rounding out to the next higher
one-sixteenth of a point.

13. WHEN WILL DIVIDENDS BE INVESTED? Reinvestment of dividends will be
made on the date when the dividend becomes payable (the "Investment Date" or
"Dividend Payment Date"). Participants will become owners of shares of Common
Stock purchased under the Plan as of the date of purchase.

14. WHAT IS THE INVESTMENT DATE? There is only one Investment Date in
each quarter. The Investment Date will be the Dividend Payment Date. If an
Investment Date falls on a Saturday, Sunday or holiday, the Investment Date will
be the next following business day.

<PAGE> 13

15. WILL CERTIFICATES BE ISSUED TO PARTICIPANTS FOR SHARES OF COMMON
STOCK PURCHASED UNDER THE PLAN? No certificates for shares of Common Stock
acquired by a Participant under the Plan will be issued, except as described in
Question 17. Shares of Common Stock purchased under the Plan will be credited to
a Participant's Noncertificated Share account and will be shown on a
Participant's statement of account. Certificates for the shares of Common Stock
purchased pursuant to the Plan will be issued to Participants upon their written
request, except that no certificates will be issued for fractional shares of
Common Stock. A Participant requesting a certificate for all the shares of
Common Stock in the Participant's Noncertificated Share account will receive
cash for the fractional shares. (See Question 17 for how a Participant may
obtain certificates.) Cash dividends on all shares of Common Stock held in the
Participant's Noncertificated Share account under the Plan will be automatically
reinvested to purchase additional shares of Common Stock which will be reflected
in the Participant's Noncertificated Share account.

REPORT TO PARTICIPANTS

16. WHAT TYPE OF REPORTS WILL BE SENT TO PARTICIPANTS IN THE PLAN?
Participants will receive a quarterly statement indicating the total dividend
payment, the amount of the dividend payment reinvested, the purchase price per
share of Common Stock, the number of shares of Common Stock purchased and the
number of shares of Common Stock in the Participant's Noncertificated Share
account. These statements are a record of the cost of purchases under the Plan
and should be retained for tax purposes. In addition, each Participant will
receive copies of the Company's annual and quarterly reports to stockholders,
proxy statements and income tax information for reporting dividends. Beneficial
owners whose shares of Common Stock are registered in names other than their own
(for instance, in the name of a broker, bank nominee or other record holder)
must arrange to obtain their copies of such reports from the record holder.

ISSUANCE

17. HOW MAY A PARTICIPANT OBTAIN CERTIFICATES FOR SHARES OF COMMON
STOCK PURCHASED UNDER THE PLAN? A Participant who has purchased shares of Common
Stock under the Plan may obtain certificates for those shares of Common Stock in
the Participant's Noncertificated Share account at any time by sending a written
request to that effect to the Plan Agent. No certificates will be issued for
fractional shares of Common Stock, but the market price of any fractional shares
of Common Stock will be paid in cash to the Participant requesting a certificate
for his Noncertified Shares. This notice should be mailed to ChaseMellon
Shareholder Services, L.L.C., P.O. Box 3338, South Hackensack, New Jersey
07606-1938. The Company, however, reserves the right at any time to issue
certificates to Participants for any shares of Common Stock in their
Noncertificated Share accounts. (See Questions 18 and 20 for information on
termination of participation).

MODIFICATION OR TERMINATION BY A PARTICIPANT

18. HOW DOES A PARTICIPANT CHANGE OR TERMINATE PARTICIPATION IN THE
PLAN? A Participant may change participation from partial to total dividend
reinvestment, from total to partial dividend reinvestment, or may simply change
the number of shares of Common Stock which are enrolled in the Plan by executing
and delivering a new Authorization Card to ChaseMellon Shareholders Services,
L.L.C. Any change concerning the reinvestment of dividends must be received by
the Plan Agent not later than five (5) business days prior to the record date
for a dividend in order for the change to become effective with that dividend.

A Participant may terminate participation in the Plan by notifying the
Plan Agent in writing at least five (5) business days prior to the record date
for determining the holders entitled to receive the next dividend. Notices will
be effective only upon receipt by the Plan Agent. Notices to change or
discontinue dividend reinvestment received by the Plan Agent at least five (5)
business days prior to any record date for a dividend payment will be effective
as of that date. In order to re-enter the Plan after termination, a stockholder
must complete a new Authorization Card.

19. CAN THE SHARES OF COMMON STOCK HELD IN THE PLAN BE SOLD THROUGH THE
PLAN AGENT? A Participant can instruct the Plan Agent to sell any or all of the
whole shares of Common Stock held in the Plan. The written notification to the
Plan Agent should include the number of shares of Common Stock that are to be
sold. The Plan Agent will make the sale as soon as practicable following receipt
of a Participant's request through independent securities brokers selected by
the Company or the Plan Agent in its sole discretion. A check for the proceeds
of such sale, less trading fees and transfer taxes (if any), will usually be
sent by the Plan Agent on the settlement date, which will be three (3) business
days from the date of sale. No Participant shall have the authority or power to
direct the date or sales price

<PAGE> 14

at which shares of Common Stock may be sold. Requests must indicate the minimum
number of shares to be sold and not the dollar amount to be attained. Any such
request that does not clearly indicate the number of shares of Common Stock to
be sold will be returned to the Participant with no action taken. A
withdrawal/termination form is provided on the reverse side of the account
statement for this purpose. This notice should be addressed to ChaseMellon
Shareholder Services, L.L.C., P.O. Box 3338, South Hackensack, New Jersey
07606-1938.

20. WHAT HAPPENS TO THE SHARES OF COMMON STOCK HELD IN THE
NONCERTIFICATED SHARE ACCOUNT WHEN A PARTICIPANT TERMINATES PARTICIPATION IN THE
PLAN? A certificate for the shares of Common Stock held in the account will be
issued to the Participant upon the Participant's written request or upon a
Participant's termination of participation in the Plan. No fractional shares
will be issued. (See Question 15 for information on share certificates and
Question 17 for information on the cash payment for fractional shares in the
account.)

OTHER INFORMATION

21. WHAT HAPPENS IF THE COMPANY ISSUES A STOCK DIVIDEND, DECLARES A
STOCK SPLIT OR HAS A RIGHTS OFFERING? Any shares of Common Stock issued in a
stock dividend or stock split with respect to a Participant's shares of Common
Stock which are subject to the Plan will be added to the Participant's
Noncertificated Share account. If the Company has a rights offering in which
separately tradeable and exercisable rights are issued to registered holders of
Common Stock, the rights attributable to whole shares of Common Stock in a
Participant's Plan account will be transferred to the Participant as promptly as
practicable after the rights are issued. No partial rights will be issued with
respect to fractional shares of Common Stock in the Participant's account.

22. HOW WILL SHARES IN A PARTICIPANT'S NONCERTIFICATED SHARE ACCOUNT BE
VOTED AT A MEETING OF STOCKHOLDERS? All of a Participant's shares of Common
Stock, both Certificated and Noncertificated, may be voted by the Participant.
For any meeting of stockholders, the Participant will be sent proxy material for
that meeting covering all of the shares of Common Stock that the Participant
owns on the record date for the meeting. The Participant may vote all of
Participant's shares of Common Stock in person or by proxy.

23. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN
THE PLAN? Under the current provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), the purchase of shares of Common Stock under the Plan will
generally result in the Federal income tax consequences to U.S. Participants in
the Plan set forth in (a) through (c) below. The term "U.S. Participants"
denotes: (i) citizens or residents of the United States; (ii) corporations,
partnerships, or other entities created or organized under the laws of the
United States or any political subdivision thereof or therein; (iii) estates the
income of which is subject to United States federal income tax regardless of its
source; (iv) trusts the administration of which is subject to the primary
supervision of a court within the United States and with respect to which one or
more United States fiduciaries have the authority to control all substantive
decisions; or (v) any other person defined as a United States person under the
Code.

(a) A distribution on the shares of Common Stock will be treated for
Federal income tax purposes as a dividend distribution received by the
Participant notwithstanding that it is used to purchase additional shares of
Common Stock pursuant to the Plan. The full amount of cash distributions
reinvested under the Plan, plus the 5% purchase discount from the applicable
Market Price, represents dividend distributions to Participants. As in the case
of cash dividend distributions, the full amount will be taxable ordinary income
to the extent of the Company's current and accumulated earnings and profits, and
the excess over the amount of such earnings and profits, if any, will be a
return of capital which reduces the basis of the Participant's shares of stock
in the Company or results in gain to the extent it exceeds such stock basis.

(b) A Participant's tax basis in additional shares of Common Stock
acquired with cash distributions reinvested under the Plan will be equal to the
full amount that is treated as a dividend distribution for Federal income tax
purposes. The Participant's holding period for such shares of Common Stock will
commence on the day after the Investment Date.

(c) A Participant will not realize any taxable income upon the receipt
of a certificate for full shares of Common Stock credited to the Participant's
account either upon the Participant's request for certificates or upon
withdrawal from, or termination of, the Plan. A Participant will recognize gain
or loss when a fractional share interest is liquidated or when the Participant
sells or exchanges shares of Common Stock received from the Plan. Such gain or

<PAGE> 15

loss will equal the difference between the amount which the Participant receives
for such fractional share interest or such shares and the tax basis therefor.

In the case of Participants whose distributions are subject to
withholding of Federal income tax, distributions will be reinvested less the
amount of tax required to be withheld.

24. WHAT PROVISION IS MADE FOR FOREIGN PARTICIPANTS SUBJECT TO INCOME
TAX WITHHOLDING OR OTHER PARTICIPANTS SUBJECT TO BACK-UP WITHHOLDING? In the
case of any Participants who are not U.S. Participants ("Foreign Participants")
who elect to have their distributions reinvested and whose distributions are
subject to United States income tax withholding, and other Participants who
elect to have the distributions reinvested and who are subject to "backup"
withholding under Section 3406(a)(1) of the Code, the Plan Agent will invest in
shares of Common Stock in an amount equal to the distributions of such
Participants less the amount of tax required to be withheld. The quarterly
statements confirming purchases made to such Participants will indicate the net
payment reinvested. The withholding rate for Foreign Participants is 30%, except
where modified by treaty.

Under Section 3406(a)(1) of the Code, the Company is currently required
to withhold for United States income tax purposes 31% of all distribution
payments to a stockholder if (i) such stockholder has failed to furnish to the
Company his taxpayer identification number ("TIN"), which for an individual is
his social security number, (ii) the Internal Revenue Service (the "Service")
has notified the Company that the TIN furnished by the stockholder is incorrect,
(iii) the Service notifies the Company that back-up withholding should be
commenced because the stockholder has failed to properly report distributions or
(iv) the stockholder has failed to certify, under penalties of perjury, that he
is not subject to back-up withholding. Stockholders have previously been
requested by the Company or their broker to submit all information and
certifications required in order to exempt them from back-up withholding if such
exemption is available to them.

THE ABOVE IS INTENDED ONLY AS A GENERAL DISCUSSION OF THE CURRENT
FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN. PARTICIPANTS
SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE AND LOCAL AND
FOREIGN INCOME TAX CONSEQUENCES (INCLUDING THE EFFECTS OF ANY CHANGES IN LAW) OF
THEIR INDIVIDUAL PARTICIPATION IN THE PLAN.

25. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN
THE PLAN BY AN IRA, KEOGH PLAN, 401(K) PLAN, SIMPLIFIED PENSION ACCOUNT OR ANY
CORPORATE EMPLOYER-SPONSORED RETIREMENT PLAN? The tax consequences of
participation in the Plan by retirement plans differ from those outlined above
for individuals. Since the law and regulations regarding the Federal income tax
consequences of retirement plan participation are complex and subject to change,
those considering such participation should consult with their own retirement
plan trustees, custodians or tax advisors for specific information.

26. WHAT IS THE RESPONSIBILITY OF THE COMPANY UNDER THE PLAN? Neither
the Company nor the Plan Agent will be liable for any act done in good faith or
for any good faith omission to act, including, without limitation, any claim of
liability arising out of failure to terminate participation in the Plan upon a
Participant's death. In addition, no stockholder, director, officer, employee,
representative or agent of the Company shall be personally liable for the
satisfaction of the Company's obligations under the Plan and a Participant shall
look solely to the assets of the Company for satisfaction of any claims
thereunder.

Participants should recognize that neither the Company nor the Plan
Agent can provide any assurance of a profit or protection against loss on any
shares of Common Stock purchased under the Plan.

27. MAY THE PLAN BE CHANGED OR DISCONTINUED? The Company reserves the
right to suspend or terminate the Plan at any time. The Plan may also be
terminated once the Company has issued and sold an aggregate of 500,000 shares
of Common Stock, which is the number of shares that is set forth in the Plan
that may be issued and sold under the Plan, subject to certain adjustments. The
Company also reserves the right to make modifications to the Plan. Participants
will be notified of any suspension, termination or modification of the Plan.

The Company could lower or eliminate the discount without prior notice
to Participants if for any reason the Company believes that Participants were
engaging in positioning and other transactions with the intent to purchase
shares of Common Stock under the Plan and then immediately reselling such shares
of Common Stock in order to capture the

<PAGE> 16

discount. Any Participants who engage in such transactions may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act.

28. WHO ANSWERS A PARTICIPANT'S QUESTIONS OR SUPPLIES INFORMATION? Any
inquiries or correspondence about the Plan should be addressed as follows:
ChaseMellon Shareholder Services, L.L.C., Investment Services, P.O. Box
3338, South Hackensack, New Jersey 07606-1938. Telephone inquires to the Plan
Agent should be made to (800) 851-9677.

29. WILL THE PLAN AGENT HOLD CERTIFICATED SHARES? The Plan provides a
share deposit feature to eliminate the need for Participants to hold physical
Common Stock certificates. If a Participant currently holds physical Common
Stock certificates and would like to combine these shares with his Plan shares
held in book-entry, the Participant should complete the tear-off section of his
account statement and complete the portion designated for share deposit. The
certificates need not be endorsed. The Participant should ensure that his Common
Stock certificates are sent by registered/insured mail or by some other similar
means as the Participant bears the risk of loss in transit. Participants should
be aware that dividends on the shares so deposited will be automatically
reinvested. Certificates should be sent to ChaseMellon Shareholder Services,
L.L.C., P.O. Box 3338, South Hackensack, New Jersey 07606-1938.

USE OF PROCEEDS

The net proceeds from the sale, from time to time, of the shares of
Common Stock by the Company under the Plan will be used by the Company for
general corporate purposes.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby have been
passed upon for the Company by Bradley Arant Rose & White LLP, Birmingham,
Alabama.

EXPERTS

The financial statements and the related financial statement schedules
of the Company incorporated in this Prospectus by reference from the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, and the
financial statements of the Company incorporated by reference in this Prospectus
by reference from the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on January 15, 1998, as amended by Form 8-K/A
filed on March 16, 1998 and by Form 8-K/A filed on March 17, 1998, 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.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law provides for the
indemnification of directors and officers of corporations organized thereunder
in certain circumstances. In addition, Section 145 grants to each such
corporation the power to indemnify its directors and officers against liability
for certain of their acts.

The Amended and Restated By-laws, as amended (the "By-laws"), of the
Company provide that the Company shall indemnify its directors and officers
against liability for certain of their acts under certain circumstances. The
Delaware General Corporation Law and the By-Laws also permit the Company to
purchase insurance on behalf of its directors and officers against liabilities
arising out of their positions with the Company, whether or not such liabilities
would be within the foregoing indemnification provisions. Pursuant to this
authority, the Company has obtained directors and officers liability insurance,
the effect of which is to indemnify the directors and officers of the Company
against certain damages and expenses because of certain claims made against such
directors and officers caused by their negligent acts, errors or omissions. The
Company also has entered into indemnification agreements with each of its

<PAGE> 17

directors and executive officers that provide for advancement of certain
expenses and reimbursements for certain liabilities incurred in connection with
the performance of their duties.

Insofar as indemnification for liabilities under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.

15
<PAGE> 18

APPENDIX A

CAVALIER HOMES, INC.
AMENDED AND RESTATED DIVIDEND REINVESTMENT PLAN

WHEREAS, Cavalier Homes, Inc., a Delaware corporation (the "Company"),
previously adopted a Dividend Reinvestment and Stock Purchase Plan; and

WHEREAS, the Company thereafter amended and restated the Dividend
Reinvestment and Stock Purchase Plan to make certain administrative changes to
such plan and also to add 300,000 shares to be issued in accordance with such
plan, subject to certain adjustments; and

WHEREAS, the Board of Directors of the Company has determined that it
is in the best interest of the Company to modify the Amended and Restated
Dividend Reinvestment and Stock Purchase Plan to eliminate the provision in such
plan permitting participants to purchase common stock of the Company by making
optional cash payments, and to rename such plan as the Amended and Restated
Dividend Reinvestment Plan;

NOW THEREFORE, effective September 1, 1998, the Amended and Restated
Dividend Reinvestment Plan shall provide as follows:

1. DEFINITIONS

The following terms when used herein shall have the following
definitions:

"Authorization Card" means such Authorization Card as the Plan Agent
may from time to time or upon request furnish Stockholders and which shall be
returned to the Plan Agent to indicate their election to participate in
specified portions of the Plan.

"Certificated Shares" means shares of Stock which are evidenced by
physical certificates.

"Company" means Cavalier Homes, Inc.

"Dividend Payment Date" means the Investment Date.

"Investment Date" means each date on which a dividend is paid on the
shares of Stock, which the Company anticipates to be on or about the 15th day of
February, May, August and November each year. If an Investment Date falls on a
Saturday, Sunday or holiday, the Investment Date will be the next following
business day.

"Market Price" as of any day means the higher of the average of the
daily high and low sale prices of the Company's Stock on the NYSE on the four
Trading Days including and preceding the Investment Date or the average of the
high and low sale prices of the Company's Stock on the NYSE on the Investment
Date.

"Noncertificated Shares" means shares of Stock which are held by the
Plan Agent in an account for each Participant and for which no physical
certificates are issued.

"NYSE" means the New York Stock Exchange, Inc.

A-1

<PAGE> 19
"Participant" means any Stockholder who has returned a properly
completed Authorization Card to the Plan Agent indicating election to
participate in any portion of the Plan and who has been enrolled in that portion
of the Plan by the Plan Agent.

"Plan" means this Amended and Restated Dividend Reinvestment Plan,
together with any amendments hereto.

"Plan Agent" means any bank or trust company as from time to time may
be appointed by the Company as agent to administer the Plan. Initially, the Plan
Agent shall be The Chase Manhattan Bank, with certain administrative support
provided by ChaseMellon Shareholder Services, L.L.C. (collectively with The
Chase Manhattan Bank, the "Plan Agent") and thereafter shall be the Company or
any successor institution appointed by the Company in substitution therefor.

"Stockholder" means any holder of shares of Stock.

"Stock" means the common stock, par value $0.10 per share, of the
Company.

"Trading Day" means a day on which the NYSE is open for trading.

2. PURPOSE

The purpose of this Plan is to provide Stockholders with a convenient
and economical method for having all or part of their dividends automatically
reinvested in additional shares of Stock without payment of any trading fees or
service charge. Because shares of Stock will be purchased for the Plan directly
from the Company by the Plan Agent, the Plan will assist the Company in raising
funds for general business purposes. The Plan does not reflect a change in the
Company's dividend policy or a guarantee of future dividends, which will
continue to be determined by the Board of Directors based on the Company's
results of operations, financial condition, regulatory requirements and other
factors.

3. ELIGIBILITY FOR PARTICIPATION

All Stockholders of record are automatically eligible to participate in
the Plan and may do so by completing and returning to the Plan Agent the
Authorization Card furnished to them by the Plan Agent. Beneficial owners of
shares of Stock which are registered in names other than their own (e.g., in the
name of a broker, bank nominee or other record holder) may participate in the
Plan by making arrangements with their broker or bank to participate on their
behalf through the Depository Trust Company Dividend Reinvestment Service. The
Company reserves the right to refuse to permit a broker, bank nominee or other
record holder to participate in the Plan if the terms of such participation
would, in the Company's sole judgment, result in excessive cost or burden on the
Company.

4. ADMINISTRATION OF THE PLAN

The Plan Agent shall administer the Plan and will maintain records and
perform such other duties as may be required. In addition, the Plan Agent will
send each Participant (a) after each dividend reinvestment, a statement which
will indicate the amount of the dividend, the purchase price per share of Stock,
the number of shares of Stock purchased and the total number of Noncertificated
Shares owned by the Participant; and (b) annual and quarterly reports to
Stockholders, proxy statements and income tax information for reporting
dividends earned. Shares of Stock purchased by a Participant through reinvested
dividends will be credited to the Participant's Noncertificated Share Account.
Upon request of a Participant, the Plan Agent will furnish certificates for
shares of Stock in the Participant's Noncertificated Share Account. No
certificates will be issued for fractional shares of Stock, but the market price
thereof will be paid in cash to a requesting Stockholder who is terminating
participation in the Plan. The Plan Agent will have the responsibility for
furnishing certificates for shares of Stock upon request or termination of
participation by the Stockholder.

5. REINVESTMENT OF DIVIDENDS

Stockholders may join the Plan at any time. Stockholders may elect to
have dividends on all or part of their shares of Stock automatically reinvested
by completing the Authorization Card provided by the Plan Agent to that effect
and returning it to the Plan Agent. If the Authorization Card is received by the
Plan Agent five (5) business days prior to the record date for the payment of
the next dividend, reinvestment will begin with that dividend. The record dates
for

A-2

<PAGE> 20

dividend payments on shares of the Stock are generally on or about January 30,
April 30, July 30 and October 30. If the Authorization Card is received
subsequent to five (5) business days prior to the record date, that dividend
will be paid in cash and the Stockholder's initial dividend reinvestment will
begin with the next dividend. The purchase price per share for shares of Stock
purchased for the Plan with reinvested dividends shall be 95% of the Market
Price. Cash dividends on shares of Stock credited to the Participant's account
will be automatically reinvested to purchase additional shares of Stock.

6. [RESERVED.]

7. CALCULATION OF SHARES OF STOCK PURCHASED

The number of shares of Stock purchased shall be determined by dividing
the amount of the dividends reinvested by the purchase price per share of Stock
determined in accordance with Section 5 above. Each Participant's account will
be credited on each Investment Date with that number of shares of Stock, plus
fractional share interests computed to at least four (4) decimal places, equal
to the total amount of the dividends reinvested on behalf of such Participant on
such date divided by the purchase price per share of Stock for that date.

8. COSTS

There are no trading fees on purchases. All costs of administration of
the Plan are paid by the Company, except that Participants may incur certain
costs in connection with their withdrawal from the Plan if they direct the Plan
Agent to sell their shares of Stock.

9. SHARES OF STOCK SUBJECT TO THE PLAN

(a) The number of shares of Stock which may be issued and sold by the
Company under the Plan shall not exceed 500,000 shares of stock, subject to
adjustment pursuant to the provisions of paragraph (b) below. Such shares of
Stock may be either authorized and unissued shares or shares issued and
thereafter acquired by the Company and such amount of shares shall be and is
hereby reserved for issuance pursuant to this Plan. The Company shall at all
times reserve a sufficient number of shares of Stock to meet the requirements of
the Plan. Shares of Stock will not be purchased for the Plan in the open market.

(b) In the event that the outstanding shares of Stock are increased or
decreased after the date hereof by reason of reorganization, recapitalization,
reclassification, combination of shares, stock split or stock dividend, then the
aggregate number of shares of Stock which may be issued and sold hereunder, set
forth in paragraph (a) above, shall be adjusted appropriately. Any adjustments
and the manner of application of the foregoing sentence shall be determined
solely by the Company.

10. MODIFICATION OR TERMINATION OF PARTICIPATION

Participants may modify their participation in the Plan by notifying
the Plan Agent in writing five (5) business days prior to the record date for
determining the holders of Stock entitled to receive the next dividend that they
wish to reinvest dividends on an increased or decreased number of shares of
Stock specified in such notice. Participants may terminate participation in the
Plan any time by notifying the Plan Agent in writing five (5) business days
prior to the record date for determining the holders of Stock entitled to
receive the next dividend of the Participant's intent to terminate participation
in the Plan. Any notice is effective only upon receipt. If a Participant's
notice of termination or modification is received by the Plan Agent at least
five (5) business days prior to the record date for determining the Stockholders
entitled to receive the next dividend payment, the Plan Agent will modify or
terminate the reinvestment of the Participant's dividends under the Plan as of
that Investment Date. If the notice of termination or modification is received
by the Plan Agent subsequent to five (5) business days prior to the record date
for the next dividend, that dividend will be reinvested in shares of Stock for
the Participant in accordance with the Participant's previous instructions, and
the request for termination or modification will be processed promptly
thereafter. In order to re-enter the Plan after termination, the Stockholder
must complete a new Authorization Card.

A-3

<PAGE> 21

11. SALE OF PLAN SHARES

A Participant can instruct the Plan Agent to sell any or all of the
whole shares of Stock held in the Plan. The written notification to the Plan
Agent should include the number of Shares that are to be sold. The Plan Agent
will make the sale as soon as practicable following receipt of the written
notification and a check for the proceeds less trading fees and transfer taxes
(if any) will usually be sent by the Plan Agent to the Participant on the
settlement date, which will be three (3) business days from the date of sale. No
Participant shall have the authority or power to direct the date or sales price
at which shares of Stock may be sold. Requests must indicate the minimum number
of shares of Stock to be sold and not the dollar amount to be attained. Any such
request that does not clearly indicate the number of shares of Stock will be
returned to the Participant with no action taken. A withdrawal/termination form
is provided on the reverse side of the account statement for this purpose. This
notice should be addressed as indicated on the account statement. Shares of
Stock held in a Participant's account may not be pledged. In order to pledge
such shares, a Participant must request certificates for such shares of Stock.

12. CERTIFICATES FOR PURCHASED SHARES OF STOCK

No certificates for shares of Stock acquired for a Participant under
the Plan will be issued. Stock purchased under the Plan will be credited to a
Participant's Noncertificated Share account and will be held in the name of the
Plan Agent or its nominee. A Participant who wishes to obtain certificates for
those shares of Stock that he has purchased under the Plan may do so by
notifying the Plan Agent in writing to that effect. No certificate will be
issued for fractional shares of Stock, but the market price of any fractional
shares of Stock will be paid in cash to the Participant requesting a certificate
for all his Noncertificated Shares.

13. STOCK SPLITS, STOCK DIVIDENDS AND RIGHTS OFFERINGS

Shares of Stock issued in a stock dividend or stock split with respect
to a Participant's shares of Stock which are subject to the Plan will be
credited to a Participant's Noncertificated Share account. If the Company has a
rights offering in which separately tradable and exercisable rights are issued
to registered holders of Stock, the rights attributable to whole shares of Stock
held in a Participant's Plan account will be transferred to the Participant as
promptly as practicable after the rights are issued. No partial rights will be
issued with respect to fractional shares of Stock in the Participant's account.

14. VOTING

All shares of Stock credited to a Participant's Noncertificated Share
account under the Plan may be voted by the Participant. A Participant will
receive a proxy to vote the number of shares of Stock held in his Plan account.
If the Participant returns an executed proxy, it will be voted with respect to
all of Participant's shares of Stock (including any fractional shares of Stock),
or the Participant may vote all of the shares of Stock in person at the meeting.

15. LIABILITY

Neither the Company, nor its duly appointed Plan Agent (if any) in
administering the Plan, shall be liable for any act or failure to act taken in
good faith, including, without limitation, any claim of liability arising out of
failure to terminate a Participant's participation in the Plan upon the
Participant's death. In addition, no Stockholder, director, officer, employee,
representative or agent of the Company shall be personally liable for the
satisfaction of the Company's obligations under this Plan and a Participant
shall look solely to the assets of the Company for satisfaction of any claims
hereunder.

16. TERMINATION, SUSPENSION OR MODIFICATION

The Company reserves the right to modify, suspend or terminate the Plan
at any time and from time to time, including during the period between the
record date for a dividend payment and the related Investment Date.

A-4

<PAGE> 22

discount. Any Participants who engage in such transactions may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act of 1933.

17. COMPLIANCE WITH APPLICABLE LAW AND REGULATIONS

The Company's obligation to offer, issue or sell shares of Stock
hereunder shall be subject to the Company's obtaining any necessary approval,
authorization and consent from any regulatory authorities having jurisdiction
over the issuance and sale of the shares of Stock. The Company may elect not to
offer or sell its shares of Stock hereunder to Stockholders residing in any
jurisdiction where, in the sole discretion of the Company, the burden or expense
of compliance with applicable blue sky or securities laws make that offer or
sale impracticable or inadvisable.

18. PARTICIPANTS SUBJECT TO BACK-UP WITHHOLDING

In the case of both foreign participants who elect to have their
dividends reinvested and whose dividends are subject to United States income tax
withholding and other Participants who elect to have their dividends reinvested
and who are subject to "backup" withholding under Section 3406(a)(1) of the
Internal Revenue Code of 1986, as amended, the Plan Agent shall invest in shares
of Stock in an amount equal to the dividends of such Participants less the
amount of tax required to be withheld.

19. SAFEKEEPING

At a Participant's request, the Plan Agent will receive and hold any
Certificated Shares now held by or for such Participant. A Participant may send
such Certificated Shares to the Plan Agent for credit to such Participant's
account in the Plan. These Certificated Shares will be added to the shares of
Stock in such Participant's account and will appear in subsequent statements in
combination with a Participant's previous Plan shares of Stock and dividends. If
a Participant is interested in having the Plan Agent hold shares of Stock now in
such Participant's possession, write for further information to:

ChaseMellon Shareholder Services, L.L.C.
P.O. Box 3338
South Hackensack, New Jersey 07606-1938

A-5

<PAGE> 23

No person has been authorized to give any information or to make any
representations other than those contained herein and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make an offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
not been any change in the facts set forth in this Prospectus or in the affairs
of the Company since the date hereof.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S> <C>
Available Information.......................................................2
Incorporation of Certain Documents by Reference ............................2
Risk Factors ...............................................................3
The Company ................................................................8
Description of the Plan.....................................................8
Use of Proceeds............................................................14
Legal Matters..............................................................14
Experts....................................................................14
Indemnification of Directors and Officers..................................14
Amended and Restated Dividend Reinvestment
Plan.................................................................A-1
</TABLE>

300,000 SHARES

CAVALIER HOMES, INC.

COMMON STOCK
OFFERED BY CAVALIER HOMES, INC.
TO ITS STOCKHOLDERS
SOLELY IN CONNECTION WITH ITS
AMENDED AND RESTATED
DIVIDEND REINVESTMENT PLAN

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

PROSPECTUS

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

SEPTEMBER 29, 1998

<PAGE> 24

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
---- ------
<S> <C>
SEC Registration fee $ 979.70*
Printing expenses 5,000.00
Legal fees and expenses 10,000.00
Accounting fees and expenses 3,000.00
Miscellaneous 1,000.00
------------
Total $ 19,979.70
============
</TABLE>

- -------------------
* This registration fee was paid at the time of the filing of the
Company's Registration Statement on Form S-3 (Reg. No. 333-48111) to
which this Post-Effective Amendment No. 1 relates.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Amended and Restated By-laws of the Company provide that the
Company will indemnify its directors and officers in actions, suits or
proceedings (other than derivative actions) against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such director or officer if such director or officer
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The By-laws give the Company the power in its discretion to indemnify
any employee or agent of the Company in the same manner as the Company is
required to indemnify its officers and directors pursuant to the foregoing
sentence. The By-laws provide that the Company shall indemnify any director or
officer of the Company who is a party to any derivative action on behalf of the
Company against expenses (including attorneys' fees) actually and reasonably
incurred by such director or officer if such director or officer acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interest of the Company, and except that no indemnification shall be made in
respect of any claim as to which such person shall have been judged to be liable
to the Company 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 that such
person is fairly and reasonably entitled to indemnity. The By-laws give the
Company the power in its discretion to indemnify any employee or agent of the
Company in the same manner as the Company is required to indemnify its officers
and directors pursuant to the foregoing sentence. The By-laws further provide
that the Company may purchase and maintain insurance on behalf of its respective
directors, officers, employees or agents.

Section 145 of the Delaware General Corporation Law contains provisions
governing the indemnification of directors and officers by Delaware
corporations. The statute provides that a corporation has the power to indemnify
a person who was or is a party or is threatened to be made a party to a
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 or she 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, partner, trustee,
employee or agent of another foreign or domestic 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 or her in connection with the action, suit or proceeding, if the
person acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
a criminal action or proceeding, if the person had no reasonable cause to
believe his or her conduct was unlawful. The termination of an action, suit or
proceeding by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner which he

<PAGE> 25

or she reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to a criminal action or proceeding, had reasonable
cause to believe that his or her conduct was unlawful.

Indemnification of expenses (including attorneys' fees) and amounts
paid in settlement is permitted in derivative actions, except that
indemnification is not allowed for any claim, issue or matter in which such
person has been found liable to the corporation unless and to the extent that
the Delaware Court of Chancery or the court in which such action was brought
decides indemnification is proper. To the extent that any such person has been
successful on the merits or otherwise in defense of an action, suit or
proceeding, or in defense of a claim, issue or matter in the action, suit or
proceeding, he or she shall be indemnified against actual and reasonable
expenses (including attorneys' fees) incurred by him or her in connection with
the action, suit or proceeding, and any action, suit or proceeding brought to
enforce the mandatory indemnification provided under the Delaware General
Corporation Law.

A determination that the person to be indemnified meets the applicable
standard of conduct and an evaluation of the reasonableness of the expenses
incurred and amounts paid in settlement must be made by a majority vote of a
quorum of the board of directors who are not parties or threatened to be made
parties to the action, suit or proceeding, even though less than a quorum, or by
a committee of such directors designated by majority vote of such directors,
even though less than a quorum, or if there are no such directors, or such
directors so direct, by independent legal counsel in a written opinion, or by
the stockholders.

Under the Delaware General Corporation Law, a corporation may pay or
reimburse the reasonable expenses incurred by a director or officer who is a
party or threatened to be made a party to an action, suit or proceeding in
advance of final disposition of the proceeding if the person furnishes the
corporation a written undertaking to repay the advance if it is ultimately
determined that he or she was not entitled to be indemnified.

The indemnification provisions of the Delaware General Corporation Law
are not exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise. The indemnification
provided for under the Delaware General Corporation Law continues as to a person
who ceases to be a director or officer.

The Company's Amended and Restated Certificate of Incorporation, as
amended ("Certificate"), provides that a director of the corporation shall not
be personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, as the same exists or may be hereafter
amended, or (iv) for any transaction from which the director derived an improper
personal benefit.

The Delaware General Corporation Law permits the Company to purchase
insurance on behalf of its directors and officers against liabilities arising
out of their positions with the Company, whether or not such liabilities would
be within the above indemnification provisions. Pursuant to this authority and
as authorized by its By-laws, the Company maintains such insurance on behalf of
its directors and officers. The Company also has entered into indemnification
agreements with each of its directors and executive officers that provide for
advancement of certain expenses and reimbursement for certain liabilities
incurred in connection with the performance of their duties.

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.

Item Description
- ---- -----------
<S> <C>
*4(a) The Certificate of Designation of Series A Junior Participating
Preferred Stock of Cavalier Homes, Inc. as filed with the Office of the
Delaware Secretary of State on October 24, 1996 and filed as Exhibit A
to Exhibit 4 to Cavalier Homes, Inc.'s Registration Statement on Form
8-A filed on October 30, 1996.
*4(b) Rights Agreement between Cavalier Homes, Inc. and ChaseMellon
Shareholder Services, L.L.C., filed as Exhibit 4 to Cavalier Homes,
Inc.'s Current Report on Form 8-K dated October 30, 1996.
*4(c) Articles four, six, seven, eight and nine of Cavalier Homes, Inc.'s
Amended and Restated Certificate of Incorporation, as amended, filed as
Exhibit 3(a) to Cavalier Homes, Inc.'s Annual Report on Form 10-K for
</TABLE>

<PAGE> 26

<TABLE>
<S> <C>
the year ended December 31, 1993, and the amendment thereto, filed as
Exhibit 3(b) to Cavalier Homes, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended June 27, 1997.
*4(d) Article II, Sections 2.1 through 2.18; Article III, Sections 3.1 and
3.2; Article IV, Sections 4.1 and 4.3; Article VI, Sections 6.1 through
6.5; Article VIII, Sections 8.1 and 8.2; and Article IX of the
Company's Amended and Restated By-laws, included in the Amended and
Restated By-laws of Cavalier Homes, Inc. filed as Exhibit 3(d) to
Cavalier Homes, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 27, 1997.
*5 Opinion of Bradley Arant Rose & White LLP as to the legality of the
securities being registered, filed as Exhibit 5 to Cavalier Homes,
Inc.'s Registration Statement on Form S-3 (Reg. No. 333-48111), filed
on March 17, 1998.
*23(a) Consent of Bradley Arant Rose & White LLP (included in Exhibit
5).
23(b) Consent of Deloitte & Touche LLP.
*24 Power of Attorney, filed as Exhibit 24 to Cavalier Homes, Inc.'s
Registration Statement on Form S-3 (Reg. No. 333-48111), filed on March
27, 1998.
</TABLE>

- ----------------------
* Incorporated by reference.

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 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.

<PAGE> 27

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company
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 Post-Effective
Amendment No. 1 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Addison, State of
Alabama, on this 29th day of September, 1998.

CAVALIER HOMES, INC.

By: /s/ DAVID A. ROBERSON
---------------------------------
David A. Roberson
President
and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to the Company's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ DAVID A. ROBERSON Director and September 29, 1998
- -------------------------------------------- Principal Executive Officer
David A. Roberson

/s/ MICHAEL R. MURPHY Director and Principal September 29, 1998
- -------------------------------------------- Financial and Accounting Officer
Michael R. Murphy

/s/ BARRY B. DONNELL Chairman of the Board and Director September 29, 1998
- --------------------------------------------
Barry B. Donnell

* Director September 29, 1998
- --------------------------------------------
Thomas A. Broughton, III

* Director September 29, 1998
- --------------------------------------------
John W Lowe

* Director September 29, 1998
- --------------------------------------------
Lee Roy Jordan

* Director September 29, 1998
- --------------------------------------------
Gerald W. Moore

* Director September 29, 1998
- --------------------------------------------
A. Douglas Jumper, Sr.

* Director September 29, 1998
- --------------------------------------------
Mike Kennedy

*By /s/ MICHAEL R. MURPHY September 29, 1998
- --------------------------------------------
Michael R. Murphy
Attorney in Fact
</TABLE>

<PAGE> 28

INDEX TO EXHIBITS

Exhibit
Number Description
------ -----------
<S> <C>
*4(a) The Certificate of Designation of Series A Junior Participating
Preferred Stock of Cavalier Homes, Inc. as filed with the Office
of the Delaware Secretary of State on October 24, 1996 and filed
as Exhibit A to Exhibit 4 to Cavalier Homes, Inc.'s Registration
Statement on Form 8-A filed on October 30, 1996.
*4(b) Rights Agreement between Cavalier Homes, Inc. and
ChaseMellon Shareholder Services, L.L.C., filed as Exhibit 4
to Cavalier Homes, Inc.'s Current Report on Form 8-K dated
October 30, 1996.
*4(c) Articles four, six, seven, eight and nine of Cavalier Homes,
Inc.'s Amended and Restated Certificate of Incorporation, as
amended, filed as Exhibit 3(a) to Cavalier Homes, Inc.'s
Annual Report on Form 10-K for the year ended December 31,
1993, and the amendment thereto, filed as Exhibit 3(b) to
Cavalier Homes, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended June 27, 1997.

*4(d) Article II, Sections 2.1 through 2.18; Article III, Sections
3.1 and 3.2; Article IV, Sections 4.1 and 4.3; Article VI,
Sections 6.1 through 6.5; Article VIII, Sections 8.1 and 8.2;
and Article IX of the Company's Amended and Restated By-laws,
included in the Amended and Restated By-laws of Cavalier
Homes, Inc. filed as Exhibit 3(d) to Cavalier Homes, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 27,
1997.
*5 Opinion of Bradley Arant Rose & White LLP as to the
legality of the securities being registered, filed as Exhibit
5 to Cavalier Homes, Inc.'s Registration Statement on Form S-3
(Reg. No. 333-48111), filed on March 17, 1998.
*23(a) Consent of Bradley Arant Rose & White LLP (included in
Exhibit 5).
23(b) Consent of Deloitte & Touche LLP.
*24 Powers of Attorney, filed as Exhibit 24 to Cavalier Homes,
Inc.'s Registration Statement on Form S-3 (Reg. No. 333-48111),
filed on March 17, 1998.
</TABLE>

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* Incorporated by reference.

<PAGE> 1

EXHIBIT 23(B)

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Post-Effective Amendment
No. 1 to the Registration Statement on Form S-3 (Reg. No. 333-48111) of Cavalier
Homes, Inc. of our reports dated February 17, 1998 (March 13, 1998 as to the
amendment to the Credit Facility described in Note 5) appearing in the Annual
Report on Form 10-K of Cavalier Homes, Inc. for the year ended December 31,
1997, and appearing in the Current Report on Form 8-K dated January 15, 1998, as
amended by Form 8-K/A dated March 16, 1998 and by Form 8-K/A dated March 17,
1998, and to the reference to us under the heading "Experts" in the Prospectus,
which is a part of this Post-Effective Amendment No. 1 to the Registration
Statement.

/s/ DELOITTE & TOUCHE LLP

Birmingham, Alabama
September 25, 1998