<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
CAVALIER HOMES, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[LOGO]
APRIL 4, 2000
Dear Stockholder:
You are cordially invited to join us at our 2000 Annual Meeting of
Stockholders to be held on Tuesday, May 16, 2000, beginning at 10:00 A.M.,
C.D.T., at The Summit Club, Suite 3100, AmSouth-Harbert Plaza, 1901 6th Avenue
North, Birmingham, Alabama. At the meeting, we will consider the election of
directors, the selection by the Board of Directors of Deloitte & Touche LLP as
independent public accountants for the Company, and any other business as may
properly come before the Annual Meeting.
Stockholders of the Company who are unable to be present personally at
the Annual Meeting may vote by proxy. The enclosed Notice and Proxy Statement
contain important information concerning the matters to be considered, and we
urge you to review them carefully. You will also find enclosed a copy of the
Company's Annual Report for the year ended December 31, 1999, which we encourage
you to read.
It is important that your shares be voted at the meeting. Accordingly,
whether or not you plan to attend the Annual Meeting, please complete, sign,
date and return the enclosed form of proxy promptly so that the Company may be
assured of the presence of a quorum. If you attend the meeting and wish to vote
your shares personally, you may revoke your proxy.
We look forward to seeing you on May 16th.
Sincerely yours,
CAVALIER HOMES, INC.
/s/ Barry B. Donnell
Barry B. Donnell
Chairman of the Board
/s/ David A. Roberson
David A. Roberson
President and Chief Executive Officer
<PAGE> 3
CAVALIER HOMES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2000
TO THE STOCKHOLDERS OF CAVALIER HOMES, INC.:
The Annual Meeting of Stockholders of Cavalier Homes, Inc., a Delaware
corporation (the "Company"), will be held at The Summit Club, Suite 3100,
AmSouth-Harbert Plaza, 1901 6th Avenue North, Birmingham, Alabama, on Tuesday,
May 16, 2000, at 10:00 A.M., C.D.T., for the following purposes:
(1) To elect nine directors;
(2) To consider the ratification and approval of the appointment
by the Board of Directors of Deloitte & Touche LLP as
independent public accountants for the Company; and
(3) To transact such other business as may properly come before
the meeting.
Details respecting these matters are set forth in the accompanying
Proxy Statement.
Holders of record of the Common Stock of the Company at the close of
business on March 17, 2000, are entitled to notice of and to vote at the Annual
Meeting. A list of the stockholders of the Company who are entitled to vote at
the Annual Meeting will be available for inspection for a period of ten days
prior to the Annual Meeting at 800 Shades Creek Parkway, Birmingham, Alabama,
and at the Annual Meeting, for any purpose germane to the meeting. The meeting
may be adjourned from time to time without notice other than such notice as may
be given at the meeting or any adjournment thereof, and any business for which
notice is hereby given may be transacted at any such adjourned meeting.
You are cordially invited to attend the Annual Meeting of the
Stockholders of your Company, and we hope you will be present at the meeting.
WHETHER YOU PLAN TO ATTEND OR NOT, PLEASE SIGN AND RETURN THE ENCLOSED
FORM OF PROXY SO THAT THE COMPANY MAY BE ASSURED OF THE PRESENCE OF A QUORUM AT
THE MEETING. A postage-paid envelope is enclosed for your convenience in
returning your proxy to the Company.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael R. Murphy
Michael R. Murphy
Secretary
Post Office Box 540
Highway 41 North and 32 Wilson Blvd.
Addison, Alabama 35540
April 4, 2000
<PAGE> 4
CAVALIER HOMES, INC.
POST OFFICE BOX 540
HIGHWAY 41 NORTH AND 32 WILSON BLVD.
ADDISON, ALABAMA 35540
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2000
The accompanying proxy is solicited on behalf of the Board of Directors
of Cavalier Homes, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders and any adjournments thereof (the "Annual
Meeting") to be held at The Summit Club, Suite 3100, AmSouth-Harbert Plaza, 1901
6th Avenue North, Birmingham, Alabama, on Tuesday, May 16, 2000, at 10:00 A.M.,
C.D.T. This Proxy Statement and the enclosed form of proxy are first being
mailed or given to stockholders on or about April 4, 2000.
GENERAL INFORMATION
OUTSTANDING VOTING SHARES; VOTING PROCEDURES
Holders of record of the Common Stock of the Company outstanding at the
close of business on March 17, 2000, are entitled to notice of, and to vote at,
the Annual Meeting. A total of 17,767,528 shares of Common Stock were
outstanding on such date and will be entitled to vote at the Annual Meeting.
Each holder of shares of Common Stock entitled to vote has the right to one vote
for each share held of record on the record date for each matter to be voted
upon.
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock of the Company entitled to vote, consisting of at least
8,883,765 shares, is necessary to constitute a quorum at the Annual Meeting.
Shares of Common Stock represented by a properly executed proxy will be treated
as present at the Annual Meeting for purposes of determining the presence or
absence of a quorum without regard to whether the proxy is marked as casting a
vote for or against or abstaining with respect to a particular matter. In
addition, shares of Common Stock represented by "broker non-votes" will be
treated as present for purposes of determining a quorum. In accordance with the
Amended and Restated By-laws of the Company, as amended (the "By-laws"), the
nine nominees receiving the highest vote totals will be elected as directors of
the Company. Accordingly, assuming the presence of a quorum, abstentions and
broker non-votes will not affect the outcome of the election of directors at the
Annual Meeting. The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock of the Company present in person or
represented by proxy at the Annual Meeting and entitled to vote thereon is
required (i) for the approval and ratification of the selection of the Company's
independent auditors, and (ii) for approval of all other matters. Abstentions
and broker non-votes will be included for purposes of determining whether the
requisite number of affirmative votes have been cast with respect to the
ratification of the selection of the Company's independent auditors and approval
of any other matters coming before the stockholders meeting; and, accordingly,
will have the same effect as a negative vote.
VOTING YOUR PROXY
Proxies, in the form enclosed, properly executed by a stockholder and
returned to the Board of Directors of the Company, with instructions specified
thereon, will be voted at the Annual Meeting in accordance with such
instructions. If no specification is made, a properly executed proxy will be
voted in favor of:
(i) The election to the Board of Directors of the nine nominees
named in this Proxy Statement; and
(ii) The ratification of action taken by the Board of Directors in
selecting Deloitte & Touche LLP as independent public
accountants for the Company.
<PAGE> 5
As of the date of this Proxy Statement, the Board of Directors knows of
no business to be presented for consideration or action at the Annual Meeting
other than the matters stated above. If any other matters properly come before
the meeting, however, it is the intention of the persons named in the enclosed
form of proxy to vote in accordance with their best judgment on such matters.
A stockholder may revoke a proxy by notice in writing delivered to the
Secretary of the Company, Michael R. Murphy, at any time before it is exercised.
A proxy may also be revoked by attending the Annual Meeting and voting in
person. The presence of a stockholder at the Annual Meeting will not
automatically revoke a proxy previously given to the Company.
COSTS OF SOLICITATION
The cost of soliciting proxies, including the preparation, printing and
mailing of this Proxy Statement, will be borne by the Company. The Company may
reimburse investment bankers, brokers and other nominees for their expenses
incurred in obtaining voting instructions from beneficial owners of Common Stock
held of record by such investment bankers, brokers and other nominees; however,
the Company has not entered into any written contract or arrangement for such
repayment of expenses. In addition to the use of mails, proxies may be solicited
by personal interview, telephone or facsimile machine by the directors, officers
and employees of the Company, without additional compensation.
ELECTION OF DIRECTORS
The By-laws of the Company provide for a Board of Directors of not
fewer than one nor more than ten members, the exact number to be determined by
resolution of the Board of Directors. The present Board of Directors has fixed
the number of directors at nine members and proposes the election of the nine
persons listed below, each of whom has consented to being named and to serving
in such capacity as directors until the next Annual Meeting of Stockholders and
until their successors are duly elected and shall have qualified. Unless
otherwise directed, it is intended that shares of Common Stock represented by
all proxies received by the Board of Directors will be voted in favor of the
nominees listed below. Should any such nominee become unable or decline to
accept election, which is not anticipated, it is intended that such shares of
Common Stock will be voted for the election of such person or persons as the
Board of Directors may recommend.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
NOMINEES SET FORTH BELOW.
The following table sets forth certain information concerning each
nominee, each of whom is currently serving as a director:
<TABLE>
<CAPTION>
Name Age Principal Occupation Director Since
- ---- --- -------------------- --------------
<S> <C> <C> <C>
Thomas A. Broughton, III 44 President of First Commercial 1986
Bank (a state banking corporation)
Barry B. Donnell 60 Chairman of the Board 1986
of the Company
Lee Roy Jordan 58 President of Lee Roy Jordan 1993
Redwood Lumber Company
(lumber supply business) and
Southern Valve Services, Inc.
(remanufacturer and installer
of industrial valves)
A. Douglas Jumper, Sr. 68 President of S & J Steel Builders, Inc. 1997
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
Name Age Principal Occupation Director Since
- ---- --- -------------------- --------------
<S> <C> <C> <C>
Mike Kennedy 40 Senior Vice President 1997
of Belmont Homes, Inc.
John W Lowe 58 Partner, Lowe, Mobley 1984
& Lowe (law firm)
Gerald W. Moore 67 Certified Public Accountant 1996
Michael R. Murphy 54 Vice President, Chief Financial 1997
Officer and Secretary-Treasurer
of the Company
David A. Roberson 43 President and Chief Executive 1996
Officer of the Company
</TABLE>
Messrs. Jumper and Kennedy became members of the Board of Directors
effective upon the merger involving Belmont Homes, Inc. ("Belmont"), pursuant to
which Belmont became a wholly owned subsidiary of the Company as of December 31,
1997. The Estate of Mr. Kennedy's father, Jerold Kennedy (former President and
Chief Executive Officer of Belmont), an Alabama corporation that originally
owned the initial Belmont manufacturing facility ("BHIA"), Belmont, certain
other corporate entities (the "Other Corporations"), and certain other named and
unnamed individual officers, employees, agents and directors of BHIA, Belmont
and the Other Corporations, have been sued in the Circuit Court of Madison
County, Alabama (Case Number CV 97-2297) by three former shareholders of BHIA,
who have alleged breach of fiduciary duties, misrepresentation, deceit,
suppression and civil conspiracy in connection with the sale of their stock in
BHIA in February 1989. In addition to certain other allegations, these
plaintiffs claim that Jerold 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. Additionally, the
plaintiffs claim that the defendants intentionally depreciated the market value
of the stock of BHIA. The plaintiffs request in their complaint an unspecified
amount of compensatory and punitive damages and/or equitable relief, including a
constructive trust, and also have filed a separate claim against the Estate of
Jerold 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 held in the estate. The Circuit Court of Madison County, Alabama, has
transferred the Madison County action to the Circuit Court of Franklin County,
Alabama. The Circuit Court of Franklin County has granted summary judgment in
favor of the defendants on all counts asserted in the plaintiffs' complaint in
the Franklin County action. The plaintiffs have appealed this decision, and the
appeal is currently pending before the Alabama Court of Civil Appeals. For
further information regarding these proceedings, see the Company's Annual Report
on Form 10-K for the year ended December 31, 1999, under the heading "Legal
Proceedings."
Each nominee for the Board of Directors listed above has occupied the
position indicated for at least the last five years, with the exception of
Messrs. Kennedy, Jumper, Murphy and Roberson. Since October 1993, Mr. Kennedy
has served Belmont in various capacities, including as Acting Senior Vice
President of Administration from March 31, 1997 to September 5, 1997, and as
Senior Vice President of Administration of Belmont from September 5, 1997 to
December 31, 1997. Mr. Kennedy served as a director of Belmont from July 31,
1997 to December 31, 1997. Mr. Jumper served as Chairman of the Board of
Directors of Belmont from 1993 to December 1997. Mr. Jumper is also a director
of BancorpSouth, Inc., a bank holding company headquartered in Tupelo,
Mississippi. Mr. Murphy was Controller of Peerless Coatings, Inc. for the five
years prior to his joining the Company in June 1995 as Corporate Controller. Mr.
Murphy served in that capacity until his appointment as the Company's Chief
Financial Officer and Secretary-Treasurer in October 1996. Mr. Roberson served
as the Company's Chief Financial Officer and Secretary- Treasurer prior to
becoming President and Chief Executive Officer in October 1996.
INFORMATION REGARDING BOARD OF DIRECTORS AND COMMITTEES
During 1999, the Board of Directors of the Company held four regular
meetings. In addition, the Board of Directors held three special meetings in
which the directors participated by conference telephone. Each
3
<PAGE> 7
director attended at least 75% of the aggregate of the number of meetings of the
Board of Directors and the number of meetings of all committees on which he
served held in 1999.
The Company currently pays each nonemployee director $2,500 for each
regular Board meeting at which he is in attendance and $250 for each telephone
conference Board meeting in which he participates. Nonemployee directors who are
members of committees also receive $750 for attendance for each committee
meeting held on a date when no Board meeting is held and $250 for each committee
meeting held by conference telephone. Through October, 1999, the Company paid
directors who were also employees of the Company $1,250 for each regular Board
meeting attended and an amount equal to the amount paid nonemployee directors
for committee and telephone meetings in which they participated. The Board of
Directors has resolved that, effective with meetings subsequent to October,
1999, those directors who are also employees of the Company will no longer
receive additional compensation for attendance at Board meetings. Directors are
also reimbursed for travel and out-of-pocket expenses incurred in connection
with attending Board and committee meetings.
Pursuant to the Company's 1993 Amended and Restated Nonemployee
Directors Stock Option Plan (the "Nonemployee Directors Plan"), options to
purchase 20,000 shares of Common Stock are granted to each nonemployee director
upon first being elected to the Board of Directors. In addition to such initial
grants, annually on January 2, each nonemployee director who has served as a
director of the Company during the calendar year immediately preceding such date
receives an option to purchase 5,000 shares of Common Stock; provided, however,
that no director of the Company may be granted options to purchase more than
125,000 shares of stock under the Nonemployee Directors Plan. All such options
are granted at an exercise price equal to the fair market value of the Common
Stock on the date of grant. Options granted under the Nonemployee Directors Plan
generally have a term of ten years, and are exercisable at any time beginning
six months after the date of grant; provided, however, that no option is
exercisable unless at all times during the period from the date of grant and
ending twelve months before the date of exercise, the optionee was a director of
the Company.
The Board of Directors has three standing committees: the Executive
Committee, the Compensation Committee and the Audit Committee. The Board of
Directors does not have a nominating committee. The Executive Committee is
composed of David A. Roberson, Michael R. Murphy and John W Lowe and is
authorized to act in place of the full Board of Directors in certain
circumstances. The Compensation Committee, which held three meetings in 1999,
including one meeting in which its members participated by conference telephone,
is currently composed of Thomas A. Broughton, III, Lee Roy Jordan, John W Lowe,
Gerald W. Moore and A. Douglas Jumper, Sr. The Compensation Committee
administers the Company's stock option plans (other than the Nonemployee
Directors Plan) and sets the compensation of the executive officers of the
Company. In certain instances when the Compensation Committee needs to take
actions that are designed to meet exemptions provided for stock awards under
Section 16(b) and Rule 16b-3 ("Rule 16b-3") of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or to permit the deductibility by the
Company of executive compensation in excess of $1,000,000 under Section 162(m)
("Section 162(m)") of the Internal Revenue Code of 1986, as amended, and all
members of the Compensation Committee do not meet the definition of
"Non-employee Directors" or "Outside Directors" under Rule 16b-3 and Section
162(m), respectively, these actions may be taken by separate committees or
sub-committees of the Board of Directors or the Compensation Committee or may
otherwise be structured to meet the requirements of these rules. During 1999,
Messrs. Jumper and Moore functioned as the Non-employee Director Sub-committee
for purposes of Rule 16b-3 and held one regular meeting and one special meeting
in which its members participated by conference telephone. Messrs. Broughton and
Moore functioned as the Outside Directors Sub-committee for purposes of Section
162(m) and held one regular meeting and one special meeting in which its members
participated by conference telephone. These directors received no additional
compensation for serving in these capacities.
The Audit Committee held one meeting during 1999. The Audit Committee
is currently composed of Thomas A. Broughton, III, Gerald W. Moore and A.
Douglas Jumper, Sr. The Audit Committee, among other things, recommends the
selection each year of the Company's independent public accountants, reviews and
evaluates the Company's financial statements for reliability and
informativeness, reviews the external and internal audit procedures, scope and
controls practiced by the Company's independent public accountants and its
internal accounting personnel, and evaluates the services performed and fees
charged by the Company's independent public accountants to determine, among
other things, that the non-audit services performed by such auditors do not
compromise their independence.
4
<PAGE> 8
RATIFICATION AND APPROVAL OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has unanimously selected, subject
to ratification by the stockholders, the accounting firm of Deloitte & Touche
LLP as the independent public accountants for the Company for fiscal year 2000.
Deloitte & Touche LLP has served as the Company's auditors since 1984.
Ratification of the selection of auditors is being submitted to the stockholders
of the Company because the Board of Directors believes it is an important
corporate decision in which stockholders should participate. If the stockholders
do not ratify the selection of Deloitte & Touche LLP or if Deloitte & Touche LLP
shall decline to act, resign or otherwise become incapable of acting, or if its
engagement is otherwise discontinued, the Board of Directors will select other
auditors for the period remaining until the 2001 Annual Meeting of Stockholders
when engagement of auditors is expected to again be subject to ratification by
the stockholders at such meeting.
Representatives of Deloitte & Touche LLP will be in attendance at the
Annual Meeting and will be provided an opportunity to address the meeting and to
respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
RATIFICATION AND APPROVAL OF DELOITTE & TOUCHE LLP.
EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
executive officers of the Company, who are elected annually by the Board of
Directors:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- --- -------------------------
<S> <C> <C>
David A. Roberson 43 President and Chief Executive Officer
Barry B. Donnell 60 Chairman of the Board
Michael R. Murphy 54 Vice President, Chief Financial Officer
and Secretary-Treasurer
</TABLE>
Messrs. Roberson's, Donnell's and Murphy's business experience is set
forth above under the heading "Election of Directors."
5
<PAGE> 9
OWNERSHIP OF EQUITY SECURITIES
Set forth below is information as of March 20, 2000, with respect to
the beneficial ownership of the Common Stock of the Company by (a) each of the
directors of the Company (which directors also constitute the nominees for
election as directors at the Annual Meeting), (b) the Company's President and
Chief Executive Officer and the two other executive officers of the Company, and
(c) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Name of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class(1)
---------------- -------------------- -------------------
<S> <C> <C> <C>
Thomas A. Broughton, III 167,344 (2) * %
Barry B. Donnell 899,333 (3) 4.98%
Lee Roy Jordan 64,514 (4) * %
A. Douglas Jumper, Sr. 712,803 (5) 4.00%
Mike Kennedy 84,136 (6) * %
John W Lowe 192,501 (7) 1.08%
Gerald W. Moore 37,250 (8) * %
Michael R. Murphy 106,500 (9) * %
David A. Roberson 531,646 (10) 2.94%
Directors and Executive Officers
as a Group (nine persons) 2,796,027 (11) 14.88%
</TABLE>
The following persons have reported ownership in the Company at a level
greater than 5%, according to statements on Schedule 13G as filed by such
persons with the Securities and Exchange Commission:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
---------------- -------------------- ----------------
<S> <C> <C>
Thomson Horstmann & Bryant, Inc.
Park 80 West, Plaza Two
Saddle Brook, NJ 07663 1,416,737 12 7.97%
Private Capital Management, Inc.
3003 Tamiami Trail North
Naples, Florida 33940 2,870,009 13 16.15%
Dimensional Fund Advisors
1299 Ocean Avenue,
11th Floor
Santa Monica, CA 90401 1,355,232 14 7.63%
</TABLE>
* Represents beneficial ownership of less than 1% of the outstanding shares
of the Company's Common Stock.
(1) Beneficial ownership in the foregoing table is based upon information
furnished by the persons listed. For purposes of this table, a person or group
of persons is deemed to have "beneficial ownership" of any shares as of
6
<PAGE> 10
March 20, 2000, that such person or group has the right to acquire within sixty
days after such date, or with respect to which such person otherwise has or
shares voting or investment power. For purposes of computing beneficial
ownership and the percentages of outstanding shares held by each person or group
of persons on a given date, shares which such person or group has the right to
acquire within sixty days after such date are shares for which such person has
beneficial ownership and are deemed to be outstanding for purposes of computing
the percentage for such person, but are not deemed to be outstanding for the
purpose of computing the percentage of any other person. Except as otherwise
indicated in these notes to the foregoing table, the beneficial owners named in
the table have sole voting and investment power with respect to the shares of
Common Stock reflected.
(2) Includes 16,477 shares beneficially owned in an Individual Retirement
Account and 12,720 shares owned by the minor children of Mr. Broughton. Includes
90,857 shares issuable pursuant to stock options presently exercisable as of
March 20, 2000, or within 60 days thereafter.
(3) Includes 300,000 shares issuable pursuant to stock options presently
exercisable as of March 20, 2000, or within 60 days thereafter, 30,000 shares
held by the Donnell Foundation, of which Mr. Donnell is co-trustee, and 100
shares held by T&C Investments Club, in which Mr. Donnell is a member. Mr.
Donnell shares voting and investment power with respect to the shares of the
Company held by the Donnell Foundation and T&C Investments Club.
(4) Includes 63,514 shares issuable pursuant to stock options presently
exercisable as of March 20, 2000, or within 60 days thereafter.
(5) Includes 32,000 shares issuable pursuant to stock options presently
exercisable as of March 20, 2000, or within 60 days thereafter. Also includes
80,000 shares held of record by the Thomas D. Keenum, Sr. Trust, of which Mr.
Jumper is a co-trustee (but not a beneficiary) along with Mr. Keenum. Mr. Keenum
and Mr. Jumper are first cousins, and the trust is primarily for the benefit of
Mr. Keenum and his spouse and their descendants. Mr. Jumper disclaims beneficial
ownership of the shares held in this trust.
(6) Includes 52,800 shares issuable pursuant to stock options presently
exercisable as of March 20, 2000, or within 60 days thereafter.
(7) Includes 56,484 shares issuable pursuant to stock options presently
exercisable as of March 20, 2000, or within 60 days thereafter.
(8) Includes 32,250 shares issuable pursuant to stock options presently
exercisable as of March 20, 2000, or within 60 days thereafter.
(9) Includes 95,000 shares issuable pursuant to stock options presently
exercisable as of March 20, 2000, or within 60 days thereafter, 2,700 shares
held in Mr. Murphy's Individual Retirement Account and 1,700 shares held in his
wife's Individual Retirement Account. Mr. Murphy disclaims beneficial ownership
of the shares held in his wife's Individual Retirement Account.
(10) Includes 6,435 shares beneficially owned in an Individual Retirement
Account, 1,813 shares held in his wife's Individual Retirement Account and
17,748 shares owned by the minor children of Mr. Roberson. Includes 175,000
shares issuable pursuant to stock options presently exercisable as of March 20,
2000, or within 60 days thereafter. Also includes 230,902 shares beneficially
owned by the Estate of Jerry F. Wilson, of which 125,000 shares are issuable
pursuant to a stock option presently exercisable as of March 20, 2000, or within
60 days thereafter. Mr. Roberson is a co-executor (but not a beneficiary) of
this estate along with Mr. Wilson's widow. Mr. Roberson disclaims beneficial
ownership of the shares held in Mr. Wilson's estate.
(11) See notes 1-10 above.
(12) In a Schedule 13G/A filed by Thomson Horstmann & Bryant, Inc. ("TH&B")
on January 11, 2000, TH&B, a registered investment advisor, reported having sole
voting power of 849,579 of such shares, and sole dispositive power of all
1,416,737 of such shares.
(13) In a Schedule 13G/A filed by Private Capital Management, Inc. ("PCM"),
Mr. Bruce S. Sherman, SPS Partners, LP ("SPS") and Mr. Michael J. Seaman on
February 15, 2000, PCM, an investment advisor registered under Section
7
<PAGE> 11
203 of the Investment Advisors Act of 1940, reported having sole voting power
and sole dispositive power of 16,000 shares, and shared dispositive power of
2,854,009 shares beneficially owned by PCM on behalf of its clients. SPS acts as
the Investment Advisor for the Entrepreneurial Value Fund, L.P. ("EVF"), and
exercises shared dispositive power of 171,500 shares. As Chairman of PCM and the
Managing General Partner of SPS, Mr. Sherman shares dispositive power with
respect to shares for which either PCM or SPS has sole or shared dispositive
power (3,041,509 shares), and Mr. Sherman has sole voting and dispositive power
over an additional 28,700 shares. Mr. Seaman is an employee of PCM and has sole
voting and dispositive power of 75,000 shares. Mr. Seaman (i) does not exercise
sole or shared voting or dispositive power with respect to shares for which PCM,
SPS, or Mr. Sherman exercises voting or dispositive power, (ii) disclaims
beneficial ownership of shares for which PCM, SPS, or Mr. Sherman exercises
voting or dispositive power, and (iii) disclaims, along with Mr. Sherman, the
existence of a group. All information in this footnote was obtained from the
Schedule 13G/A filed by PCM, Mr. Sherman, SPS and Mr. Seaman.
(14) In a Schedule 13G filed on February 3, 2000, Dimensional Fund Advisors
Inc. ("Dimensional"), an investment advisor registered under Section 203 of the
Investment Advisors Act of 1940, reporting having sole voting and dispositive
power of 1,355,232 shares. Dimensional furnishes investment advice to four
investment companies registered under the Investment Company Act of 1940, and
serves as investment manager to certain other commingled group trusts and
separate accounts. These investment companies, trusts and accounts are the
"Funds". In its role as investment adviser or manager, Dimensional possesses
voting and/or investment power over the securities of the issuers described in
the schedule that are owned by the Funds. Dimensional disclaims beneficial
ownership of such securities. All information in this footnote was obtained from
the Schedule 13G filed by Dimensional.
8
<PAGE> 12
EXECUTIVE COMPENSATION
The following tables, graphs and other information provide details
concerning executive compensation.
PERFORMANCE GRAPH
The following indexed graph compares the yearly percentage change in the
Company's cumulative total stockholder return on its Common Stock with the
cumulative total return of (i) the Standard and Poor's 500 Stock Index and (ii)
a group of public companies, each of which is engaged in the business of
designing, producing and selling manufactured homes. The industry group
companies included in the index are American Homestar Corporation, Champion
Enterprises, Inc., Clayton Homes, Inc., Fleetwood Enterprises, Inc., Kit
Manufacturing Company, Liberty Homes, Inc., Nobility Homes, Inc., Oakwood Homes
Corporation, Skyline Corporation and Southern Energy Homes, Inc.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cavalier Homes, Inc. 100.00 240.83 251.97 216.25 255.38 90.57
S & P 500 100.00 137.58 169.17 225.60 290.08 351.12
Peer Group 100.00 160.01 162.57 214.43 188.50 94.98
</TABLE>
9
<PAGE> 13
REPORT OF THE COMPENSATION COMMITTEE
GENERAL. The Compensation Committee of the Board of Directors (the
"Committee") currently consists of five directors, Thomas A. Broughton, III, Lee
Roy Jordan, John W Lowe, Gerald W. Moore and A. Douglas Jumper, Sr. The
Committee is responsible for establishing the base salary and annual bonus of
the Company's executive officers. The Committee also reviews other matters
relating to compensation of the Company's executive officers and administers the
terms, conditions and policies of, and the benefits granted under, the Company's
1988 Nonqualified Stock Option Plan, the 1986 Long Term Incentive Compensation
Plan, the 1993 Amended and Restated Nonqualified Stock Option Plan, the Employee
Stock Purchase Plan (the "ESPP"), the 1996 Key Employee Stock Incentive Plan
(the "1996 Plan") and the Executive Incentive Compensation Plan (the "EICP"). In
addition, the Committee is responsible for administering options granted under
the Belmont Homes, Inc. 1994 Incentive Stock Plan that were converted in the
merger involving Belmont into options to purchase shares of the Company's Common
Stock. For a further description of the functioning of the Committee, and the
use of the Non-Employee Director and the Outside Director sub-committees, see
above under the heading "Information Regarding Board of Directors and
Committees." For purposes of this report, references to actions of the Committee
include actions that are taken by these sub-committees or otherwise structured
to comply with Rule 16b-3 and Section 162(m).
COMPENSATION POLICIES. The Committee believes that the most effective
executive compensation program is one which provides incentives to achieve both
increased current profitability and longer term stockholder value. In this
regard, the Committee believes executive compensation should be comprised of a
reasonable annual base salary and an annual cash bonus program that rewards the
executive officers in a manner directly related to the annual profitability of
the Company. Annual bonuses are payable under the EICP based on corporate
performance in comparison to targets previously set by the Committee. While
these bonuses have been paid on a quarterly basis under the EICP in the past,
the Committee has recently decided to change the payment structure of these
bonuses so that they will more closely reflect the Company's annual performance.
The Committee further believes that annual base salary and bonus arrangements
should be supplemented with equity-based programs, pursuant to which the Company
affords the ownership and retention of the Company's Common Stock by its
executive officers and other key employees. The Committee endorses the
proposition that equity ownership by management is beneficial because it aligns
management's and stockholders' interest in the enhancement of stockholder value.
The Committee feels that the combination of these programs helps to assure that
the Company's executive officers and other key employees have a meaningful stake
in the Company, its value, and its long-term and short-term performance.
The Committee determines base salary, bonus and other components of
executive compensation upon the basis of corporate performance, judged by
revenues, earnings, stock trading prices, and strategies, and return on equity
and earnings per share in relation to an industry peer group (which generally
are the companies in the industry group included in the index for the
performance graph set forth above), and on the basis of the Committee's
subjective perception of a particular executive's performance and worth to the
Company, the Company's past compensation practices and a comparison of the
Company's executive compensation with the compensation paid by other companies
in the same industry and, to a lesser extent, a random selection of other
companies. The Committee's decisions respecting stock option grants generally
are made using the same criteria discussed above, and take into consideration
the number of unexercised options held by the executive officers, exercise
prices and market prices of the Company's Common Stock. In making executive
compensation decisions, the Committee considers the views of Mr. Roberson and
Mr. Donnell and information provided by them.
In late 1997 and early 1998, the Committee, with the assistance of an
executive compensation consultant, undertook a review of its executive
compensation policies and implemented certain changes that took effect in 1998.
Based upon the recommendations of the consultant and its finding that Cavalier's
executive officer base salaries were generally below market, the Committee
decided to raise the base salaries of its executive officers, but to lower the
amount of annual cash bonuses that could be earned by the executives under the
EICP and to revise the formula for earning bonuses under the EICP in a manner
that is designed to increase the risk to the executives in earning the bonus
payments. Under the revised annual incentive program, the bonus is still
calculated as a percentage of incentive net income (as defined in the EICP), but
uses a lower percentage at a defined targeted level of incentive net income and
provides that the percentage of incentive net income paid into the bonus pool
varies based on the degree of achievement of the defined incentive net income
target. Other changes include the addition of a minimum level of performance,
below which no incentive would be paid, and a maximum payment or "cap" on the
amount of bonus which can be received. Subsequent to the implementation of these
new bonus arrangements, the Company adopted a deferred compensation plan for its
executive officers and employee directors which permits them to defer some or
all of their
10
<PAGE> 14
bonuses, to elect to have these amounts deemed invested in one or more
investment options established under the plan, and to receive the amounts in
their deferral account upon the occurrence of a distributable event, which
includes attainment of a certain age (i.e., between 65 and 70), death,
disability (as defined in the plan), termination of employment and a change in
control of the Company (as defined in the plan).
As part of the restructuring of executive compensation, the Committee
revised its approach to granting stock-based compensation and implemented the
long-term incentive feature provided for under the EICP. The Committee adopted
the approach of providing annual grants of stock options in more conservative
amounts to the Company's executive officers, whereas in the past the Committee
had granted options less frequently but in greater amounts. The Committee
believes this approach enables it to monitor more closely this component of
compensation and to create more incentive for the executive to remain with the
Company. In addition, in January 1998, the Company's Board of Directors adopted
a policy that, in the event of any cancellation and repricing of options under
the Company's 1996 Plan, the Company's Board of Directors will use all
reasonable efforts to insure that the committee administering the Company's 1996
Plan requires that such cancellation and repricing be approved or ratified by
the stockholders of the Company. With respect to implementing the long-term
incentive feature of the EICP, the Committee has established three long-term
performance periods, one for 1998-1999, one for 1998-2000, and one for
1999-2001. In March, 2000, the Committee established a long-term performance
period for 2000-2002. Long-term incentive compensation would be payable based on
the Company's performance during these periods for average return on equity and
average growth in earnings per share (as such terms are defined in the EICP) as
compared to the performance of a defined industry peer group with respect to
these criteria. The program provides for a threshold, targeted and maximum
incentive payment, and also provides that a reduced payment will be made in the
event a threshold level of incentive net income for the Company is not achieved
over the course of the long-term performance period. The long-term incentive
compensation is generally payable following the end of a performance period in
the form set forth in the EICP, which provides that the Committee will determine
at the time it certifies performance following the end of a long-term
performance period the percentage of the payment, if any (but not to exceed
40%), that will be paid in the form of restricted stock under the terms of the
EICP and the 1996 Plan, with the balance being paid in cash. The number of
shares of restricted stock equals the amount which could be purchased with such
percentage of long-term incentive compensation applying a 20% or 30% discount
from fair market value (as defined in the EICP), as elected by the executive,
with a two-year restriction period on the 20% discount and a three-year
restriction period on the 30% discount.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Roberson's compensation for 1999
was established according to the policies, bases, relationships to corporate
performance and restructuring of executive compensation that are discussed above
as being applicable to the Company's executive officers generally. Mr.
Roberson's base salary was fixed at $375,000 per annum in 1999, which was the
same amount as Mr. Roberson's salary in 1998. Mr. Roberson received a bonus
under the short-term incentive compensation portion of the EICP of $63,206 based
on the Company's financial performance in 1999, which was significantly below
that of previous years. This amount was earned by Mr. Roberson during the first
quarter of 1999, prior to the time when the Company's financial performance
declined due to deteriorating market conditions. Mr. Roberson also earned
$225,000 in long-term incentive compensation for the 1998-1999 performance
period, which was equal to 50% of the targeted amount for this period and was
based on the Company's performance in terms of earnings per share and return on
equity in relation to the peer group's performance on these criteria. In light
of existing industry conditions, and the fact that while the Company's first
quarter performance was positive its annual performance was not, Mr. Roberson
voluntarily agreed, along with the other executive officers of the Company, to
reduce the amount of long-term compensation by the $63,206 amount of short-term
bonus he earned for the first quarter of 1999. This voluntary reduction resulted
in a net payment of long-term incentive compensation of $161,794. Mr. Roberson
received this payment in the first quarter of 2000, which the Committee
determined to pay entirely in cash rather than in some percentage of restricted
stock.
Mr. Roberson was also granted an option to purchase 10,000 shares of the
Company's common stock at $9.66 per share during 1999, which was equal to the
fair market value of the common stock on the date of grant. Mr. Roberson is also
eligible to receive long-term compensation for the long-term compensation
periods of 1998-2000, 1999-2001, and 2000-2002, as further described above.
Mr. Roberson is eligible to participate in the Company's employee stock
purchase and 401(k) plans, as well as the deferred compensation plan described
above, and has a Split Dollar Agreement with the Company, pursuant to which the
Company pays the premiums on a life insurance policy for Mr. Roberson's benefit,
with the Company being entitled to be reimbursed for the premiums paid out of
the cash surrender value on cancellation of the policy or when the death
benefits are paid.
11
<PAGE> 15
Members of the Compensation Committee: Thomas A. Broughton, III, Chairman
Lee Roy Jordan
A. Douglas Jumper, Sr.
John W Lowe
Gerald W. Moore
12
<PAGE> 16
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth information concerning
compensation for services in all capacities, including cash and non-cash
compensation, awarded to, earned by or paid to the Company's Chief Executive
Officer and the other executive officers of the Company in each of the last
three fiscal years, unless otherwise noted.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS PAYOUTS
ANNUAL COMPENSATION ------ -------
------------------- SECURITIES
UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS PAYOUTS COMPENSATION
--------------------------- ---- ------ ----- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
David A. Roberson 1999 $375,000(1) $ 63,206(7)(8) 10,000(10) $161,794(7) $13,278(13)
President and Chief Executive Officer 1998 375,000(2) 496,898(9) 40,000(10) 7,687
1997 200,000(3) 486,482 125,000(10)(11) 9,688
Barry B. Donnell 1999 375,000(1) 63,206(7)(8) 10,000(10) 161,794(7) 12,219(13)
Chairman of the Board 1998 375,000(4) 496,898(9) 40,000(10) 7,818
1997 200,000 486,482 125,000(10) 9,862
Michael R. Murphy 1999 175,000(1) 31,584(7)(8) 7,500(10) 62,166(7) 9,580(13)
Vice President, Chief Financial 1998 175,000(5) 238,511(9) 25,000(10) 7,525
Officer and Secretary-Treasurer 1997 120,000(6) 114,356 62,500(10)(12) 8,438
</TABLE>
- ---------------
(1) Includes $21,250 that Mr. Roberson, Mr. Donnell and Mr. Murphy directed
the Company to withhold and use to purchase 3,053 shares of the Company's Common
Stock at a weighted average price of $6.96 per share pursuant to the terms of
the Company's Employee Stock Purchase Plan (the "ESPP"). Under the ESPP,
employees may elect to have a portion of their compensation withheld, subject to
certain limits, to purchase shares of the Company's Common Stock. The purchase
price for shares purchased under the ESPP is the lesser of 85% of the market
price of the stock as of the first or last day of the applicable payment period.
The payment periods under the ESPP are the six month periods beginning on each
January 1 and July 1.
(2) Includes $21,250 that Mr. Roberson directed the Company to withhold and
use to purchase 2,388 shares of the Company's Common Stock at a weighted average
price of $8.90 per share pursuant to the terms of the ESPP.
(3) Includes $21,250 that Mr. Roberson directed the Company to withhold and
use to purchase 2,500 shares of the Company's Common Stock at a weighted average
price of $8.50 per share pursuant to the terms of the ESPP.
(4) Includes $21,250 that Mr. Donnell directed the Company to withhold and
use to purchase 2,500 shares of the Company's Common Stock at a weighted average
price of $8.50 per share pursuant to the terms of the ESPP.
(5) Includes $21,250 that Mr. Murphy directed the Company to withhold and
use to purchase 2,367 shares of the Company's Common Stock at a weighted average
price of $8.98 per share pursuant to the terms of the ESPP.
(6) Includes $11,440 that Mr. Murphy directed the Company to withhold and
use to purchase 1,365 shares of the Company's Common Stock at a weighted average
price of $8.38 per share pursuant to the terms of the ESPP.
(7) The amounts under the Bonus column reflect short-term incentive
compensation paid in 1999 under the Executive Incentive Compensation Plan (the
"EICP") and earned due to the Company's positive performance in the first
quarter of 1999. The amount in the LTIP Payout column reflects long-term
incentive compensation earned under the EICP for the two-year period ended
December 31, 1999. These amounts reflect an earned payout of $225,000 in the
case of
13
<PAGE> 17
Messrs. Roberson and Donnell and $93,750 in the case of Mr. Murphy, or 50% of
the targeted amount of $450,000 in the case of Messrs. Roberson and Donnell and
$187,500 in the case of Mr. Murphy, based on the Company's performance in terms
of earnings per share and return on equity during the period in relation to the
performance of an industry peer group. In light of industry conditions and the
fact that while the Company's first quarter performance was positive, its annual
performance was not, Messrs. Roberson, Donnell and Murphy voluntarily agreed to
reduce their long-term payout by the amount of short-term bonus previously
received in 1999. The net long-term payout was made in the first quarter of
2000.
(8) Includes amounts that the executive officers directed to be withheld
and paid into the Company's Deferred Compensation Plan in the amount of $6,321
for Messrs. Roberson and Donnell and $3,158 for Mr. Murphy. The Deferred
Compensation Plan permits the executive officers and employee directors of the
Company and certain of its affiliates to defer a portion of their compensation
and have it deemed invested in one of several investment options selected by the
employee. Upon the first to occur of the employee's 70th birthday (or other date
between the employee's 65th and 70th birthday), disability, death, termination
of employment, a change in control of the Company, or some other event
designated by the employee and approved by the committee administering the plan,
the employee will be entitled to receive the balance of the amounts deferred by
the employee and any investment returns on such amounts.
(9) Includes amounts that the executive officers directed to be withheld
and paid into the Company's Deferred Compensation Plan in the amount of $18,372
for Messrs. Roberson and Donnell and $8,815 for Mr. Murphy.
(10) Options granted to executive officers during 1999, 1998 and 1997 were
granted pursuant to the Company's 1996 Key Employee Stock Incentive Plan (the
"1996 Plan"). The 1996 Plan provides for, among other things, the granting of
both incentive and non-qualified stock options. Options granted under the 1996
Plan are generally exercisable six months after the grant date and expire ten
years from the date of grant.
(11) Includes shares of Common Stock underlying an option to purchase
62,500 shares granted on January 17, 1997, which option replaced an option to
purchase 62,500 shares originally granted on May 15, 1996.
(12) Includes shares of Common Stock underlying an option to purchase
12,500 shares granted on January 17, 1997, which option replaced an option to
purchase 12,500 shares originally granted on July 25, 1996.
(13) Includes the following for 1999: (i) matching contribution made by the
Company to its 401(k) plan during 1999 on behalf of Messrs. Roberson and Donnell
in the amount of $5,813 and on behalf of Mr. Murphy in the amount of $3,580;
(ii) directors' fees paid by the Company in 1999 to Messrs. Roberson, Donnell
and Murphy in the amount of $6,000 each; and (iii) amounts paid in connection
with a split dollar insurance agreements between the Company and irrevocable
insurance trusts established by Mr. Roberson and Mr. Donnell, which provide for
the Company to be reimbursed for premiums paid for life insurance, less the
amounts attributable to term insurance, upon the earlier of the cancellation of
the policy or the payment of the death benefits. The amount reflected in the
column includes a portion of the premium payments that are attributable to term
insurance coverages for Mr. Roberson of $1,465.25 and for Mr. Donnell of
$406.09, as determined by tables supplied by the Internal Revenue Service.
14
<PAGE> 18
INFORMATION CONCERNING STOCK OPTIONS
1999 STOCK OPTION GRANTS
During 1999, the Company granted options to purchase 27,500 shares of its
Common Stock to its executive officers, as summarized in the following tables.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
PERCENTAGE OF POTENTIAL REALIZABLE VALUE
NUMBER TOTAL OPTIONS AT ASSUMED ANNUAL RATES OF
OF SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE PRICE FOR OPTION TERM (2)
OPTIONS IN FISCAL PER SHARE EXPIRATION -------------------
NAME GRANTED YEAR ($/SH) DATE 5% ($) 10% ($)
---- ------- ---- ------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
David A. Roberson 10,000(1) 4.6% $9.65625(1) 1/25/09 60,219 153,085
Barry B. Donnell 10,000(1) 4.6% $9.65625(1) 1/25/09 60,219 153,085
Michael R. Murphy 7,500(1) 3.4% $9.65625(1) 1/25/09 45,164 114,814
</TABLE>
- ---------------
(1) These awards were made pursuant to the 1996 Key Employee Stock
Incentive Plan. Each of the options granted to the named executives in 1999
became exercisable on July 25, 1999. The exercise price of these options is
equal to the fair market value of the Company's Common Stock on the date of
grant.
(2) The dollar gains under these columns result from calculations assuming
5% and 10% growth rates as set by the Securities and Exchange Commission and are
not intended to forecast future price appreciation of the Company's Common
Stock. The gains reflect future value based upon growth at these prescribed
rates. Stock options have value to recipients, including the listed executives,
only if the market price of the Company's Common Stock increases above the
option exercise price reflected in the table during the period the option
remains exercisable.
15
<PAGE> 19
During 1999, no options to purchase shares of Common Stock were exercised
by the named executive officers. Stock options to purchase 27,500 shares were
granted to these persons during 1999, and an aggregate of 570,000 shares were
subject to stock options that were unexercised at the end of the year. The
following table summarizes the foregoing:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT FISCAL
FISCAL YEAR-END (#) YEAR-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
- ---- --------------- ------------ ------------- ----------------
<S> <C> <C> <C> <C> <C>
David A. Roberson................... -- $ -- 175,000 / 0 $0 / $0
Barry B. Donnell.................... -- $ -- 300,000 / 0 $0 / $0
Michael R. Murphy................... -- $ -- 95,000 / 0 $0 / $0
</TABLE>
- ---------------
(1) A fair market value of $3.9375 per share is used to calculate the value
of unexercised options, which is based upon the closing sale price of the
Company's Common Stock on the New York Stock Exchange on December 31, 1999, the
final trading day of 1999. The actual value, if any, a person may realize as a
result of an option will depend on the excess of the stock price over the
exercise price on the date the option is exercised.
LONG-TERM INCENTIVE COMPENSATION*
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
PERFORMANCE OR UNDER NON-STOCK PRICE-BASED PLANS
OTHER PERIOD UNTIL ---------------------------------
NAME MATURATION OR PAYOUT THRESHOLD TARGET MAXIMUM
---- -------------------- --------- ------ -------
<S> <C> <C> <C> <C>
David A. Roberson December 31, 2000 $ 112,500 $450,0$0 $675,000
December 31, 2001 75,000 300,000 450,000
Barry B. Donnell December 31, 2000 $ 112,500 $450,000 $675,000
December 31, 2001 75,000 300,000 450,000
Michael R. Murphy December 31, 2000 $ 46,875 $187,500 $281,250
December 31, 2001 31,250 125,000 156,250
</TABLE>
- ---------------
* Under the Executive Incentive Compensation Plan (the "EICP"), the
Compensation Committee has established two long-term performance periods, one
for a three-year period ending December 31, 2000 and the other for a three-year
period ending December 31, 2001. Long-term incentive compensation is payable
based on the Company's performance during these periods for return on equity and
growth in earnings per share (as such terms are defined in the EICP) as compared
to the performance of a defined industry peer group with respect to these
criteria. The program provides for a threshold, targeted and maximum incentive
payment, and also provides that a reduced payment will be made in the event a
threshold level of incentive net income for the Company over the long-term
performance period is not achieved. The Compensation Committee determines at the
time it certifies performance following the end of a long-term performance
period the percentage of the payment, if any (but not to exceed 40%), that will
be paid in the form of restricted stock under the terms of the EICP and the 1996
Plan, with the balance being paid in cash. The number of shares of restricted
stock equals the amount which could be purchased with such percentage of
long-term incentive compensation applying a 20% or 30% discount from fair market
value (as defined in the EICP), as elected by the executive, with a two-year
restriction period on the 20% discount and a three-year restriction period on
the 30% discount.
16
<PAGE> 20
RETENTION AND SEVERANCE AGREEMENTS
In August, 1998, the Company entered into Retention and Severance
Agreements (the "Retention Agreements") with Messrs. Roberson, Donnell and
Murphy. The Retention Agreements provide that in the event the executive
officer's employment with the Company is involuntarily terminated (including a
constructive termination, as defined in the agreement) within two years
following a change in control for reasons other than cause, disability, or
retirement (as such terms are defined in the agreement) or death (an
"Involuntary Termination"), the executive officer will be entitled to a lump sum
payment equal to his base salary through the date of termination plus certain
bonus and incentive amounts earned but not yet paid to, and prorated amounts for
bonuses and incentive compensation not yet earned by, the executive officer
under the Company's bonus and incentive plans. In addition, upon an Involuntary
Termination, Messrs. Roberson and Donnell will be entitled to severance pay
equal to 2.99 times the sum of, and Mr. Murphy will be entitled to severance pay
equal to 2.00 times the sum of, such executive officer's annual base salary, the
average annual bonus received by the executive officer for the three years
immediately preceding the date of termination, and the amount most recently paid
under the Company's performance based long-term incentive program (or deemed
paid under the terms of the agreement if no amounts have yet become due under
the program).
Each Retention Agreement also provides that in the event the executive
officer voluntarily terminates his employment within two years following a
change in control for reasons other than disability, retirement or death or in
connection with an event of constructive termination, as such terms are defined
in the Retention Agreement (a "Voluntary Termination"), the executive officer
will be entitled to a lump sum payment equal to his full base salary through the
date of termination plus certain bonus and incentive amounts earned but not yet
paid to, and prorated amounts for bonuses and incentive compensation not yet
earned by, the executive officer under the Company's bonus and incentive plans.
In addition, upon a Voluntary Termination, the executives will be entitled to
severance pay equal to the sum of such executive officer's annual base salary,
the average annual bonus received by the executive officer for the three years
immediately preceding the date of termination, and the amount most recently paid
under the Company's performance based long-term incentive program (or deemed
paid under the terms of the agreement if no amounts have yet become due under
the program).
Each Retention Agreement also provides that, in the event of an Involuntary
Termination or a Voluntary Termination, the Company will maintain certain health
insurance and other employment benefits for the executive officer until the
earlier of (a) three years in the case of an Involuntary Termination or one year
in the case of a Voluntary Termination, and (b) such time as the executive
officer obtains substantially the same coverage from a new employer. The
Retention Agreements further provide that additional "gross up" amounts are
payable to the extent necessary for the net amount received by the executive
under the Retention Agreements and other benefit agreements applicable to the
executive to be the same as they otherwise would be in the absence of any
"golden parachute" excise taxes payable under Section 280G of the Code. The
Retention Agreements will terminate upon the earliest of the following: (1)
termination of the executive officer's employment with the Company prior to a
change in control; (2) the performance by the Company of all its obligations
following a Voluntary Termination or an Involuntary Termination; or (3) August
26, 2003. At the time of entering into the Retention Agreements with Messrs.
Roberson, Donnell and Murphy, the Company entered into similar agreements with
certain other key employees of the Company on terms comparable to Mr. Murphy's
agreement.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The following directors of the Company currently serve as members of the
Compensation Committee: Thomas A. Broughton, III, Lee Roy Jordan, John W Lowe,
Gerald W. Moore and A. Douglas Jumper, Sr.
The Company has a $35 million revolving and term loan agreement (the
"Credit Facility") with its primary lender, First Commercial Bank. No amounts
were outstanding under the Credit Facility at December 31, 1999. First
Commercial Bank has also issued letters of credit for six industrial development
bond issues relating to Company properties and provides financing to certain
Texas joint ventures in which the Company is a limited partner, as further
described below. Since no amounts were outstanding under the Credit Facility
during 1999, the Company made no interest payments to First Commercial Bank
during 1999. The Company made payments to First Commercial Bank in the amount of
$145,280 for commitment, letter of credit and trustee fees in 1999. Mr.
Broughton is the President of
17
<PAGE> 21
First Commercial Bank. The Company believes that the terms of the Credit
Facility and these other financing arrangements are reasonable compared to terms
that would be present in a similar credit facility or other financing
arrangements entered into with an unaffiliated entity.
The Company, along with two other manufactured housing producers, is a
limited partner in three separate limited partnerships formed to do business in
the State of Texas. One of the limited partnerships owns real estate (the "Real
Estate Partnership") that is leased to the other limited partnerships, one of
which engages in the business of producing roof trusses (the "WoodPerfect
Partnership") and the other of which may engage in the business of laminating
wall panels (the "Hillsboro Partnership"). Each of the operating partnerships is
expected to sell its products to manufactured housing producers, including those
producers that are partners in such partnerships. Financing for these businesses
was provided through industrial bond financing, and the lease payments from the
WoodPerfect Partnership and the Hillsboro Partnership to the Real Estate
Partnership are designed to service this indebtedness. In addition, First
Commercial Bank provides a line of credit and equipment loan to each of the
WoodPerfect Partnership and the Hillsboro Partnership and a loan to the Real
Estate Partnership to fund construction of the project, and also has issued a
letter of credit as security for the industrial bond financing for the project,
for which First Commercial Bank receives customary fees. The Company owns an
approximate 25% interest in the Real Estate Partnership and the WoodPerfect
Partnership, and an approximate 33 1/3% interest in the Hillsboro Partnership.
Lee Roy Jordan is also an approximate 25% limited partner in the Real Estate
Partnership and the WoodPerfect Partnership. Mr. Jordan is also the sole member
in the two limited liability companies that serve as the general partners to the
Real Estate Partnership and the WoodPerfect Partnership. One of the limited
liability companies owns a 0.01% interest in the Real Estate Partnership and the
other limited liability company owns a 0.01% interest in the WoodPerfect
Partnership. The Company purchased approximately $1.2 million in roof trusses
during 1999 from the WoodPerfect Partnership in the ordinary course of business.
The Company believes that the payments made for these products are reasonable
compared to amounts that would have been paid to unaffiliated entities for
similar products. The Hillsboro Partnership had not commenced manufacturing
operations as of the date of this Proxy Statement.
Mr. Lowe is a partner in the law firm of Lowe, Mobley & Lowe, which
rendered legal services to the Company and its subsidiaries during 1999 and
which the Company expects to continue to render legal services during 2000. Mr.
Lowe also has an ownership interest in an entity that leases a warehouse to the
Company, as described below. During 1999, the Company and its subsidiaries paid
Lowe, Mobley & Lowe legal fees in the aggregate amount of $269,400.
Until January, 1999, Cavalier Homes of Alabama ("Cavalier - Alabama"), a
division of one of the Company's subsidiaries, leased a manufacturing facility,
office premises and certain equipment from a partnership, the partners of which
include the estate of the former President and Chief Executive Officer of the
Company, Jerry F. Wilson, and John W Lowe, each of whom owns a one-third
interest in such partnership. Cavalier - Alabama exercised its option under the
lease to purchase the leased property for $1,900,000 in January, 1999. The
Company believes that the price paid for the property is reasonable compared to
amounts that would have been paid to an unaffiliated entity for similar
property.
Until January, 1999, Cavalier - Alabama leased another manufacturing
facility from a partnership, the partners of which include David A. Roberson,
who owns a 10% interest in such partnership, and Jonathan B. Lowe and Michael P.
Lowe, each of whom owns a 5% interest in such partnership and each of whom is a
son of John W Lowe. Cavalier - Alabama exercised its option under the lease to
purchase the leased property for $1,500,000 in January, 1999. The Company
believes that the price paid for the property is reasonable compared to amounts
that would have been paid to an unaffiliated entity for similar property.
Quality Housing Supply, LLC ("Quality"), a wholly owned subsidiary of the
Company, leases a manufacturing facility from a corporation whose shareholders
include Mike Kennedy, a director of the Company, Jonathan B. Lowe and Michael P.
Lowe, each of whom owns 10% of the outstanding common stock of such corporation.
The lease expires in July, 2004 and provides for rental payments to be made by
Quality in the amount of $150,000 per year until July, 2000, at which time
annual rental payments will be increased to $180,000 per year. The lease further
provides that Quality has the option to purchase the leased property at any time
during the term of the lease for $1,125,000, subject to adjustment based on
changes in the consumer price index if such purchase is made on or after July 1,
2000. The Company believes that the payments made and to be made under the lease
are reasonable compared to amounts that would be paid to an unaffiliated entity
for similar property.
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<PAGE> 22
Quality also leases a warehouse from a corporation in which John W Lowe
owns a 25% interest. The initial term of this lease expired in April, 1999, and
was renewed for an additional five years at the option of Quality. The lease
provided for rental payments to be made by Quality in the amount of $72,000 per
year during the initial lease term. The rent payable during the renewal term is
$90,000. Quality made rental payments under the lease in the amount of $84,000
in 1999 and expects to make rental payments in the amount of $90,000 in 2000.
The lease further provides that Quality has the option to purchase the leased
property for $850,000, subject to adjustment based on changes in the consumer
price index if such purchase occurs following the initial lease term. The
Company believes that the payments made and to be made under the lease are
reasonable compared to amounts that would be paid to an unaffiliated entity for
similar property.
During 1999, Belmont Homes, Inc., a subsidiary of the Company ("Belmont"),
purchased from Keith Kennedy for $200,000 a 10% interest in a company that
manufactures and distributes roof trusses and other lumber products and sells
them primarily to producers of manufactured homes, including Belmont and other
subsidiaries of the Company. Keith Kennedy is the brother of Mike Kennedy and
was employed at Belmont until September of 1999. The purchase price was equal to
$20,000 above Mr. Kennedy's initial investment in the company and was determined
by negotiation between Mr. Kennedy and Mr. Roberson. During 1999, the Company
and its subsidiaries purchased approximately $8.6 million in roof trusses and
other lumber products from this entity in the ordinary course of business.
Jonathan B. Lowe and Michael P. Lowe also have a minority ownership interest in
this entity. Richard Roberson, Mr. Roberson's brother, also has a minority
ownership interest in and is an executive officer of this entity. The Company
believes that the purchase price paid to Keith Kennedy for his interest in this
entity, and the payments made for the products purchased from this entity, were
reasonable compared to amounts that would have been paid to unaffiliated
entities for a similar interest or for similar products.
Belmont paid approximately $337,000 in 1999 for the construction of plant
facilities to a corporation in which A. Douglas Jumper, Sr. owns a 50% interest.
Mr. Jumper also serves as the president of this corporation. The Company
believes that the payments made to this corporation were reasonable compared to
amounts that would have been paid to an unaffiliated entity for similar
services.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1999, Belmont paid approximately $730,000 for certain furnishings to
be installed in homes manufactured by Belmont to a corporation in which Mike
Kennedy owned a 20% interest. Keith Kennedy, Mike Kennedy's brother, also owned
a minority interest in this corporation. Both Mike Kennedy and Keith Kennedy
sold their stock in this corporation in late 1999 to a person unaffiliated with
the Company. The Company believes that the payments made to this corporation
were reasonable compared to amounts that would have been paid to an unaffiliated
entity for similar products.
For a discussion of other relationships and transactions involving
directors or executive officers of the Company, see "Compensation Committee
Interlocks and Insider Participation" above.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's executive officers, directors and beneficial owners of more
than 10% of the Company's Common Stock are required under the Exchange Act to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Copies of these reports
must also be furnished to the Company. Based solely on a review of copies of
such reports furnished to the Company, the Company believes that during 1999 all
applicable filing requirements were complied with in a timely manner.
OTHER MATTERS
The Board of Directors does not know of any other business to be presented
for consideration at the Annual Meeting. If other matters properly come before
the Annual Meeting, the persons named in the accompanying form of proxy will
vote thereon in their best judgment.
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STOCKHOLDER PROPOSALS
Stockholder proposals submitted for consideration at the 2001 Annual
Meeting of Stockholders must be received by the Company no later than December
5, 2000, to be considered for inclusion in the 2001 proxy materials. According
to the Company's By-laws, for a stockholder proposal to be properly brought
before the 2001 Annual Meeting of Stockholders (other than a proposal to be
considered for inclusion in the 2001 proxy materials), it must be a proper
matter for stockholder action and must be delivered to the secretary of the
Company no earlier than January 4, 2001 and no later than February 19, 2001.
/s/ Michael R. Murphy
Michael R. Murphy
Secretary
Addison, Alabama
April 4, 2000
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<PAGE> 24
CAVALIER HOMES, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints David
A. Roberson and Michael R. Murphy, or either of them, proxies of the
undersigned, with full power of substitution, to represent and to vote all
shares of Common Stock of Cavalier Homes, Inc. which the undersigned would be
entitled to vote at the Annual Meeting of Stockholders of Cavalier Homes, Inc.,
to be held on Tuesday, May 16, 2000, beginning at 10:00 A.M., C.D.T., at The
Summit Club, Suite 3100, AmSouth-Harbert Plaza, 1901 6th Avenue North,
Birmingham, Alabama and at any adjournment or postponement thereof, in the
following manner:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below
(except as otherwise instructed below)
[ ] AUTHORITY WITHHELD
to vote for all nominees listed below
Thomas A. Broughton, III, Barry B. Donnell, Lee Roy Jordan, A. Douglas
Jumper, Sr., Mike Kennedy, John W Lowe, Gerald W. Moore, Michael R. Murphy
and David A. Roberson
To withhold authority to vote for any nominee, write that nominee's name in the
space provided below.
- --------------------------------------------------------------------------------
2. PROPOSAL TO RATIFY AND APPROVE THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on other side)
3. OTHER MATTERS
[ ] In their discretion, upon such other matters as may
properly come before the meeting
[ ] AUTHORITY WITHHELD to vote upon such matters
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR LISTED ON THE REVERSE
SIDE, FOR ITEM 2, AND IN THE DISCRETION OF THE PERSONS APPOINTED HEREIN UPON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS
OR POSTPONEMENTS THEREOF.
Dated: , 2000
-------------------
-------------------------------
Signature
-------------------------------
Signature
Please sign this proxy exactly
as your name appears hereon.
When signing as executor,
administrator, trustee,
corporate officer, etc., please
give full title. In case of
joint owners, each joint owner
should sign.
Please Date, Sign and Return TODAY in the enclosed envelope. No Postage Required
if Mailed in the United States.
