<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 Rule 240.14a-11(c) or Rule 240.14a-12
SCHULT HOMES CORPORATION
(Name of Registrant as specified in its charter)
(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the Appropriate Box):
( ) 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: Common Shares, Employee Share Options, Directors'
Compensation Plan Shares.
(2) Aggregate Number of Securities to which transaction applies:
4,475,875 Common Shares, 180,000 Employee Share Options, 381
Employee Share Purchase shares, and 9,174 Directors' Compensation
Shares.
(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):
$22.50 per Share (being the amount payable to the Registrant's
shareholders in the proposed merger).
(4) Proposed maximum aggregate value of transaction: $104,972,175.00.
(5) Total fee paid: $20,994.44.
(X) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule, or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
SCHULT HOMES CORPORATION
221 U.S. 20 West
P.O. Box 151
Middlebury, Indiana 46540
____________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 1, 1998
____________________
A Special Meeting of Shareholders of Schult Homes Corporation ("Schult")
will be held at Das Dutchman Essenhaus, 240 U.S. 20 West, Middlebury, Indiana,
on April 1, 1998, at 1:30 P.M., E.S.T.
The Special Meeting will be held (i) to consider and vote on adoption of
an Acquisition Agreement and the Plan of Merger (collectively, the "Acquisition
Agreement") with A&B Acquisition Corp., an Indiana corporation ("Merger Sub"),
and its parent, Oakwood Homes Corporation ("Oakwood") dated January 5, 1998;
and (ii) to transact such other business as may properly come before the
Special Meeting or any adjournment thereof. A copy of the Acquisition
Agreement is included with the Proxy Statement, and you should consider the
entire Proxy Statement. Pursuant to the Acquisition Agreement, Merger Sub will
be merged into Schult (the "Merger"), Schult will become a wholly owned
subsidiary of Oakwood, and each Schult Common Share will be converted into the
right to receive $22.50 in cash, without interest (the "Merger Price").
Only shareholders of record on the books of Schult at the close of
business on March 4, 1998, the record date with respect to this solicitation,
will be entitled to notice of and to vote at the Special Meeting and any
adjournment thereof.
All shareholders are cordially invited to attend the Special Meeting in
person. If you are unable to do so, please execute the enclosed proxy and
return it in the enclosed addressed envelope, since a majority of the
outstanding shares must be represented at the meeting in order to transact
business. Your promptness in returning the proxy will assist in the
expeditious and orderly processing of the proxies. If you return your proxy,
you may nevertheless attend the Meeting and vote your shares in person, if you
wish.
THE BOARD OF DIRECTORS OF SCHULT HAS UNANIMOUSLY DETERMINED THAT THE
ACQUISITION AGREEMENT IS FAIR TO AND IN THE BEST INTERESTS OF SCHULT AND ITS
SHAREHOLDERS, AND THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF THE
ACQUISITION AGREEMENT BY SCHULT SHAREHOLDERS.
<PAGE> 3
Please complete, sign, date and return the enclosed proxy promptly, whether or
not you intend to attend the meeting. A self-addressed, stamped envelope is
enclosed for your convenience. PLEASE DO NOT SEND SHARE CERTIFICATES AT THIS
TIME. If the Schult Shareholders approve the Merger and the Merger becomes
effective, Schult will provide written notice of consummation of the Merger,
together with instructions on the manner in which you are to transmit your
Share certificates for surrender and receive the Merger Price.
By Order of the Board of Directors,
SCHULT HOMES CORPORATION
Kennard R. Weaver
March 4, 1998 Secretary
Middlebury, Indiana
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SCHULT HOMES CORPORATION
221 U.S. 20 West
P.O. Box 151
Middlebury, Indiana 46540
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 1, 1998
____________________
PROXY STATEMENT
____________________
SOLICITATION OF PROXIES
Approximate date of mailing - March 4, 1998
The accompanying proxy is solicited by the Board of Directors of Schult
Homes Corporation ("Schult") for use at Schult's Special Meeting of
Shareholders to be held at Das Dutchman Essenhaus, 240 U.S. 20 West,
Middlebury, Indiana, on April 1, 1998, at 1:30 P.M., E.S.T., and at any and
all adjournments thereof. All shares represented by each properly executed
unrevoked proxy received in time for the Meeting will be voted in the manner
specified therein. Any shareholder has the power to revoke his or her proxy at
any time before it is voted. A proxy may be revoked by delivering a written
notice of revocation to the Secretary of Schult, by a subsequent proxy executed
by the person executing the prior proxy and presented to the Meeting, or by
attendance at the Meeting and voting in person by the person executing the
proxy.
The Proxy Statement is being mailed to Schult's shareholders on or
about March 4, 1998. The solicitation will be made by mail at Schult's
expense, and expenses will include reimbursements paid to brokerage firms and
others for their expenses in forwarding solicitation material regarding the
meeting to beneficial owners of Schult Common Shares. Further solicitation of
proxies may be made by telephone or oral communication with some shareholders.
All such further solicitation will be made by Schult's regular employees who
will not receive additional compensation for that solicitation. The mailing
address of Schult's principal executive offices is 221 U.S. 20 West, P.O. Box
151, Middlebury, Indiana 46540.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
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TABLE OF CONTENTS
<TABLE>
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Page
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FORWARD-LOOKING STATEMENTS........................................................................... 3
VOTE REQUIRED TO APPROVE THE MERGER.................................................................. 3
AVAILABLE INFORMATION................................................................................ 3
SUMMARY.............................................................................................. 4
Parties........................................................................................... 4
The Special Meeting............................................................................... 4
Recommendation of Schult's Board of Directors..................................................... 4
Interests of Certain Persons in the Merger........................................................ 5
Opinion of Financial Advisor...................................................................... 5
Source and Amount of Funds........................................................................ 6
Conditions to the Merger.......................................................................... 6
Treatment of Share Options and Directors' Units................................................... 6
Effective Time.................................................................................... 7
Termination....................................................................................... 7
Certain Federal Income Tax Consequences........................................................... 7
Regulatory Approvals.............................................................................. 8
Cancellation of Schult Share Certificates......................................................... 8
Dissenters' Rights................................................................................ 8
SUMMARY FINANCIAL INFORMATION CONCERNING SCHULT...................................................... 8
MARKET VALUE INFORMATION............................................................................. 9
EXPENSES AND SOLICITATION........................................................................... 10
INDEPENDENT PUBLIC ACCOUNTANTS...................................................................... 10
SHAREHOLDER PROPOSALS............................................................................... 10
THE ACQUISITION AGREEMENT........................................................................... 10
FACTORS TO BE CONSIDERED............................................................................ 14
BACKGROUND OF THE MERGER............................................................................ 14
RECOMMENDATIONS OF THE BOARD: FAIRNESS OF THE MERGER............................................... 16
OPINION OF FINANCIAL ADVISOR........................................................................ 17
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................................................. 21
ACCOUNTING TREATMENT OF THE MERGER.................................................................. 21
DISSENTERS' RIGHTS.................................................................................. 22
INTERESTS OF CERTAIN PERSONS IN THE MERGER.......................................................... 22
HOLDINGS OF SCHULT COMMON SHARES.................................................................... 22
Persons Known to Own Beneficially More Than Five Percent (5%) of Outstanding Shares.............. 23
Security Ownership of Certain Schult Management.................................................. 23
OPTIONS TO PURCHASE SCHULT COMMON SHARES............................................................ 24
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................................... 25
OTHER MATTERS....................................................................................... 26
ACQUISITION AGREEMENT............................................................................... Exhibit 1
FAIRNESS OPINION LETTER............................................................................. Exhibit 2
</TABLE>
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FORWARD-LOOKING STATEMENTS
This Proxy Statement contains certain forward-looking statements. These
statements are made upon assumptions by Schult management based upon facts
known to them when the statements are made, and Schult does not intend to
update these statements in the future. There are risk factors in Schult's
business, including interest rates and general economic conditions, sudden
increases in materials costs, increased interest rates for retailers and
consumers, and weather adversely affecting production and shipments. Consumer
confidence levels affect purchases of homes, and shifts may occur suddenly.
There have been significant changes in the retail sale and distribution of
manufactured homes in recent months, and this trend may continue or other
developments may occur with adverse effects on Schult's sales. Additional
factors which may affect Schult's performance may be found in other filings by
Schult with the United States Securities and Exchange Commission (the
"Commission"), to which reference is made.
VOTE REQUIRED TO APPROVE THE MERGER
Holders of record of the 4,475,875 Schult common shares (the "Shares")
outstanding at the close of business on March 4, 1998, the record date with
respect to this solicitation, will be entitled to notice of the Meeting and to
one vote per share at the Meeting and any adjournment or adjournments thereof.
The holders of at least 2,237,938 Shares, a majority of the Shares, must
vote in favor of the Acquisition Agreement in order to obtain approval.
AVAILABLE INFORMATION
Schult is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and files periodic reports, proxy
statements, and other information statements with the Commission. All of those
documents may be inspected and copied at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and are available for inspection and copying at the public
reference facilities of the regional offices at 7 World Trade Center, Suite
1300, New York, New York 10048, and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60611-2511. Copies of such information may be
obtained by mail from the Public Reference Section, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a World Wide Web site at http:\\www.sec.gov, with
copies of all such reports available there.
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SUMMARY
This summary highlights information found in this Proxy Statement, is not
complete, and is qualified in its entirety by reference to the information
found in the remaining portions of this Proxy Statement. Shareholders are
urged to read the entire Proxy Statement carefully, which describes the
material provisions of the Acquisition Agreement and the exhibits to it.
Shareholders should also read the entire Acquisition Agreement and the opinion
of ABN AMRO Chicago Corporation ("AACC"), a copy of each of which is included
with this Proxy Statement.
Parties. Schult, an Indiana corporation, is the eighth largest
manufacturer of manufactured homes in the United States, and it manufactures
and distributes, through independent retailers, both manufactured homes (built
according to the National Manufactured Home Construction and Safety Standards
Act) and modular homes (built pursuant to the various State building codes).
Schult serves markets nationwide with manufacturing facilities in Middlebury
and Etna Green, Indiana; Milton and Lewistown, Pennsylvania; Redwood Falls,
Minnesota; Navasota, Texas; Plainville, Kansas; Buckeye, Arizona; and
Hermiston, Oregon. Its principal executive offices are at 221 U.S. Highway 20,
Middlebury, Indiana 46540.
Oakwood, which was founded in 1946, designs, manufactures and markets
manufactured homes and finances the majority of its sales. Oakwood operates
five manufacturing plants in North Carolina, five in Georgia, three in Texas,
and one each in California, Colorado, Oregon and Tennessee. Oakwood's
manufactured homes are sold at retail primarily through 300 Oakwood owned and
operated sales centers. Oakwood writes insurance for customers choosing to
purchase insurance and reinsures the risk on the insurance it writes.
Oakwood's Common Stock is listed on the New York Stock Exchange and trades
under the symbol OH. Oakwood's principal executive offices are located at 7800
McCloud Road, Greensboro, North Carolina 27409. Merger Sub is a wholly-owned
subsidiary of Oakwood Homes Corporation, organized for the purpose of merging
with Schult. Merger Sub's principal executive offices are located at 7800
McCloud Road, Greensboro, North Carolina 27409.
The Special Meeting. The Special Meeting of the shareholders of Schult
will be held at 1:30 P.M., April 1, 1998, at Das Dutchman Essenhaus, 240 U.S.
20 West, Middlebury, Indiana 46540 to permit Schult shareholders to consider
and vote upon a proposal to approve the Merger provided for in the Acquisition
Agreement. If approved by the Schult shareholders, as a result of the Merger,
Schult shareholders will have the right to receive $22.50 per share (without
interest) for each Share held at the Effective Time of the Merger, and Oakwood,
through its acquisition subsidiary Merger Sub, will acquire Schult. Only
shareholders of record on March 4, 1998, will be permitted to vote at the
Special Meeting. The affirmative vote of a majority of the Shares will be
required to approve the Acquisition Agreement. The obligations of Schult and
Merger Sub to consummate the Acquisition Agreement are conditioned upon, among
other things, the affirmative vote of a majority of the Shares approving the
Merger. See "Factors to be Considered."
Recommendation of Schult's Board of Directors. SCHULT HOMES
CORPORATION'S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT
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THE ACQUISITION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY IT, TAKEN AS A
WHOLE, ARE FAIR TO, AND ARE IN THE BEST INTERESTS OF SCHULT'S COMMON
SHAREHOLDERS. THE BOARD RECOMMENDS APPROVAL OF THE ACQUISITION AGREEMENT. For
discussion of the factors considered by the Board, see "Recommendations of the
Board: Fairness of the Merger."
Interests of Certain Persons in the Merger. Schult's Board of
Directors and Executive Officers have significant holdings of Schult Common
Shares, and options to purchase shares. See "Holdings of Schult Common
Shares-Security Ownership of Certain Schult Management" and "Options to
Purchase Schult Common Shares". In addition, upon consummation of the Merger,
certain Schult Officers (Walter E. Wells, John P. Guequierre, Ervin L.
Bontrager, William S. Reasor, and Frederick A. Greenawalt) will enter into
two-year noncompete agreements, providing for certain severance benefits at the
rate of base compensation currently being received, in addition to the bonus
compensation earned for the fiscal year ended June 27, 1997. In addition,
Oakwood's management will recommend to the compensation committee of Oakwood's
Board of Directors that certain Schult Officers (Walter E. Wells, John P.
Guequierre, Ervin L. Bontrager, and William S. Reasor) will be granted options
to purchase Oakwood Shares, at the market price for Oakwood Shares on the date
of the grant. See "Interests of Certain Persons in the Merger." Further,
Schult's Articles of Incorporation provide for indemnification of all of
Schult's Directors and Officers by Schult for their actions, including their
approval and recommendation of the Acquisition Agreement and all actions taken
in connection with the Merger.
Opinion of Financial Advisor. Schult retained AACC as its financial
advisor to render an opinion as to the fairness of the Merger Price to Schult's
shareholders. See "Opinion of Financial Advisor." Schult selected AACC
because of its reputation, its knowledge of the industry, and its past relation
to Schult. Schult contacted or interviewed other potential financial advisors
prior to selecting AACC. On January 5, 1998, AACC rendered an opinion that, as
of such date, and subject to certain assumptions, factors and limitations set
forth in its written opinion, the Merger Price to be received by Schult
shareholders is fair to them from a financial point of view. A copy of AACC's
opinion is included with this Proxy Statement.
In connection with its opinion, AACC reviewed the Acquisition Agreement
and held discussions with certain senior Officers of Schult, members of its
Board of Directors, and other representatives and advisors of Schult concerning
the business, operations, and prospects of Schult. AACC reviewed the financial
terms of the Merger as set forth in the Acquisition Agreement in relation to:
(i) current and historical market prices of the Shares; (ii) Schult financial
and operating data; and (iii) the capitalization and financial condition of
Schult. In addition, AACC considered, to the extent publicly available, the
financial terms of certain other companies whose operations AACC considered
relevant in evaluating those of Schult. In rendering its opinion, AACC
assumed and relied upon the accuracy and completeness of the financial and
other information reviewed by it, and it did not make, obtain or assume any
responsibility for independent verification of such information. In addition,
AACC did not make an independent evaluation or appraisal of Schult. In
connection with AACC's engagement, AACC did not solicit indications of interest
from third parties for the
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possible acquisition of Schult. Neither did AACC recommend or determine the
amount of consideration to be paid. See "Opinion of Financial Advisor."
Schult has agreed to pay AACC a noncontingent financial advisory fee of
$300,000 for its services as financial advisor to the transaction. AACC served
as one of the lead underwriters for Schult's public offering of shares in 1992.
An additional fee of up to 1% of the transaction price may be paid in the event
a transaction at a cash price greater than $22.50 per Share is consummated.
Source and Amount of Funds. The total amount of funds necessary to
accomplish payment to Schult shareholders is estimated to be $102,000,000,
which is expected to be available to Oakwood and Merger Sub primarily from a
$100,000,000 credit facility from NationsBank. Oakwood has received a
commitment from NationsBank, which is subject to a number of conditions
described in "Conditions to the Merger."
Conditions to the Merger. The obligations of Schult, Merger Sub, and
Oakwood to conclude the Merger are conditioned upon approval of the Merger by a
majority of the Shares; and to expiration or waiver of the waiting period under
the Hart-Scott-Rodino Act of 1976, as amended. Oakwood's obligation to close
is also conditioned upon Oakwood having obtained financing in the amount of
$100 million and on terms and conditions set forth in a commitment letter with
NationsBank, N.A. and NationsBanc Montgomery Securities; its receipt of certain
Phase I environmental assessments with respect to Schult's properties and the
results of any reports from any supplemental testings deemed advisable thereby
which shall not disclose remediation or other work deemed advisable in excess
of $500,000, and any additional environmental due diligence by Oakwood shall
not disclose any condition or liability expected to have a material adverse
effect on Schult; and that certain key employees of Schult shall have entered
into agreements with Oakwood restricting their ability to compete with Oakwood
and providing for the payment by Oakwood of certain severance benefits in the
event their employment is terminated by Oakwood. Oakwood may waive these
closing conditions. Oakwood's obligation to close was also conditioned (on the
date the Acquisition Agreement was signed), upon its review for a specified
period of Schult's business operations and certain other matters relating to
Schult not disclosing any information or conditions which an investor would
reasonably expect to have a material adverse effect on Schult or information or
conditions materially adversely different than that disclosed in Schult's
filings with the Commission. The time period for both such reviews has now
lapsed, and Oakwood has not notified Schult of any obstacle to closing. In
addition, the obligations of each party are subject to certain customary
closing conditions that may be waived by the party benefitting from the
condition, including that all representations and warranties made by either
party are true as of the Effective Time. See the Acquisition Agreement
included with this Proxy Statement.
Treatment of Share Options and Directors' Units. Existing options to
purchase Schult Common Shares will be either converted into options to
purchase Oakwood Shares at the exchange ratio described in the Acquisition
Agreement, or exercised at the option price and the Shares issued upon exercise
will then receive the right to receive the Merger Price, at the election of the
holders of the options. Employee Share Purchase Plan shares will have the
right to receive cash at the Merger Price. Directors' Compensation Plan Units
will be converted into Schult
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Common Shares and converted into the right to receive cash at the Merger
Price. See the Acquisition Agreement.
Effective Time. The parties intend that the Closing will take place as
soon as possible after the conditions of the Acquisition Agreement are met.
The Effective Time of the Merger shall be the time the Plan of Merger is filed
with the Indiana Secretary of State.
Termination. The Acquisition Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval by Schult shareholders by mutual written consent of Schult and
Oakwood. In addition, the Acquisition Agreement may be terminated by either
Schult or Oakwood if (a) the Acquisition Agreement and the Plan of Merger are
not approved by Schult's shareholders at the shareholders' meeting; (b) the
Merger is not consummated by May 15, 1998; or (c) a court or other regulatory
or administrative agency or commission has issued an order or ruling
permanently restraining, enjoining or otherwise prohibiting the Merger. The
Acquisition Agreement may be terminated by Schult, if Oakwood has materially
breached its covenants set forth in the Acquisition Agreement and such breach
has not been cured, or if prior to approval of the Acquisition Agreement by
Schult's shareholders, Schult receives an unsolicited proposal with respect to
a merger, share exchange, acquisition, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of, Schult and the Schult Board of Directors determines
that to proceed with the Merger would violate its fiduciary duties and has paid
any required termination fee. Finally, the Acquisition Agreement may be
terminated by Oakwood if there has been a breach by Schult of any
representation or warranty set forth in the Acquisition Agreement which would
have a material adverse effect on Schult or if Schult has materially breached
its covenants set forth in the Acquisition Agreement and such breach has not
been cured. Although the Acquisition Agreement provides that Oakwood may
terminate if the Disclosure Memorandum delivered by Schult discloses any
information that is expected to have a material adverse effect on Schult, the
Disclosure Memorandum did not disclose any such information.
In the event that prior to July 15, 1998, Schult announces, enters into a
letter of intent or definitive agreement, or consummates a transaction other
than the Merger which provides for the disposition of a controlling interest in
Schult or the sale or transfer of substantially all of Schult's assets, Schult
has agreed to pay to Oakwood, up to a maximum of $3 million, an amount equal to
(i) 100% of the difference, up to $1 million and (ii) 50% of the remaining
difference above $1 million, between the consideration to be paid pursuant to
such other transaction over $22.50 per share times the Shares outstanding on
January 5, 1998. See "The Acquisition Agreement -- Termination."
Certain Federal Income Tax Consequences. In general, the receipt of cash
for Shares pursuant to the terms of the Acquisition Agreement will be a taxable
transaction for federal income tax purposes and may be a taxable transaction
for state, local and other purposes as well. Schult has not obtained an
opinion of tax counsel as to the federal and state income tax consequences of
the Merger to the Schult Shareholders. Shareholders are urged to consult their
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own tax advisors to consider the particular tax consequences of the Merger to
them. See "The Merger -- Certain Federal Income Tax Consequences."
Regulatory Approvals. Schult and Oakwood are not aware of any required
regulatory approvals for consummation of the Merger, other than expiration or
waiver of the waiting period under the Hart-Scott-Rodino Act. Schult and
Oakwood have filed under the Hart-Scott-Rodino Act, and the waiting period
expires on February 20, 1998 at 11:59 p.m.
Cancellation of Schult Share Certificates. As soon as practicable after
the Effective Time, notice of consummation of the Merger, together with a
letter of transmittal for surrendering Shares in exchange for cash, will be
mailed to Schult shareholders. DO NOT SURRENDER YOUR SHARES UNTIL YOU RECEIVE
SUCH A LETTER OF TRANSMITTAL.
Dissenters' Rights. Under the Indiana Business Corporation Law (the
"IBCL"), holders of the Shares will not be entitled to appraisal rights in
connection with the Merger. See "Dissenters' Rights."
SUMMARY FINANCIAL INFORMATION CONCERNING SCHULT
The selected summary consolidated financial data presented below for each
of the last five fiscal years and for the six months ended December 27, 1997,
have been derived from Schult's historical financial statements. This data
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Annual Report of Schult on Form 10-K, as amended
by Form 10-K/A, for the fiscal year ended June 28, 1997, and the Quarterly
Report on Form 10-Q for the quarters ended September 27, 1997, and December 27,
1997, as amended by Form 10-Q/A, which are incorporated by reference into
this Proxy Statement. See "Incorporation of Certain Documents by Reference."
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR ENDED JUNE
12/27/97 12/28/96 1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
NET SALES $175,626 $178,667 $347,769 $316,267 $287,937 $259,616 $207,822
OPERATING INCOME 5,218 8,185 15,121 11,439 7,706 10,251 7,497
NET INCOME 3,292 4,964 9,191 6,772 4,375 6,046 4,317
PER SHARE (DOLLARS)(1)
NET EARNING 0.72 1.10 2.03 1.51 0.97 1.34 0.97
DIVIDENDS PAID 0.10 0.08 0.18 0.15 0.13 0.12 0.10
BALANCE SHEET DATA
TOTAL ASSETS $100,591 $89,801 $100,156 $89,733 $75,333 $67,378 $56,499
CURRENT PORTION OF
LONG-TERM DEBT 131 274 131 710 1,000 994 623
LONG-TERM DEBT 3,494 625 555 684 3,695 2,390 3,385
SHAREHOLDERS' EQUITY 49,020 42,712 46,790 38,109 31,961 28,358 22,708
</TABLE>
________________________________
(1) The basic and diluted earnings per share for each of the periods are
identical, since there is no actual dilution.
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MARKET VALUE INFORMATION
The last sale price of Shares on January 2, 1998, the last trading day
preceding the date of the announcement of the Merger, as reported on the
American Stock Exchange, was $20.50. On November 28, 1997, the date a cash
sale price of $22.50 was first suggested by Oakwood, the last sale price of
Shares was $17.75, as reported on the American Stock Exchange. On December 18,
1997, the date Oakwood and Schult entered into a standstill and expense
reimbursement agreement, the last sale price of Shares was $19.25, as reported
on the American Stock Exchange.
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EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be paid by Schult. In addition
to soliciting proxies by mail, Officers and employees of Schult, without
receiving additional compensation therefor, may solicit proxies by telephone,
fax, or in person. In addition, Schult has continued to retain the services of
Financial Relations Board to communicate with its shareholders. Schult has
agreed to pay a noncontingent fee of $300,000 to AACC, its financial advisor,
for its financial advisory services. An additional contingent fee of up to 1%
of the transaction price may be paid in the event a transaction at a cash price
greater than $22.50 per Share is consummated. Legal and accounting fees paid
in preparation of this proxy statement are being paid by Schult.
INDEPENDENT PUBLIC ACCOUNTANTS
Schult's independent public accountants, KPMG Peat Marwick, will be
present at the Special Meeting, will have an opportunity to make a statement,
and will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
If the Merger is not consummated, shareholders having proposals that they
desire to include in the Board of Directors' Proxy and Proxy Statement relating
to Schult's next annual meeting should submit such proposal no later than May
31, 1998. To be included, all such submissions must comply with the
requirements of Rule 14a-8 of the Exchange Act. Submissions should be mailed
to Schult Homes Corporation, 221 U. S. Highway 20, P.O. Box 151, Middlebury,
Indiana 46540.
THE ACQUISITION AGREEMENT
Pursuant to the terms of the Acquisition Agreement, Merger Sub will merge
with and into Schult, with Schult as the surviving corporation and continuing
as a wholly-owned subsidiary of Oakwood. Under the Acquisition Agreement, upon
the consummation of the Merger, each Share issued and outstanding will be
converted into the right to receive $22.50, and each outstanding stock option
right to purchase one Share shall be converted into the right to purchase
0.6792 of a share of Oakwood Common Stock and the stock option exercise price
will be adjusted by dividing the current option exercise price by 0.6792.
This description of the material provisions of the Acquisition Agreement
is qualified by the Acquisition Agreement itself, which is included with this
Proxy Statement. You should read the Acquisition Agreement in its entirety.
Basic Plan. The Acquisition Agreement is between Oakwood Homes
Corporation ("Oakwood"), A&B Acquisition Corp. (the "Merger Sub") , and Schult
Homes Corporation ("Schult"), and is dated January 5, 1998. It provides for
the merger of Merger Sub into Schult, with Schult the Surviving Corporation, as
a wholly-owned subsidiary of Oakwood. The Closing will take place as soon as
possible after the conditions of the Acquisition Agreement are met.
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The Effective Time of the Merger shall be the time the Plan of Merger is
filed with the Secretary of State of Indiana.
The Articles of Incorporation and the Bylaws of Schult shall be the
articles and bylaws of the Surviving Corporation, subject to subsequent
amendment.
Conversion of Shares. At the Effective Time, each of the outstanding
Shares will be converted into the right to receive $22.50 in cash, and the
Shares will cease to exist and will have no further rights.
Exchange Agents. Harris Trust Bank, Schult's Share transfer agent, will
serve as the Exchange Agent. The Exchange Agent may withhold such amounts from
the Merger Price as are required under the Internal Revenue Code.
Representations and Warranties by Schult. The Acquisition Agreement
provides for the customary representations and warranties by Schult, including
without limitation representations and warranties as to its current financial
condition; ownership of assets; organization; liabilities; conflicts with other
agreements to which Schult is a party; the filing of all required forms with
the Commission and that all such forms were prepared in accordance with the
Securities Act of 1933 and the Exchange Act and did not at the time they were
filed contain an untrue statement of fact or omit to state a material fact;
that the Schult financial statements were prepared in accordance with generally
accepted accounting principles and certain other financial matters; disclosure
of events since June 28, 1997; certain tax matters and tax returns; employees
and fringe benefit plans; condition of assets, including compliance with
environmental laws; warranty and product liability matters; and dealer
arrangements. In addition, Schult was required to deliver to Oakwood a
Disclosure Memorandum setting forth certain disclosures regarding Schult,
including any exceptions to Schult's representations and warranties contained
in the Acquisition Agreement. In the event that, in Oakwood's reasonable
judgment, any information contained in the Disclosure Memorandum constituted or
would have a Schult Material Adverse Effect on Schult, Oakwood was entitled to
terminate the Acquisition Agreement. The right to make that determination
expired on January 27, 1998.
Environmental Matters. Oakwood has engaged environmental firms to
perform Phase I investigations at each of Schult's facilities, and certain
supplemental environmental testing, and Schult is required to disclose any
significant environmental concerns in the past or present.
Conditions of Closing. Both Oakwood's and Schult's obligations to Close
depend upon the performance by the other of all covenants of the Acquisition
Agreement and upon all representations and warranties being true as of the
Effective Time. As noted below, shareholder approval and the requirements of
Hart-Scott-Rodino may not be waived. Their obligations to perform are also
conditioned upon approval of the Acquisition Agreement by a majority of the
outstanding Shares, expiration or early termination of the Hart-Scott-Rodino
period, the absence of any legal action intended to restrain or prohibit the
Merger, and maintenance of the fairness opinion by AACC, in addition to
obtaining other consents, if any, necessary to the Merger.
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Both Oakwood and Schult would be entitled to waive any of these other
conditions that remain unsatisfied in order to conclude the Merger.
Schult's obligations are conditioned upon receipt of a certificate that
Oakwood has performed all of its obligations under the Acquisition Agreement,
certified copies of resolutions authorizing the transaction, and a good
standing certificate for Oakwood. Schult is entitled to waive any of these
conditions that remain unsatisfied in order to conclude the merger. Each
condition to Schult's obligation to close may be waived by Schult either prior
to or after approval of the Merger by the Schult shareholders (other than
approval of the Merger by a majority of the Shares and expiration or waiver of
the Hart-Scott-Rodino waiting period, which are requirements of Indiana and
federal law, respectively[)]. However, to the extent that the terms of the
Acquisition Agreement as disclosed in this Proxy Statement are waived, modified
or amended in a manner materially adverse to the interests of the Schult
shareholders, Schult will supplement the disclosures in this Proxy Statement,
if the changes occur prior to shareholder approval, or resolicit proxies, if
after Schult's shareholders approve the Merger.
Oakwood's obligations are conditioned upon the absence of a material
adverse change in the financial condition, business, operations, or prospects
of Schult other than a change which affects Schult and Oakwood similarly;
receipt of an opinion letter from Baker & Daniels, counsel for Schult, in the
form attached to the Acquisition Agreement; holders of unexercised options to
purchase have agreed to accept options to purchase Oakwood shares; Oakwood
shall have received certain Phase I environmental assessments with respect to
Schult's properties and the results of any reports from any supplemental
testing deemed advisable thereby which shall not disclose remediation or other
work deemed advisable in excess of $500,000 and any additional environmental
due diligence by Oakwood shall not disclose any condition or liability expected
to have a material adverse effect on Schult; Oakwood shall have received
certified copies of resolutions by Schult's Board of Directors and shareholders
approving the Merger; each of the Schult officers and directors shall have
resigned; certain key employees of Schult shall have entered into agreements
with Oakwood restricting their ability to compete with Oakwood and providing
for the payment by Oakwood of certain severance benefits in the event their
employment is terminated by Oakwood; Oakwood shall have received financing
from NationsBank substantially on the terms of the commitment letter received
from NationsBank (which commitment is subject to the following terms and
conditions: that there has not occurred a material change in the business,
assets, liabilities, operations, condition or prospects of Oakwood or its
subsidiaries, taken as a whole; information provided to NationsBank in
connection with the transaction does not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained therein not misleading; that all financial projections made available
to NationsBank have been or will be prepared in good faith based on reasonable
assumptions; the negotiation, execution and delivery of a definitive Credit
Facility; receipt of satisfactory opinions of counsel to Oakwood and other
related closing documentation; receipt and approval by NationsBank of
consolidated financial statements of Oakwood and pro forma consolidated
financial statements of Oakwood and Schult on a combined basis; an officer's
certificate indicating compliance by Oakwood with the financial and other
covenants in Oakwood's existing credit facility with First Union National Bank
dated November 8, 1996; the absence of any material action or investigation
that purports to affect Oakwood or the provision of the Credit Facility or of
Oakwood to perform its obligations under the Credit
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<PAGE> 16
Facility; and that the Company is in compliance with all of its existing
financial obligations); and a certificate shall have been received from Harris
Trust Bank, Schult's transfer agent, certifying the number of outstanding
Shares. Oakwood is entitled to waive any of these conditions that remain
unsatisfied in order to conclude the Merger, except the conditions to its
financing, which may only be waived by NationsBank. Oakwood's obligation to
close was also conditioned (on the date the Acquisition Agreement was signed)
upon its review for a specified period of Schult's business operations and
certain other matters relating to Schult not disclosing any information or
conditions which an investor would reasonably expect to have a material adverse
effect on Schult or information or conditions materially adversely different
than that in Schult's filings with the Commission. The period of time for such
review has now lapsed.
Termination. The Acquisition Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval by Schult shareholders, by mutual written consent of Schult and
Oakwood. In addition, the Acquisition Agreement may be terminated by either
Schult or Oakwood if (a) the Acquisition Agreement and the Plan of Merger are
not approved by Schult's shareholders at the shareholders' meeting; (b) the
Merger is not consummated by May 15, 1998; or (c) a court or other regulatory
or administrative agency or commission has issued an order or ruling
permanently restraining, enjoining or otherwise prohibiting the Merger. The
Acquisition Agreement may be terminated by Schult if Oakwood has materially
breached its covenants set forth in the Acquisition Agreement and such breach
has not been cured, or if prior to approval of the Acquisition Agreement by
Schult's shareholders, Schult receives an unsolicited proposal with respect to
any purchase of all or any significant portion of the assets or any equity
securities of Schult, and the Schult Board of Directors determines that to
proceed with the Merger would violate its fiduciary duties and has paid any
required termination fee. Finally, the Acquisition Agreement may be terminated
by Oakwood if there has been a breach by Schult of any representation or
warranty set forth in the Acquisition Agreement which would have a material
adverse effect on Schult or if Schult has materially breached its covenants set
forth in the Acquisition Agreement and such breach has not been cured.
Although the Acquisition Agreement provides that Oakwood may terminate if the
Disclosure Memorandum delivered by Schult discloses any information that is
expected to have a material adverse effect on Schult, the Disclosure Memorandum
did not disclose any such information.
Cost Reimbursement Agreement. In the event that prior to July 15, 1998,
Schult announces, enters into a letter of intent or definitive agreement, or
consummates a transaction other than the Merger which provides for the
disposition of a controlling interest in Schult or the sale or transfer of
substantially all of Schult's assets, Schult has agreed to pay to Oakwood, up
to a maximum of $3 million, an amount equal to (i) 100% of the difference, up
to $1 million and (ii) 50% of the remaining difference above $1 million,
between the consideration to be paid pursuant to such other transaction over
$22.50 per share times the Shares outstanding on January 5, 1998. See "The
Acquisition Agreement -- Termination."
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FACTORS TO BE CONSIDERED
The factors to be considered in determining whether to vote for approval
of the Merger are essentially the same factors considered by the Board of
Directors of Schult Homes Corporation in unanimously deciding to recommend
approval of the Merger. Those factors include the past and current reported
earnings of Schult, the written opinion by AACC as to the financial fairness of
the transaction, and the history and current developments in the manufactured
and modular housing industry. See "Recommendation of the Board: Fairness of
the Merger."
Recently there have been trends in the industry towards consolidation of
manufacturers, and towards vertical integration, by manufacturers acquiring
ownership of retailers, who sell the homes to the public. Oakwood has been
vertically integrated for many years, and has developed support systems for its
retailers, including retail financing. While Schult has maintained its
independent retailer system and intends to continue doing so, it has found it
necessary to investigate financial investments in retailers in selected markets
in order to protect its retailers from exclusionary ownership by other
manufacturers. Schult also needs additional financing for other support
systems for its retailers, which Schult may have difficulty obtaining on its
own.
As a result of the Merger, all of Schult's business will be owned by
Oakwood, and Schult's earnings or losses thereafter will accrue solely to
Oakwood. The Shares will be deregistered under the Exchange Act, and will no
longer be publicly traded. Oakwood has advised Schult that it intends to
proceed with deregistration as soon as practicable after the Effective Date.
Upon the Effective Time, all of the Directors and Officers of Schult will
resign, and be replaced by Directors and Officers nominated by Oakwood. Some
of the former Schult Officers will become officers of the Surviving
Corporation, but all will serve at the pleasure of Oakwood.
If the Merger is not approved, Schult will continue as an independent
entity.
BACKGROUND OF THE MERGER
Schult's management has periodically investigated various alternatives to
enhance the value of Schult Common Shares, including acquisition by Oakwood or
other publicly or privately held entities, continuation of Schult's internal
growth, joint ventures with others, and various methods for consolidating its
competitive position. Particularly in view of the recent trend towards
consolidation of manufacturers and towards vertical integration of the
distribution of manufactured homes, Schult's Board of Directors has concluded
that Schult would benefit by an alliance with a larger competitor.
In August 1997, a competitor began a series of acquisitions of retailers
in markets which are important to Schult, as well as other manufacturers of
homes. Over the next several months, Schult's President, Walter E. Wells, had
preliminary discussions with several of its
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competitors, potential partners, to discuss joint ventures for acquiring a
financial interest in selected retailers. None of those discussions resulted
in an agreement, although discussions may continue for that purpose. Mr. Wells
also simultaneously investigated methods of obtaining financing for investment
in retailers in amounts and in a manner which would not interfere with
obtaining necessary financing for future expansion of Schult in order to
compete in an industry experiencing consolidation. These discussions included
consideration of an alliance with a larger competitor.
Following the October 23, 1997 meeting of the Schult Board of Directors,
Mr. Wells met with representatives of Oakwood and obtained an expression of
interest at $21.00 per share. Mr. Wells also met after October 23 with other
potential alliance prospects, but none of them suggested a price for the
Shares, and some of the others indicated an intent to essentially purchase
physical assets and otherwise dismantle Schult operations. On November 26, Mr.
Wells responded to Oakwood by rejecting the proposed price of $21.00 per share
and suggesting a price range of $23.00 per share. On November 28, Oakwood
revised its offer to $22.50 per share.
After further discussions with the Board of Directors on December 1, 1997,
and upon receipt of an oral opinion from AACC on December 16, 1997, that the
proposed transaction is fair to Schult shareholders in financial terms, the
Board authorized Mr. Wells to execute an agreement. Oakwood agreed that it
would not purchase any Shares until February 15, 1998, Schult would not solicit
any offers to purchase all or substantially of the assets or outstanding stock
of Schult or to merge with or into Schult until February 15, 1998, neither
Schult nor Oakwood would solicit any employees of the other until July 1, 1998
and they agreed to negotiate a transaction. In the event that prior to July
15, 1998, Schult announces, enters into a letter of intent or definitive
agreement, or consummates a transaction other than the Merger which provides
for the disposition of a controlling interest in Schult or the sale or transfer
of substantially all of Schult's assets, Schult has agreed to pay to Oakwood,
up to a maximum of $3 million, an amount equal to (i) 100% of the difference,
up to $1 million and (ii) 50% of the remaining difference above $1 million,
between the consideration to be paid pursuant to such other transaction over
$22.50 per share times the Shares outstanding on January 5, 1998.
A definitive agreement was prepared and considered at a meeting of the
Schult Board of Directors on January 2, 1998. At the meeting, AACC reviewed
its fairness opinion and responded to questions by Board members. The meeting
was adjourned until January 4, 1998, when consideration of the Merger was again
discussed. Approval of the Acquisition Agreement was then unanimous, and the
Officers were authorized to execute such documents and take all action
necessary to accomplish the Merger. The Board also unanimously recommended
that its shareholders approve the Merger, and authorized solicitation of
proxies for a shareholders meeting to be held to consider and approve the
Merger. The Acquisition Agreement was approved unanimously by the Board of
Directors of Oakwood and Merger Sub on January 5, 1998.
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RECOMMENDATIONS OF THE BOARD: FAIRNESS OF THE MERGER
The Board of Directors of Schult has unanimously determined that the
Merger, taken as a whole, is fair in financial terms to Schult shareholders,
and unanimously recommends approval of the Merger by the shareholders. The
Board has based its determination upon a number of factors, including:
(a) Schult Share prices have been volatile, due in part to the difficulty
of maintaining steadily increasing earnings from manufacturing operations in an
industry subject to many potentially adverse influences. Schult is in the
group of "small cap" entities, which are not so attractive to investors as are
many large cap enterprises, and Schult Common Shares have very limited
liquidity with few trades on a daily basis. Small trades can affect market
prices, and Schult's experience has been that large sales tend to depress the
share price inordinately.
(b) The trends towards consolidation of manufacturers and vertical
integration in the distribution of manufactured homes requires manufacturers to
take defensive measures, even when, as in Schult's case, it intended to
continue distribution through independent retailers. Independent retailers need
systematic support even more than in the past in order to remain independent,
and such support requires large amounts of investment capital and greater
operating costs than in the past, both of which need be spread over a larger
volume of sales in order to maintain the margins prevalent in the industry.
The demands for funds to protect Schult retailers from control by competitors
makes it difficult for Schult to raise capital and provide operating support
for independent dealers, without the assistance of financing and operating
capabilities available by an alliance with another entity.
Retail distribution consolidation is also occurring through the formation
of buying groups of retailers, some of which are affiliated by contractual
management arrangements, and some of which have become part of publicly-held
entities, in a process known as "rollups." All of these developments are new
to the manufactured housing industry, but provide transferable value to
retailers and thus contain their own impetus for continuing and growing
throughout the industry. These groups and entities present new challenges to
manufacturers, and in many cases are not affiliated with particular
manufacturers except on a negotiated purchasing basis. These groups are a new
development in the manufactured housing industry, and larger manufacturer
groups will be more easily able to respond to their demands. The existence of
these groups also makes it easier for competitor manufacturers to acquire
control of large parts of the retail distribution system by forming an alliance
with the groups, rather than having to deal with numerous individual retailers.
(c) The $22.50 per share price to be received by the holders of the
Shares in the Merger compared to (i) historical and recent market prices for
the Shares; (ii) market prices for other companies believed to be comparable to
Schult; and (iii) prices proposed by other potential acquirers in preliminary
discussions with management. The low trading volume of Shares, which limits
the liquidity of the Schult shareholders and exaggerates the impact on trading
price of trades in Shares.
(d) The written opinion by AACC to the Board of Directors that the
proposed cash merger is fair in financial terms to Schult shareholders. The
Board of Directors has worked
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with AACC in the past, as it was one of its lead underwriters in a public
offering by Schult in July, 1992, and has continued to follow the Shares in the
aftermarket since that time. AACC is familiar with Schult and the industry,
and has reviewed Schult's current operations and the proposed Merger, and has
found it to be fair in financial terms to Schult shareholders. See "Opinion of
Financial Advisor."
(e) The relationship of the cash price to Schult shareholders and the
historical price earnings ratio for the Shares, particularly in view of
Schult's declining earnings in the first two quarters of fiscal year 1998
indicates that the price is more favorable than may be expected from the market
in the near future. Although the market price for the Shares has advanced
since the initial determination of interest and price, but the expected price
recognition of decreased earnings makes the cash price appear to be favorable.
(f) The Board of Directors holds 17.9% of the outstanding Shares, and
their individual determination that the cash price is fair is a good indicator
that other Schult shareholders will also believe it to be financially fair.
(g) Oakwood's financial condition and ability to meet its obligations
under the Acquisition Agreement.
(h) Schult management has been aware of and familiar with Oakwood's
operations for some time, and believes that the two corporate cultures are
similar, and operations will prove a good fit for all employees of Schult, its
retailers and suppliers.
OPINION OF FINANCIAL ADVISOR
Schult retained AACC as its financial advisor to render an opinion as
to the fairness of the Merger Price to Schult's shareholders. Schult contacted
or interviewed other potential financial advisors prior to selecting AACC.
Schult selected AACC because of its reputation, its knowledge of the
manufactured housing industry, and its past relation to Schult. AACC served as
one of the lead underwriters for a public offering of Schult Shares during
July, 1992. Since that time, an AACC analyst has reported on Schult and the
manufactured housing industry. In the ordinary course of AACC's business, AACC
and its affiliates may actively trade securities of Schult and Oakwood for
their own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities.
On January 5, 1998, AACC rendered an opinion that, as of such date, and
subject to certain assumptions, factors and limitations set forth in its
written opinion, the Merger Price to be received by Schult shareholders is fair
to them from a financial point of view.
The full text of the written opinion of AACC dated January 5, 1998,
which sets forth the assumptions made, matters considered and limitations on
the review undertaken in connection with the opinion, is attached to this Proxy
Statement and should be read in its entirety for information with respect to
procedures followed, assumptions made and matters considered by AACC in
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rendering such opinion. AACC's opinion was prepared for the Schult Board
of Directors and addresses only the fairness of the consideration to the
holders of the Shares. The AACC opinion does not constitute a recommendation
to any Schult shareholder as to how such shareholder should vote with respect
to the proposed Merger. The summary of the opinion of AACC set forth in this
Proxy Statement is qualified in its entirety by reference to the full text of
such opinion.
It is a condition to Schult's obligations (and the obligation of Oakwood)
to proceed with the Merger that AACC's fairness opinion not be withdrawn as of
the effective time of the Merger.
In connection with its opinion, AACC reviewed the Acquisition Agreement
and related documents and held discussions with certain senior Officers of
Schult, members of its Board of Directors, and other representatives and
advisors of Schult concerning the business, operations, and prospects of
Schult. AACC also reviewed publicly available business and financial
information relating to Schult as well as certain financial and other data
provided by Schult's management. AACC reviewed the financial terms of the
Merger as set forth in the Acquisition Agreement in relation to: (i) current
and historical market prices of the Shares; (ii) Schult financial and operating
data; and (iii) the capitalization and financial condition of Schult. In
addition, AACC considered, to the extent publicly available, the financial
terms of certain recent similar transactions AACC considered relevant in
evaluating the Merger and certain financial, stock market and other publicly
available information relating to other companies AACC considered relevant in
evaluating Schult. In rendering its opinion, AACC assumed and relied upon the
accuracy and completeness of the financial and other information reviewed by
it, and it did not make, obtain or assume any responsibility for independent
verification of such information. In addition, AACC did not make an
independent evaluation or appraisal of Schult. With respect to the financial
data, AACC has assumed that it has been reasonably prepared on bases reflecting
the best currently available estimates and judgments of the management of
Schult as to the future financial performance of Schult. AACC has assumed that
the Merger will be consummated in accordance with the terms of the Merger
Agreement. In connection with AACC's engagement, AACC did not solicit
indications of interest from third parties for the possible acquisition of
Schult. Neither did AACC recommend or determine the amount of consideration to
be paid.
The following is a summary of the material financial analyses AACC
utilized in connection with providing its written opinion to the Board of
Directors of Schult on January 5, 1998. The summary of the analyses does not
purport to be a complete description of the analyses underlying AACC's opinion.
(a) Share Trading History. AACC reviewed the performance of the
trading price and volume of the Shares for the period from December
27, 1996 through December 30, 1997. This examination indicated
that during this period, the trading price of the Shares ranged
from $15.50 per share to $20.38 per share.
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(b) Implied Multiple and Premium Analysis. AACC calculated certain
valuation multiples implied by the terms of the Merger Agreement
based on a per Share value of $22.50. AACC calculated that the
total equity value as a multiple of Schult's latest twelve months'
("LTM") net income, projected calendar 1997 net income, and
projected calendar 1998 net income was 12.3x, 13.7x, and 11.6x,
respectively, based on a per share value of $22.50. AACC also
calculated that the total enterprise value (defined to be total
equity value plus total debt less cash and cash equivalents, also
referred to as total market capitalization) as a multiple of
Schult's LTM earnings before interest and taxes ("EBIT"), LTM
earnings before interest, taxes, depreciation and amortization
("EBITDA"), and LTM sales was 7.5x, 5.7x, and 0.3x, respectively,
based on a per share value of $22.50.
AACC calculated the percentage premium implied by the terms of the
Merger Agreement relative to the market price of the Shares one
day, one week and four weeks prior to the announcement of the
Merger, and relative to the 52-week high market price of the
shares. AACC calculated that the percentage premium to the market
price of the Shares one day, one week and four weeks prior to the
announcement of the Merger was 10.4%, 12.5% and 25.0%,
respectively, and the premium offered relative to the 52-week high
market price of the Shares was 10.4%.
(c) Discounted Cash Flow Analysis. AACC performed discounted cash
flow analyses of Schult based on estimates of projected financial
performance prepared by Schult's management for the six months
ended 6/30/98 and for the fiscal years 1999 to 2002. Schult's
estimates included two scenarios: a base case scenario which
assumed the business is operated consistent with the historical
manner, and an industry consolidation scenario which assumed the
industry undergoes significant consolidation in manufacturing,
retailing and financing and Schult acquires several dealers. In
the discounted cash flow analyses, AACC calculated a range of
present values of the sum of (i) Schult's estimated free cash flows
for the six months ended 6/30/98 and the fiscal years ending 1999
through 2002 using discount rates ranging from 15.0% to 18.0% and
(ii) the estimated terminal value in fiscal year 2002 based on a
multiple of Schult's EBIT in fiscal 2002 ranging from 6.0x to 7.0x
and discounted at rates ranging from 15.0% to 18.0%. Using the
foregoing discounted cash flows and terminal values, AACC
calculated the equity value per Share to range from $15.45 to
$23.22.
(d) Comparable Public Company Analysis. AACC compared certain
financial and operating information for Schult to the corresponding
financial and operating information of the following group of
manufactured housing companies (the "Comparable Companies"):
American Homestar Corporation, Belmont Homes, Inc., Cavalier Homes,
Inc., Liberty Homes, Inc., Skyline Corp., and Southern Energy
Homes, Inc. AACC analyzed, among other things, the market price
per share of common stock of each Comparable
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Company and Schult as a multiple of LTM EPS, estimated calendar
1997 EPS, and estimated calendar 1998 EPS, and the total market
capitalization as a multiple of LTM EBIT, LTM EBITDA, and LTM
sales. For the Comparable Companies (excluding outliers), an
analysis of market price per share as a multiple of LTM EPS yielded
a range of 8.3x to 14.9x with a mean of 11.0x; an analysis of
market price per share as a multiple of estimated 1997 EPS yielded
a range of 9.2x to 16.1x with a mean of 13.2x; an analysis of
market price per share as a multiple of estimated 1998 EPS yielded
a range of 7.8x to 13.2x with a mean of 10.3x; an analysis of total
market capitalization as a multiple of LTM EBIT yielded a range of
5.0x to 8.1x with a mean of 6.0x; an analysis of total market
capitalization as a multiple of LTM EBITDA yielded a range of 4.6x
to 7.2x with a mean of 5.2x; an analysis of total market
capitalization as a multiple of LTM sales yielded a range of 0.1x
to 0.6x with a mean of 0.3x.
(e) Comparable Transactions Analysis. AACC analyzed certain
information relating to the following selected transactions in the
manufactured housing industry (the "Comparable Transactions"):
Belmont Homes, Inc./Cavalier Homes, Inc.; Brilliant Holding
Corporation/American Homestar Corporation; Cavco Industries/Centex
Real Estate Corporation; BR Holding (Blue Ribbon)/Southern Energy
Homes, Inc.; Redman Industries, Inc./Champion Enterprises, Inc.;
Newco Homes/Palm Harbor Homes; Homes of Legend, Inc. and Legend
Realty, Inc./Champion Enterprises, Inc.; Grand Manor, Inc./Champion
Enterprises, Inc.; New Horizon Manufactured Homes/Champion
Enterprises, Inc.; Imperial Homes Corp./Southern Energy Homes,
Inc.; Spirit Homes Inc./Belmont Homes, Inc.; Destiny
Industries/Oakwood; Chandeleur Homes and Crest Ridge Homes/Champion
Enterprises, Inc.; Astro Manufacturing Co./Cavalier Homes, Inc.;
Prestige Home Centers, Inc./Nobility Homes, Inc.; Imperial
Manufactured Homes/Southern Energy Homes, Inc.; Golden West
Homes/Oakwood; and Dutch Housing, Inc./Champion Enterprises, Inc.
Such analysis indicated that for the comparable transactions
(excluding outliers), total equity value as a multiple of LTM net
income ranged from 4.9x to 14.0x with a mean of 9.0x, total
enterprise value as a multiple of LTM EBIT ranged from 4.0x to 9.5x
with a mean of 6.7x, and total enterprise value as a multiple of
LTM EBITDA ranged from 4.0 to 8.0x with a mean of 6.0x.
(f) Premium Analysis. AACC analyzed the percentage premiums
offered in public mergers within the manufactured housing
industry. AACC calculated the premium offered relative to the
market price one day, one week, and four weeks prior to the
announcement date of each transaction, and the premium offered
relative to the 52-week high market price. The analysis indicated
that the mean percentage premium one day, one week, and four weeks
prior to announcement was 10.6%, 13.6% and 25.9%, respectively,
while the mean premium/(discount) to the 52-week high market price
was (14.5)%. The median percentage premium one day, one week, and
four weeks prior to
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<PAGE> 24
announcement was 13.2%, 18.9% and 30.5%, respectively, while the mean
premium to the 52-week high market price was 3.9%.
AACC also analyzed the percentage premiums offered in all cash
transactions of $75 million to $200 million in size announced since 1996. AACC
calculated the premium offered relative to the market price one day, one week,
and four weeks prior to the announcement date of each transaction, and the
premium offered relative to the 52-week high market price. The analysis
indicated that the median percentage premium one day, one week, and four weeks
prior to announcement was 25.1%, 33.5% and 35.9%, respectively, while the
median premium to the 52-week high market price was 6.0%.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to practical analysis or summary description.
Selecting portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying AACC's opinion. In arriving at its fairness
determination, AACC considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is identical to Schult
or the Merger. The analyses were prepared solely for purposes of AACC's
opinion provided to the Board of Directors of Schult as to the fairness of the
consideration to be received by Schult's stockholders pursuant to the
Acquisition Agreement and do not purport to be appraisals or necessarily
reflect the prices at which businesses or securities actually may be sold.
Analyses based upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or less favorable
than suggested by such analyses. Because such analyses are inherently subject
to uncertainty, being based upon numerous factors or events beyond the control
of the parties or their respective advisors, none of Schult, Oakwood, AACC or
any other person assumes responsibility if future results are materially
different from those forecast.
Schult has agreed to pay AACC a noncontingent financial advisory fee of
$300,000 for its services as financial advisor to the transaction. An
additional contingent fee of up to 1% of the transaction price may be paid in
the event a transaction at a cash price greater than $22.50 per Share is
consummated.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The disposition of the Shares pursuant to the terms of the Acquisition
Agreement may give rise to capital gain or loss. The Taxpayer Relief Act of
1997 made significant changes to the taxation of capital gains of individuals,
trusts and estates. Generally speaking, for gains properly taken into account
after July 28, 1997, the maximum rate of federal income tax on net capital
gains of individuals, trusts and estates from the sale or exchange of capital
assets held for more than 18 months has been reduced to 20%. The maximum rate
of tax for tax on net capital gains from the sale of capital assets held more
than one year but not more than 18 months remains at 28%. Short-term capital
gains (gains related to the sale of Shares held for less than a year) are still
taxed at the same rates applicable to ordinary income. For taxpayers with
certain income levels, the marginal federal income tax rate applicable to
ordinary income can range up to 39.6%. Capital losses continue to be
deductible to the extent of capital gains plus, in the case of
-21-
<PAGE> 25
individuals, $3,000 per taxable year. This discussion is not based on an
opinion of counsel, and each Schult shareholder should consult their own tax
advisor regarding the tax consequences of the Merger.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for by Oakwood under the "purchase" method of
accounting whereby the purchase price will be allocated based on fair market
values of assets acquired and liabilities assumed.
DISSENTERS' RIGHTS
Under the IBCL, holders of the Shares will not be entitled to appraisal
rights as a result of the Merger. Under the IBCL, appraisal rights are
unavailable in a merger for shares of any class of stock which on the record
date for the shareholder vote on such merger are listed on a national
securities exchange. On the record date the Shares were listed on the American
Stock Exchange. Accordingly, holders of the Shares will not be entitled to
appraisal rights as a result of the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Other than with respect to the employment arrangements and the
non-competition and severance agreements described in this paragraph, no
director or executive officer of Schult or associate of any such director or
executive officer has any substantial interest in the Merger, other than any
interest arising from the ownership of securities of Schult (in which case each
such owner receives no extra or special benefit not shared on a pro rata basis
by all other holders of the same class of securities). Substantially all of
the officers of Schult are expected to remain in the employ of Schult as the
Surviving Corporation after the Merger. Additionally, upon consummation of the
Merger, certain Schult officers viz., Walter E. Wells, John P. Guequierre,
Ervin L. Bontrager, William S. Reasor, and Frederick A. Greenawalt, will enter
into noncompetition and severance agreements with the Surviving Corporation of
the Merger providing for (a) a two-year noncompetition period from the
Effective Time; (b) certain severance benefits at the rate of base compensation
currently being received, in addition to the bonus compensation earned for the
fiscal year ended June 27, 1997, and (c) continuation of Schult's current
severance policy for payment of severance benefits upon termination for other
than cause in an amount equal to one-half week of salary for each year of
service.
Oakwood's management has indicated that it will recommend to the
Compensation Committee of Oakwood's Board of Directors that it grant stock
options to the following Schult officers to purchase the number of shares of
Oakwood Common Stock indicated by such officer's name: Walter E. Wells,
45,000; John P. Guequierre, 40,000; Ervin L. Bontrager, 30,000; and William
Reasor, 20,000.
-22-
<PAGE> 26
HOLDINGS OF SCHULT COMMON SHARES
Members of the Board of Directors of Schult have significant holdings of
Schult Common Shares. Upon the Effective Time of the Merger, Management will
have the right to receive the cash price for their shares, except for
unexercised options to purchase Shares, to the extent that Management who are
also employees elect to receive options to purchase Oakwood shares instead.
Neither Oakwood nor any of its benefit plans are beneficial owners of any of
the Shares. All of the persons named below, to Schult's knowledge, have
beneficial ownership and voting power for the Shares shown.
PERSONS KNOWN TO OWN BENEFICIALLY MORE THAN FIVE PERCENT (5%)
OF OUTSTANDING SHARES
<TABLE>
<CAPTION>
Name Number of Outstanding Shares Percent
- ---- ---------------------------- -------
<S> <C> <C>
Heartland Advisors, Inc. 585,020 13.0%
790 N. Milwaukee Street
Milwaukee, WI 53202-3712
Fidelity Management & Research Corp. 435,920 9.7%
82 Devonshire St.
Boston, MA 02109
Wellington Management Company 320,000 7.14%
75 State Street
Boston, MA 02109-1809
Walter E. Wells, President 271,554(1) 6.0%
P.O. Box 151
Middlebury, IN 46540
- ------------------------
</TABLE>
(1) This total includes Mr. Wells' options. See "Options to Purchase Schult
Common Shares."
Security Ownership of Certain Schult Management. The following table sets
forth the beneficial ownership of Schult Common Shares by each Schult Director
and each Schult Executive Officer who earned more than $100,000 during fiscal
year 1997 and all Directors and Officers as a group. The beneficial ownership
information set forth below includes unvested options for the Shares or
Directors' units which will become fully vested on the Effective Date of the
Merger, more fully described in the table next following this table:
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE PERCENT OF CLASS
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP BENEFICIALLY OWNED
- ---------------- ----------------------- ------------------
<S> <C> <C>
Walter E. Wells 271,554 (1)(3) 6.0%
Francis M. Kennard 153,919 (1)(3) 3.4%
John P. Guequierre 67,746 (1)(3) 1.5%
Ervin L. Bontrager 119,808 (1)(3) 2.6%
</TABLE>
-23-
<PAGE> 27
<TABLE>
<S> <C> <C>
Frederick A. Greenawalt 12,582 (1)(3) 0.3%
William S. Reasor 11,400 (1)(3) 0.2%
Todd Goodwin 65,712 (2) 1.5%
Donald Pletcher 98,862 (2) 2.2%
Robert Deputy 83,644 (2) 1.9%
Directors and Officers as a Group 885,227 (4) 19.7%
</TABLE>
- ------------------------------
(1) Including the options granted under the 1995 Share Incentive Plan. These
options to purchase Common Shares are the fair market value on October 19,
1995 at the exercise price of $12.71 and October 24, 1996 at the exercise
price of $19.79, the dates the options were granted.
(2) Includes the shares which will be issued pursuant to the Directors
Deferred Compensation Plan approved at the Shareholders Meeting held
October 24, 1996.
(3) Refer to Options to Purchase Schult Common Shares Chart below for
individual Share Options.
(4) Includes all Options to Purchase Schult Common Shares.
OPTIONS TO PURCHASE SCHULT COMMON SHARES
Several plans for the purchase of Schult Common Shares have been in place
for some time, and there are options outstanding pursuant to those plans, all
of which are described in the Form 10-K incorporated herein by reference. The
following table sets forth the options available to each Director and Executive
Officer as of the date of this Proxy Statement. As a result of the Merger,
each option shall become fully vested, and pursuant to the Acquisition
Agreement, each such option shall either be exercised in Shares and the Shares
purchased for $22.50 per share, or it will become an option to purchase shares
of Oakwood pursuant to an agreement offered by Oakwood to each such individual
employees.
<TABLE>
<CAPTION>
Name and Title Shares Available Original Vesting Date Option Price
- -------------- ---------------- --------------------- ------------
<S> <C> <C> <C>
Walter E. Wells, President 12,000 October 19, 1996(1) $12.71
6,000 October 24, 1997(2) $19.79
Francis M. Kennard 6,000 October 19, 1996(1) $12.71
2,400 October 24, 1997(2) $19.79
John P. Guequierre 12,000 October 19, 1996(1) $12.71
6,000 October 24, 1997(2) $19.79
Ervin L. Bontrager 9,000 October 19, 1996(1) $12.71
4,950 October 24, 1997(2) $19.79
Frederick A. Greenawalt 3,600 October 19, 1996(1) $12.71
2,400 October 24, 1997(2) $19.79
William S. Reasor 6,000 October 19, 1996(1) $12.71
3,000 October 24, 1997(2) $19.79
</TABLE>
- -----------------------
-24-
<PAGE> 28
(1) Under the 1995 Share Incentive Plan half of the shares granted under the
option vested after one (1) year and the remaining half of the shares
vested after two (2) years. Therefore the remaining half of the shares
granted on October 19, 1995 vested on October 19, 1997.
(2) Under the 1995 Share Incentive Plan half of the shares granted under the
option vested after one (1) year and the remaining half of the shares
vested after two (2) years. Therefore the remaining half of the shares
granted on October 24, 1996 vest on October 24, 1998.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Schult (registrant no.
0-15506) with the Commission pursuant to the Exchange Act are incorporated by
reference in this Proxy Statement:
1. Annual Report on Form 10-K for the year ended June 28, 1997 (filed
September 26, 1997), filing number 0000950137-97-003167.
2. Amendment on Form 10-K/A for the year ended June 28, 1997 (filed
October 3, 1997), filing number 0000950137-97-003259.
3. Quarterly Report on Form 10-Q for the quarter ended September 27, 1997
(filed November 13, 1997), filing number 0000803349-97-000006.
4. Quarterly Report on Form 10-Q for the quarter ended December 27, 1997
(filed February 10, 1998), filing number 0000950137-98-000385.
5. Quarterly Report on Form 10-Q/A for the quarter ended December 27,
1997 (filed February 26, 1998), filing number 0000950137-98-000779.
6. Current Report on Form 8-K dated August 22, 1997 (filed August 25,
1997), filing number 0000803349-97-000003.
7. Current Report on Form 8-K dated January 6, 1998 (filed January
6, 1998), filing number 0000803349-98-000002.
8. Current Report on Form 8-K dated February 25, 1998, filed February 27,
1998, filing number 0000803349-98-000007.]
All documents filed by Schult pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the filing of this Proxy Statement and
prior to the date of the Special Meeting are deemed to be incorporated herein
by reference herein, as modified or amended, if applicable.
Upon written or oral request, Schult will send to you, without charge, a
copy of any or all of the documents incorporated by reference. The request
must be directed to the attention of Frederick Greenawalt, Vice President -
Finance, Schult Homes Corporation, P.O. Box 550, Elkhart, Indiana 46515-0550
(219-294-3574).
-25-
<PAGE> 29
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the Board of
Directors knows of no other matters which will be acted upon at the Meeting.
If any other matters are properly presented for action at the Meeting or at any
adjournment thereof, it is intended that the proxies will be voted with respect
thereto in accordance with the best judgment and in the discretion of the proxy
holders.
By Order of the Board of Directors
SCHULT HOMES CORPORATION
Kennard R. Weaver
Secretary
Middlebury, Indiana
March 4, 1998
-26-
<PAGE> 30
SCHULT HOMES CORPORATION PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby designates Walter E.Wells or Kennard R. Weaver, or
either of them, to act as proxy for the purpose of voting the common shares of
Schult Homes Corporation held of record by the undersigned on March 4, 1998, at
the Special Shareholders meeting of the Corporation on April 1, 1998 and any
adjournment thereof, as directed herein, or in the absence of direction and as
to any other matters which may come before the meeting, in the discretion of
said proxies as follows:
I VOTE FOR THE APPROVAL OF THE ACQUISITION FOR AGAINST ABSTAIN
AGREEMENT WITH OAKWOOD HOMES
CORPORATION AS DEFINED IN THE PROXY [ ] [ ] [ ]
STATEMENT, AND AUTHORIZE THE SCHULT HOMES
CORPORATION BOARD OF DIRECTORS TO WAIVE
CONDITIONS OR MODIFY THE ACQUISITION
AGREEMENT FOR ANY MATTER NOT MATERIALLY
ADVERSE TO SCHULT SHAREHOLDERS.
Dated: __________, 1998
_______________________________________ ______________________________
(Name of Shareholder) (Name of Shareholder)
(PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON YOUR CERTIFICATES, WITH ALL
PERSONS SIGNING ON JOINTLY HELD CERTIFICATES.)
PROXIES SIGNED AND RETURNED WITHOUT CHECKING ANY BOXES WILL BE EFFECTIVE AS
VOTES FOR APPROVAL.
<PAGE> 1
EXHIBIT 99.1
E X E C U T I O N C O P Y
Exhibit 1
ACQUISITION AGREEMENT
among
OAKWOOD HOMES CORPORATION,
A & B ACQUISITION CORP.
and
SCHULT HOMES CORPORATION
Dated as of January 5, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 THE MERGER...................................................... i
1.1 The Merger...................................................... i
1.2 The Closing..................................................... i
1.3 Effective Time.................................................. i
ARTICLE 2 ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION..................................................... i
2.1 Articles of Incorporation....................................... i
2.2 Bylaws.......................................................... i
ARTICLE 3 CONVERSION OF SCHULT COMMON STOCK............................... i
3.1 Conversion of Shares................................. i
3.2 Stock Options................................................... i
3.3 Exchange Agent; Funding......................................... i
3.4 Withholding Rights.............................................. i
3.5 Dissenting Shares............................................... i
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SCHULT........................ i
4.1 Organization and Qualification: Subsidiaries.................... i
4.2 Articles of Incorporation and Bylaws............................ i
4.3 Capitalization.................................................. i
4.4 Authority Relative to this Agreement............................ i
4.5 No Conflict; Required Filings and Consents...................... i
4.6 Compliance...................................................... i
4.7 Other Interests ................................................ i
4.8 SEC Filings; Financial Statements............................... i
4.9 Subsequent Events............................................... i
4.10 Tax Matters..................................................... i
4.11 Employees and Fringe Benefit Plans.............................. i
4.12 Title to Assets................................................. i
4.13 Condition of Tangible Assets.................................... i
4.14 Leases.......................................................... i
4.15 Adequacy of Assets.............................................. i
4.16 Arms-Length Transaction......................................... i
4.17 Lawfully Operating.............................................. i
4.18 Litigation...................................................... i
4.19 State Takeover Laws............................................. i
4.20 Labor Matters................................................... i
4.21 No Brokers...................................................... i
4.22 Bank Accounts................................................... i
4.23 Insurance....................................................... i
4.24 Warranty and Product Liability Matters.......................... i
4.25 Warranty, Repurchase and Other Service Obligations.............. i
4.26 Dealer Arrangements............................................. i
4.27 Guarantees...................................................... i
4.28 Prospective Changes............................................. i
4.29 Full Disclosure................................................. i
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF OAKWOOD AND MERGER
SUB....................................................................... ii
5.1 Organization and Qualification............................................ ii
5.2 Authority Relative to this Agreement...................................... ii
5.3 No Conflict: Required Filings and Consents................................ ii
5.4 Brokers................................................................... ii
5.5 Full Disclosure........................................................... ii
ARTICLE 6 COVENANTS................................................................. ii
6.1 Covenants of Oakwood and Schult........................................... ii
6.2 Covenants of Schult....................................................... ii
6.3 Covenants of Oakwood...................................................... ii
ARTICLE 7 CONDITIONS................................................................ ii
7.1 Conditions to Each Party's Obligation to Effect the Merger................ ii
7.2 Conditions to Obligation of Schult to Effect the Merger................... ii
7.3 Conditions to Obligation of Oakwood and Merger Sub to Effect the Merger... ii
ARTICLE 8 TERMINATION............................................................... ii
8.1 Termination by Mutual Consent............................................. ii
8.2 Termination by Either Oakwood or Schult................................... ii
8.3 Termination by Schult..................................................... ii
8.4 Termination by Oakwood.................................................... ii
8.5 Effect of Termination and Abandonment..................................... ii
8.6 Extension: Waiver......................................................... ii
8.7 Cost Reimbursement Agreement.............................................. ii
ARTICLE 9 GENERAL PROVISIONS........................................................ ii
9.1 Notices................................................................... ii
9.2 Expenses.................................................................. ii
9.3 Assignment, Binding Effect, Benefit....................................... ii
9.4 Entire Agreement.......................................................... ii
9.5 Amendment................................................................. ii
9.6 Governing Law............................................................. ii
9.7 Counterparts.............................................................. ii
9.8 Headings.................................................................. ii
9.9 Interpretation............................................................ ii
9.10 Waivers................................................................... ii
9.11 Severability.............................................................. ii
9.12 Enforcement of Agreement.................................................. ii
9.13 Effectiveness............................................................. ii
</TABLE>
ii
<PAGE> 4
ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT (the "Agreement"), is made and entered into as
of the 5th day of January 1998, by and among OAKWOOD HOMES CORPORATION, a north
Carolina corporation ("Oakwood"), A & B ACQUISITION CORP., a newly formed
Indiana corporation and wholly-owned subsidiary of Oakwood ("Merger Sub"), and
SCHULT HOMES CORPORATION, an Indiana corporation ("Schult").
WITNESSETH:
WHEREAS, The Boards of Directors of Oakwood, Merger Sub and Schult each
have determined that a business combination pursuant to which Merger Sub will
merge with and into schult and schult will become a wholly-owned subsidiary of
Oakwood is in the best interests of the respective companies and their
shareholders, and accordingly have approved the merger provided for herein upon
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Indiana Business Corporation Law
("IBCL"), at the Effective Time (as defined in Section 1.3), Merger Sub shall
be merged with and into Schult and the separate corporate existence of Merger
Sub shall thereupon cease (the "Merger"). Schult shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and shall be a wholly-owned subsidiary of Oakwood.
1.2 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place (a) at the offices
of Kennedy Covington Lobdell & Hickman, L.L.P., NationsBank Corporate Center,
Suite 4200, 100 North Tryon Street, Charlotte, North Carolina, at 9:00 a.m.,
Charlotte time, as promptly as practicable (and in any event within two
business days) following the day on which the last to be fulfilled or waived of
the conditions set forth in Article 7 shall be fulfilled or waived in
accordance herewith or (b) at such other time, date or place as Oakwood and
Schult may agree. The date on which the Closing occurs is hereinafter referred
to as the "Closing Date".
1.3 Effective Time. If all of the conditions to the Merger set forth in
Article 7 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 9, on the
Closing Date the parties hereto shall cause Articles of Merger meeting the
<PAGE> 5
requirements of Section 23-1-40-5 of the IBCL and substantially in the form of
Exhibit A attached hereto (the "Articles of Merger") to be properly executed
and filed, together with a Plan of Merger meeting the requirements of Section
23-1-40-1 of the IBCL and substantially in the form of Exhibit B attached
hereto (the "Plan of Merger" and together with the Articles of Merger, the
"Merger Documents"), with the Secretary of State of Indiana. The Merger shall
become effective at the time of filing of the Merger Documents or at such later
time which the parties hereto shall have agreed upon and designated in such
filing as the effective time of the Merger (the "Effective Time").
ARTICLE 2
ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION
2.1 Articles of Incorporation. The Articles of Incorporation of Schult in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation, until duly amended in accordance
with applicable law.
2.2 Bylaws. The Bylaws of Schult in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
ARTICLE 3
CONVERSION OF SCHULT COMMON STOCK
3.1 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of Oakwood, Merger Sub, Schult or the holders of any of their
respective securities, each Common Share of Schult ("Schult Common Stock")
issued and outstanding immediately prior to the Effective Time (other than any
Dissenting Shares (if applicable and as defined in Section 3.5(a)) shall be
converted into the right to receive a cash amount equal to $22.50 per share
(the "Merger Consideration"). At the Effective Time, all shares of Schult
Common Stock shall automatically be canceled and retired and shall cease to
exist, and each certificate previously evidencing any such shares shall
thereafter represent the right to receive the cash consideration provided for
in this Agreement or, in the case of Dissenting Shares, the fair value therefor
as described in Section 3.5(a). The holders of certificates previously
evidencing such shares of Schult Common Stock outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such shares
except to receive the Merger Consideration as otherwise provided herein or by
law.
(b) At the Effective Time, by virtue of the Merger and without any action
on the part of Oakwood, Merger Sub or Schult, each share of Common Stock of
Merger Sub ("Merger Sub Common Stock") issued and outstanding prior to the
Effective Time, shall be converted into one share of Common Stock of Schult as
the Surviving Corporation. From and after the Effective Time, Oakwood, as
holder of all of the outstanding shares of Merger Sub Common Stock, shall have
the right to receive a certificate evidencing ownership of Common Stock of
Schult as provided hereinabove upon its surrender of the certificate or
certificates representing all shares of Merger Sub Common Stock. Until
surrender, each outstanding certificate which prior to the Effective Time
represented Merger Sub Common Stock shall be deemed for all corporate purposes
<PAGE> 6
to evidence ownership of the number of whole shares of Schult Common Stock into
which the shares of Merger Sub Common Stock have been so converted.
3.2 Stock Options. Prior to the Effective Time, each holder of an
outstanding Schult Stock Option (as defined in Section 4.3) to purchase shares
of Schult Common Stock, shall have either (a) exercised such options (so long
as such option is vested and exercisable at such time) or (b) agreed to the
amendment of such options in the manner described in the following sentence.
The Schult Stock Options outstanding as of the Effective Time shall be amended
such that Oakwood shall be substituted for Schult as a party thereto and shall
continue to have, and be subject to, the same terms and conditions as set forth
in the stock option plans and agreements pursuant to which such Schult Stock
Options were issued as in effect immediately prior to the Effective Time,
except that (a) each Schult Stock Option shall be exercisable for that number
of whole shares of Oakwood Common Stock equal to the product of the number of
shares of Schult Common Stock covered by such Schult Stock Option immediately
prior to the Effective Time multiplied by the fraction obtained by dividing
$22.50 by the closing price of Oakwood Common Stock on the New York Stock
Exchange on the date hereof (the "Exchange Ratio") and rounded up to the
nearest whole number of shares of Oakwood Common Stock and (b) the price at
which each such Schult Stock Option is exercisable shall be equal to the
exercise price of the Schult Stock Option immediately prior to the Effective
Time divided by the Exchange Ratio and rounded up to the nearest cent. Oakwood
shall (i) reserve for issuance the aggregate number of shares of Oakwood Common
Stock that will become issuable upon the exercise of such Schult Stock Options
pursuant to this Section 3.2 and (ii) as soon as practicable after the
Effective Time, file a registration statement on Form S-3 or Form S-8 (or any
successor or other appropriate form), as determined by Oakwood, with respect to
the shares of Oakwood Common Stock subject to such options and shall use its
reasonable efforts to maintain the effectiveness of such registration statement
(and maintain the current status of the prospectus or prospectuses contained
therein) for so long as such options remain outstanding. Nothing in this
Section 3.2 shall affect the schedule of vesting with respect to the Schult
Stock Options to be assumed by Oakwood. For each outstanding Schult Stock
Option, Schedule 3.2 sets forth the number of shares of Schult Common Stock for
which such option is exercisable and the exercise price with respect thereto.
3.3 Exchange Agent; Funding.
(a) Exchange Agent. Oakwood shall designate and engage an exchange agent,
subject to the reasonable approval of Schult (the "Exchange Agent"),
sufficiently in advance of the Effective Time so that the exchange of cash for
shares of Schult Common Stock to be effected pursuant to the Merger Documents
can be commenced as soon as possible after the Effective Time. Such Exchange
Agent shall be a bank or trust company mutually acceptable to Oakwood and
Schult, it being agreed that Harris Trust, Schult's transfer agent, is mutually
acceptable.
(b) Funding. Subject to the terms and conditions of this Agreement,
Oakwood shall cause (i) there to be available to the Exchange Agent, at or
prior to the Effective Time, for purposes of the conversion and exchange of
shares of Schult Common Stock in the Merger, the aggregate amount of cash to be
delivered to the shareholders of Schult pursuant to the Plan of
<PAGE> 7
Merger and (ii) Merger Sub to take such other actions as shall be necessary for
it to consummate the Merger.
3.4 Withholding Rights.
Oakwood, Schult or the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of or options to acquire Schult Common Stock such amounts
as Oakwood, Schult or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Code (hereinafter defined)
or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by Oakwood, Schult or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Schult Common Stock in respect of which such
deduction and withholding was made by Oakwood, Schult or the Exchange Agent.
3.5 Dissenting Shares.
(a) If provided for under the IBCL, notwithstanding any other provision of
this Agreement to the contrary, shares of Schult Common Stock that are
outstanding immediately prior to the Effective Time and which are held by
shareholders of Schult who shall not have voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in writing
payment for such shares in accordance with Sections 23-1-44 et seq. of the IBCL
and who shall not have withdrawn such demand or have been deemed or otherwise
have forfeited the right to payment (such shares of Schult Common Stock being
referred to as the "Dissenting Shares") shall not be converted into or
represent the right to receive the Merger Consideration. Such shareholders
instead shall be entitled to receive payment of the fair value of such shares
of Schult Common Stock held by them in accordance with the provisions of the
IBCL, except that all Dissenting Shares held by shareholders who shall have
failed to perfect or who effectively shall have withdrawn or lost their rights
to payment for such shares of Schult Common Stock under the IBCL shall
thereupon be deemed to have been converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without any
interest thereon, the Merger Consideration, upon surrender of the certificate
or certificates that formerly evidenced such shares of Schult Common Stock.
(b) Schult shall give Oakwood (i) prompt notice of any demands for payment
received by Schult, withdrawals of such demands, and any other instruments
delivered pursuant to the IBCL and received by Schult and (ii) the opportunity
to direct all negotiations and proceedings with respect to demands for payment
under the IBCL. Schult shall not, except with the prior written consent of
Oakwood, make or commit to make any payment with respect to any demands for
payment, or offer to settle, or settle, any such demands.
<PAGE> 8
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SCHULT
Schult hereby makes the representations and warranties contained in this
Article 4. As used herein, where a statement is made "to the knowledge" or
"the best knowledge" of Schult or a Schult Subsidiary (as defined below) or a
statement is made that Schult or a Schult Subsidiary "knows" a particular fact
or circumstance, such knowledge shall include the knowledge of the officers and
key employees of Schult and each Schult Subsidiary after (a) review by such
officers and key employees of the pertinent business records of Schult and each
Schult Subsidiary in their files and (b) inquiry by one or more of such
officers and key employees of each attorney or accountant retained by Schult or
any Schult Subsidiary who is reasonably believed to have relevant information
about the matter as to which such knowledge or lack of knowledge is asserted
(the scope of such review and inquiry being that of a reasonable person under
the circumstances). As used herein, the term "Schult Material Adverse Effect"
means any change or effect that is or would be materially adverse to the
business, results of operations or financial condition of Schult and the Schult
Subsidiaries, taken as a whole, excluding any changes or effects caused by
changes in general economic conditions or changes generally affecting Schult's
industry. As used herein, the term "Disclosure Memorandum" means a memorandum
delivered by Schult to Oakwood within ten days following the date hereof in
form satisfactory to Oakwood in its reasonable judgment and containing certain
disclosures regarding Schult and the Schult Subsidiaries under this Agreement.
In the event that, in Oakwood's reasonable judgment, any information or
disclosures, individually or in the aggregate, contained in the Disclosure
Memorandum constitutes or would have a Schult Material Adverse Effect, Oakwood
shall be entitled to terminate this Agreement by giving written notice to
Schult on or before the second business day after the Due Diligence Completion
Date (as defined in Section 7.3(d)).
4.1 Organization and Qualification: Subsidiaries.
Schult and each subsidiary of Schult (a "Schult Subsidiary"), which
subsidiaries and their capitalization are set forth in the Disclosure
Memorandum (as defined above), is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a
Schult Material Adverse Effect (as defined below). Schult and each Schult
Subsidiary are duly qualified or licensed as foreign corporations to do
business, and are in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by them or the nature of their
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a Schult Material Adverse Effect.
4.2 Articles of Incorporation and Bylaws.
Schult has heretofore made available to Oakwood a complete and correct
copy of the Articles of Incorporation and the Bylaws or equivalent
organizational documents, each as amended to date, of Schult and each Schult
Subsidiary. Such Articles of Incorporation, Bylaws and equivalent
organizational documents are in full force and effect. Neither Schult or any
Schult
<PAGE> 9
Subsidiary is in violation of any provisions of its Articles of Incorporation,
Bylaws or equivalent organizational documents.
4.3 Capitalization.
The authorized capital stock of Schult consists of 10,000,000 shares of
Schult Common Stock and 2,000,000 Preferred Shares. As of the date hereof, (i)
4,475,875 shares of Schult Common Stock were issued and outstanding, all of
which shares were validly issued, fully paid and nonassessable and were not
issued in violation of any preemptive rights, (ii) 180,000 shares of Schult
Common Stock were reserved for future issuance pursuant to outstanding employee
stock options granted pursuant to Schult's 1995 Share Incentive Plan and any
other employee stock option plan or program, which options were not granted in
violation of any preemptive rights, (iii) 9,177 shares of Schult Common Stock
were reserved for future issuance pursuant to outstanding director units
granted pursuant to Schult's Directors Deferred Compensation Plan and any other
director award or stock option plan or program, which units were not granted in
violation of any preemptive rights, (iv) 381 shares were reserved for issuance
under Schult's Employee Share Purchase Plan pursuant to payroll deductions made
on or before the date hereof, which shares are to be purchased in January 1998
on a per share price based on the closing price for Schult Common Stock on the
American Stock Exchange on December 31, 1997, (v) 8,000 shares of Schult Common
Stock were reserved for future issuance pursuant to an option granted to Mike
Wolf with an aggregate option price of $1.00 (the "Wolf Option") (the Wolf
Option and any employee or director stock option or award issued under any plan
described in the preceding clauses (ii) through (iv) being a "Schult Stock
Option") and (vi) no Preferred Shares are currently outstanding. Except as set
forth in this Section 4.3, there are no outstanding options, warrants or other
rights, agreements, arrangements or commitments of any character relating to
the issued or unissued capital stock of Schult or any Schult Subsidiary
obligating Schult or any Schult Subsidiary to issue or sell any shares of
capital stock of, or other equity interests in, Schult or any Schult
Subsidiary. All shares of Schult Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of Schult or any Schult Subsidiary to repurchase,
redeem or otherwise acquire any shares of Schult Common Stock or any capital
stock of any Schult Subsidiary, or make any material investment (in the form of
a loan, capital contribution or otherwise) in, any Schult Subsidiary or any
other person or entity. Each outstanding share of capital stock of each Schult
Subsidiary has been duly authorized, validly issued, and is fully paid and
nonassessable, was not issued in violation of any preemptive rights and is
owned beneficially and of record by Schult or a Schult Subsidiary. Each such
outstanding share of capital stock of a Schult Subsidiary is owned by Schult or
a Schult Subsidiary free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on Schult's
or such other Schult Subsidiary's voting rights, charges and other encumbrances
of any nature whatsoever. All offers and sales of Schult Common Stock and the
capital stock of any Schult Subsidiary prior to the date hereof were at all
relevant times duly registered under or exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and were duly registered under or exempt from the registration requirements of
the applicable state securities or "blue sky" laws ("Blue Sky Laws").
4.4 Authority Relative to this Agreement.
Schult has all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Schult and the consummation by it of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action and no
other proceedings on the part of Schult are necessary to authorize this
Agreement or to
<PAGE> 10
consummate the transactions contemplated herein (other than, with respect to
the Merger, any approval and adoption of this Agreement and the Plan of Merger
by the holders of Schult Common Stock and the filing and recordation of
appropriate merger documents as required by Indiana law). This Agreement has
been duly and validly executed and delivered by Schult and, assuming the due
authorization, execution and delivery by Oakwood and Merger Sub, constitutes a
legal, valid and binding obligation of Schult enforceable against it in
accordance with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject to the effect of general principles of equity,
including without limitation concepts of materiality, reasonableness, good
faith and the possible unavailability of specific performance or injunctive
relief, regardless of whether considered in a proceeding in equity or at law.
4.5 No Conflict; Required Filings and Consents.
(a) Except as set forth in the Disclosure Memorandum or in the exceptions
in Section 4.5(b) below, the execution and delivery of this Agreement by Schult
do not, and the performance of the transactions contemplated herein by Schult
will not, (i) conflict with or violate the Articles of Incorporation or Bylaws
or equivalent organizational documents of Schult or any Schult Subsidiary, (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Schult or any Schult Subsidiary or by which property or assets of
Schult or any Schult Subsidiary is bound or affected, or (iii) result in any
breach of or constitute a default (or any event which with notice or lapse of
time or both would become a default) under, result in the loss of a material
benefit under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Schult or any Schult Subsidiary
pursuant to any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Schult or
any Schult Subsidiary is a party or by which Schult or any Schult Subsidiary or
any property or asset of Schult or any Schult Subsidiary is bound or affected.
(b) The execution and delivery of this Agreement by Schult do not, and the
performance of this Agreement by Schult will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign (each a "Governmental
Entity"), except for (i) applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (ii) the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations thereunder (the "HSR" Act")
and (iii) filing and recordation of the Merger Documents as required by Indiana
law.
4.6 Compliance.
Except as set forth in the Disclosure Memorandum, neither Schult or any
Schult Subsidiary is in conflict with, or in default or violation of, (a) any
law, rule, regulation, order, judgment or decree applicable to Schult or any
Schult Subsidiary or by which any property or asset of Schult or any Schult
Subsidiary is bound or affected or (b) the provisions of any note, bond,
mortgage, indenture, contract, agreement, understanding, arrangement,
commitment, lease, license, permit, franchise or other instrument or obligation
to which Schult or any Schult Subsidiary is a party or by which Schult or any
Schult Subsidiary or any property or asset of
<PAGE> 11
Schult or any Schult Subsidiary is bound or affected, nor does any circumstance
exist which with notice or the passage of time or both would result in such a
conflict, default, or violation, except where such conflict, violation or
default would not prevent or delay consummation of the Merger in any material
respect, or otherwise prevent Schult from performing its obligations under this
Agreement in any material respect, and would not, individually or in the
aggregate, have a Schult Material Adverse Effect.
4.7 Other Interests.
Other than the Schult Subsidiaries or as set forth in the Disclosure
Memorandum, Schult does not own directly or indirectly any interest or
investment in any corporation, partnership, limited liability company, joint
venture, business, trust or other entity.
4.8 SEC Filings; Financial Statements.
(a) Schult has filed all forms, reports and documents required to be filed
by it with the SEC since June 15, 1995, and has heretofore delivered to
Oakwood, in the form filed with the SEC, (i) its Annual Report on Form 10-K for
the fiscal year ended June 28, 1997, (ii) its Quarterly Report on Form 10-Q for
the period ended September 27, 1997, (iii) all proxy statements relating to
Schult's meetings of shareholders (whether annual or special) held since
January 1, 1996 and (iv) all other forms, reports and other registration
statements filed by Schult with the SEC since June 15, 1995 (the forms, reports
and other documents referred to in clauses (i), (ii), (iii), and (iv) above
being referred to herein, collectively, as the "Schult SEC Reports"). The
Schult SEC Reports and any other forms, reports and other documents filed by
Schult with the SEC after the date of this Agreement (x) at the time of filing
were or will be prepared in all material respects in accordance with the
requirements of the Securities Act and the Exchange Act, as the case may be,
and the rules and regulations thereunder and (y) did not at the time they were
filed, or will not at the time they are filed, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Schult SEC Reports (the "Financial
Statements") was prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto) and each fairly presented the
consolidated financial position, results of operations and cash flows of Schult
and the Schult Subsidiaries, as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which were not and are
not expected, individually or in the aggregate, to be material in amount). The
Financial Statements have been prepared from the books and records of Schult
and the Schult Subsidiaries which accurately and fairly reflect the
transactions and dispositions of the assets of Schult and the Schult
Subsidiaries in accordance with generally accepted accounting principles.
(c) As of September 27, 1997, or any subsequent date for which a balance
sheet is provided, Schult had no known material liabilities, contingent or
otherwise, whether due or to become due, other than as indicated on the balance
sheet, or in the notes thereto, as of such date, and Schult's reserves for
uncollectible receivables and contingent liabilities were adequate. Schult and
the Schult Subsidiaries have adequately funded all accrued employee benefit
costs and such funding (to the date thereof) is reflected in the September 27
Balance Sheet (as such term is defined in Section 4.12(c)).
(d) All Debt of Schult and any Schult Subsidiary is set forth in the
Disclosure Memorandum. The term "Debt" means all liabilities, obligations and
indebtedness for borrowed
<PAGE> 12
money including but not limited to (a) obligations evidenced by bonds,
debentures, notes or other similar instruments and (b) all obligations of any
lessee under any lease of any property that should, in accordance with
generally accepted accounting principles, be classified and accounted for as a
capital lease on a consolidated balance sheet of Schult and the Schult
Subsidiaries. Except as set forth in the Disclosure Memorandum, all such Debt
may be prepaid in full without premium or penalty.
4.9 Subsequent Events. Except as set forth in the Disclosure Memorandum
or as specifically described in the footnotes to the Financial Statements,
since June 28, 1997 there has not been:
(a) any Schult Material Adverse Effect, and no Schult Material Adverse
Effect is reasonably expected to occur;
(b) any disposition or issuance by Schult or any Schult Subsidiary of any
of its capital stock (other than in connection with the exercise of a vested
and exerciseable Schult Stock Option), or of any option or right or privilege
to acquire any of its capital stock, or any acquisition or retirement by Schult
of any of its capital stock;
(c) any sale, mortgage, pledge, grant, dividend or other disposition or
transfer of any asset or interest owned or possessed by Schult or any Schult
Subsidiary, other than those occurring in the ordinary and regular course of
business consistent with past practices and prior periods;
(d) any expenditure or commitment by Schult or any Schult Subsidiary for
the acquisition of assets of any kind, other than expenditures or commitments
in the ordinary and regular course of business consistent with past practices
and prior periods;
(e) any damage, destruction or loss of such character as to interfere
materially with the continued operation of any part of the business of Schult
or any Schult Subsidiary (whether or not such loss was insured against) or to
have a Schult Material Adverse Effect;
(f) any increase in the compensation payable or to become payable by
Schult or any Schult Subsidiary to any officer or key employee of Schult or any
Schult Subsidiary, or any agreement therefor;
(g) any change made or authorized in the Articles of Incorporation or
Bylaws (or other organizational documents) of Schult or any Schult Subsidiary;
(h) any loans or advances by or to Schult or any Schult Subsidiary, other
than renewals or extensions of existing indebtedness and uses of lines of
credit in the ordinary course of business;
(i) any cancellation or payment by Schult or any Schult Subsidiary of any
indebtedness owing to or owed by it other than in the ordinary course of
business, or any cancellation or settlement by Schult or any Schult Subsidiary
of any claims against others;
(j) any failure by Schult or any Schult Subsidiary to operate its business
other than in the ordinary course of business, any change from past practices
in the manner of building or
<PAGE> 13
depleting inventories, incurring or collecting receivables, or incurring or
paying trade payables or accrued liabilities;
(k) any failure to maintain the books and records of Schult or any Schult
Subsidiary consistent with past practices, or any write-down of assets shown on
the books and records of Schult or any Schult Subsidiary, or the establishment
of any reserves or accruals in an amount or nature that is not consistent with
past practices or prior periods;
(l) any change in accounting practices; or
(m) any agreement or commitment by or on behalf of Schult or any Schult
Subsidiary to do or to take any of the actions referred to in the foregoing
subparagraphs (a) through (1).
4.10 Tax Matters
Schult and the Schult Subsidiaries have duly filed all Tax reports and
returns required to be filed by them as of the date hereof or have validly
extended the due date for the filing thereof and have duly paid all Taxes and
other charges (whether or not shown on any Tax return) due or expressly claimed
to be due from them by federal, foreign, state or local taxing authorities as
of the date hereof or an adequate reserve has been established therefor in the
Financial Statements; and true and correct copies of all federal income and
state franchise and income Tax reports and returns beginning with the 1992 tax
year have been heretofore delivered to Oakwood. The reserves for Taxes
contained in the Financial Statements and carried on the books of Schult (other
than any reserve for deferred taxes established to reflect temporary
differences between book and tax income) are adequate to cover all Tax
liabilities as of the date of this Agreement. Since December 31, 1996, neither
Schult nor any Schult Subsidiary has incurred any material Tax liabilities
other than in the ordinary course of business; there are no Tax liens (other
than liens for current Taxes not yet due) upon any properties or assets of
Schult or any Schult Subsidiary (whether real, personal or mixed, tangible or
intangible), and, except as set forth in the Disclosure Memorandum and as
reflected in the Financial Statements, there are no pending or, to the best
knowledge of Schult and each Schult Subsidiary, threatened questions or
examinations relating to, or claims asserted for, Taxes or assessments against
Schult or any Schult Subsidiary. Neither Schult nor any Schult Subsidiary has
granted or been requested to grant any extension of the limitation period
applicable to any claim for Taxes or assessments with respect to Taxes. Except
as set forth in the Disclosure Memorandum, neither Schult nor any Schult
Subsidiary is a party to any Tax allocation or sharing agreement. Schult and
the Schult Subsidiaries have withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor or shareholder that required withholding. For
purposes of this Agreement, "Tax" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Internal Revenue Code of 1986, as amended (the "Code")),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not. Schult has never made an
election under Section 341(f) of the Internal Revenue Code of 1954, as amended
and all federal tax elections under the Code that are in effect with respect to
Schult for the current and immediately preceding fiscal year are set forth in
the Disclosure Memorandum
4.11 Employees and Fringe Benefit Plans.
(a) The Disclosure Memorandum sets forth the names and titles of all
members of the Boards of Directors and officers of Schult and the Schult
Subsidiaries and the names and positions
<PAGE> 14
of all employees of Schult and the Schult Subsidiaries whose annual rate of
compensation exceeds $150,000 per annum, and the annual rate of compensation
(and bonuses) being paid to each such member of the Boards of Directors,
officer and employee as of the date hereof.
(b) The Disclosure Memorandum sets forth each employment agreement of
Schult or any Schult Subsidiary and each employment, bonus, deferred
compensation, pension, stock option, stock appreciation right, profit-sharing
or retirement plan, arrangement or practice, each medical, vacation, retiree
medical, severance pay plan, and each other agreement or fringe benefit plan,
arrangement or practice, of Schult or any Schult Subsidiary, whether legally
binding or not, which affects its employees generally or affects one or more
groups of its employees, including all "employee benefit plans" as defined by
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (each a "Plan" and collectively, the "Plans").
(c) For each Plan which is an "employee benefit plan" under Section 3(3)
of ERISA, Schult or the Schult Subsidiary has delivered to Oakwood correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the
most recent Form 5500 Annual Report, the most recent trust statement or other
document detailing the investments and assets of such Plan, and all related
trust agreements, insurance contracts, investment advisory contracts, service
agreements and funding agreements that involve the operation or administration
of such Plan.
(d) Neither Schult or any Schult Subsidiary has any commitment, whether
formal or informal and whether legally binding or not, (i) to create any
additional Plan; (ii) to modify or change any Plan in any material respect; or
(iii) to maintain for any period of time any such Plan. An accurate and
complete description of the funding policies (and commitments, if any) of
Schult or any Schult Subsidiary with respect to each such existing Plan is set
forth in the Disclosure Memorandum. None of the Plans is an "employee stock
ownership plan" as defined by Section 4975(e)(7) of the Code or Section
407(d)(6) of ERISA or is invested in any securities issued by Schult or any of
its affiliates.
(e) None of Schult or any Schult Subsidiary or any Plan or any trustee,
administrator, fiduciary or sponsor of any Plan has engaged in any prohibited
transaction, as defined in Section 406 of ERISA or Section 4975 of the Code,
for which there is no statutory exemption in Section 408 of ERISA or Section
4975 of the Code; all filings, reports and descriptions as to the Plans
(including Form 5500 Annual Reports, summary plan descriptions, and summary
annual reports) required to have been made or distributed to participants, the
Internal Revenue Service, the United States Department of Labor and other
governmental agencies have been made in a timely manner; there is no
litigation, disputed claim, governmental proceeding or investigation pending
or, to the best knowledge of Schult and each Schult Subsidiary, threatened with
respect to any of the Plans, the related trusts or other funding media, or any
fiduciary, trustee, administrator or sponsor of the Plans except (i) as set
forth in the Disclosure Memorandum or (ii) for claims for health or medical
benefits arising in the normal course of plan administration that have not
progressed beyond the Plan's internal claims procedures and, if granted, will
not differ in any material respect from the plan benefits historically provided
under the Plan; except as set forth in the Disclosure Memorandum such Plans
have been established, maintained and administered in all material respects in
accordance with their governing documents and in compliance in all material
respects with all applicable provisions of ERISA and the Code; and, except as
set forth
<PAGE> 15
in the Disclosure Memorandum each Plan which is intended to be a qualified
plan under Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service with respect to its qualified plan
status covering such Plan's current terms and provisions and, since the date of
each most recent determination letter, no event has occurred and no condition
or circumstance has existed that resulted or is likely to result in the
revocation of any such determination or that could adversely affect the
qualified status of any such Plan.
(f) Schult and each Schult Subsidiary have complied in all material
respects with all applicable federal, state and local laws, rules and
regulations relating to employees' employment and/or employment relationships,
including, without limitation, wage and hour related laws, anti-discrimination
laws, employee safety and workers compensation laws and the coverage
continuation requirements of Code Section 4980B and Part 6 of Subtitle B of
Title I of ERISA ("COBRA").
(g) Except as set forth in the Disclosure Memorandum, the consummation of
the transactions contemplated by this Agreement will not (i) result in the
payment or series of payments by Schult or any Schult Subsidiary to any
employee or other person of an "excess parachute payment" within the meaning of
Section 280G of the Code, (ii) entitle any employee or former employee of
Schult or any Schult Subsidiary to severance pay, unemployment compensation or
any other payment, or (iii) accelerate the time of payment or vesting of any
stock option, stock appreciation right, deferred compensation or other employee
benefits under any Plan (including vacation and sick pay).
(h) None of the Plans that are "welfare benefit plans," within the meaning
of Section 3(l) of ERISA, provide for continuing benefits or coverage after
termination or retirement from employment, except for COBRA rights under a
"group health plan" as defined in Code Section 4980B(g) and ERISA Section 607.
(i) Neither Schult nor any "affiliate" of Schult (defined herein to mean
an entity which is a member of a "controlled group of corporations," or under
"common control," with Schult as defined in Code Sections 414(b) or (c) or in
the regulations promulgated thereunder) has ever participated in, contributed
to or withdrawn from a multiemployer plan as defined in Section 4001(a)(3) of
ERISA, and neither Schult nor any Schult Subsidiary has incurred, or owes, any
liability as a result of any partial or complete withdrawal by any employer
from such a multiemployer plan as described under Sections 4201, 4203 or 4205
of ERISA.
(j) None of Schult nor any Schult Subsidiary nor any "affiliate" of Schult
(as defined above) has ever sponsored, maintained, participated in or
contributed to an employee benefit plan or arrangement that is or was subject
to Title IV of ERISA or any of the minimum funding standards or requirements of
Section 412 of the Code.
<PAGE> 16
4.12 Title to Assets.
(a) Real Property and Leasehold Interests. All real property and
improvements owned by Schult or any Schult Subsidiary (the "Real Property") and
all leases of real property under which Schult or any Schult Subsidiary is a
lessee or sublessee (the "Leases") are set forth in the Disclosure Memorandum.
Schult or a Schult Subsidiary, as the case may be, has good and marketable
indefeasible fee simple title to the Real Property free and clear of all liens,
charges, security interests, easements, reservations, restrictions,
encumbrances and other defects of title (collectively, "Encumbrances"), other
than exceptions set forth in the Disclosure Memorandum (the "Exceptions") which
Exceptions do not have a material adverse effect on the current use or
occupancy of the Real Property or the value thereof. Schult has delivered to
Oakwood copies of all Leases, including all amendments or supplements thereto
and all notices from the landlord thereunder or its leasing agent with respect
thereto, all of which are set forth in the Disclosure Memorandum. Schult or
the Schult Subsidiary, as the case may be, has a valid and enforceable
leasehold interest under all of the Leases, subject only to the terms and
conditions set forth in the Leases and the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject to the effect of general principles of equity,
including without limitation concepts of materiality, reasonableness, good
faith and the possible unavailability of specific performance or injunctive
relief, regardless of whether considered in a proceeding in equity or at law.
Neither Schult nor any Schult Subsidiary is in default under any Lease, and
there does not exist any event which with notice or the lapse of time or both
would constitute a default by either Schult or any Schult Subsidiary
thereunder, except for such defaults that in the aggregate would not constitute
a Schult Material Adverse Effect. To the best knowledge of Schult and each
Schult Subsidiary, the landlord under each Lease is not in default thereunder
and there does not exist any event which with notice or the lapse of time or
both would constitute a default by such landlord thereunder, except for such
defaults that in the aggregate would not constitute a Schult Material Adverse
Effect. To the best knowledge of Schult and any Schult Subsidiary, each
landlord under the Leases has good and marketable fee simple title to the
premises leased under the Lease, subject to the leasehold interest of the
lessee under the Lease. As to all such real property owned or leased by Schult
or any Schult Subsidiary (the "Property"), except as set forth in the
Disclosure Memorandum:
(i) Schult and all Schult Subsidiaries have adequate rights
of ingress and egress to all such Property;
(ii) to the best knowledge of Schult and each Schult
Subsidiary, there is no interest of any third party which impairs
the current use of the Property by Schult or any Schult
Subsidiary;
(iii) the Property, as currently used by Schult or any Schult
Subsidiary, is not in violation of any existing applicable,
federal, state or local statute, ordinance, order, requirement,
law, rule or regulation (including, without limitation, building
or environmental laws) affecting the Property which in any
material respect would affect the value thereof or materially
interfere with or materially impair the present and continued use
thereof in the usual and normal conduct of the business of Schult
or any Schult Subsidiary;
<PAGE> 17
(iv) no notice of violation of any applicable, federal, state
or local statute, law, ordinance, rule, regulation, order or
requirement, or of any covenant, condition, restriction or
easement, affecting the Property or with respect to the use or
occupancy of the Property, has been given to Schult or any Schult
Subsidiary (or, to their knowledge, any of the lessors) by any
governmental authority having jurisdiction over the Property or by
any other person entitled to enforce the same;
(v) to the best knowledge of Schult and each Schult
Subsidiary, there is no (A) intended public improvement which may
involve any charge being levied or assessed or which may result in
the creation of any lien upon the Property, (B) intended or
proposed, federal, state or local statute ordinance, order,
requirement, law or regulation (including, but not limited to,
zoning changes) which may adversely affect the current or proposed
use of the Property, or (C) suit, action, or legal,
administrative, arbitration or other proceeding (including,
without limitation, any proceeding for condemnation) or
governmental investigation pending, threatened or contemplated
against or affecting the Property or the use thereof of any part;
(vi) there are no encroachments onto the Property or any
improvements on any adjoining property which in any material
respect would affect the value thereof or interfere with or
materially impair the present and continued use thereof in the
usual and normal conduct of the business of Schult or any Schult
Subsidiary, and no improvement on the Property materially
encroaches on any adjoining property or any easements or
right-of-ways on, under or over the Property;
(vii) neither Schult nor any Schult Subsidiary is in breach
of any, and each of them is currently complying in all material
respects with all, covenants, conditions, restrictions, easements
and similar matters affecting the Property;
(viii) the buildings and improvements located on the
Property, and the present use thereof, comply with all city, state
and local zoning laws, ordinances and regulations; and
(ix) the utilities (including electrical, gas, water supply
and sewage) and the waste disposal facilities available at each
such Property have been adequate for the business of Schult and
the Schult Subsidiaries as currently conducted and as proposed to
be conducted in the future.
(b) Fixtures and Equipment. Schult or a Schult Subsidiary, as the case
may be, has good and marketable fee simple title to all fixtures, structures
and leasehold improvements on the Real Property (together with all fixtures,
structures and leasehold improvements on the real property that is the subject
of the Leases, the "Fixtures") and to all machinery and equipment, computers,
office supplies, furniture, parts, transportation equipment and other tangible
personal property (other than Inventory (hereinafter defined)) used in the
businesses of Schult and the Schult Subsidiaries (the "Equipment"), free and
clear of all Encumbrances other than those set forth in the Disclosure
Memorandum (the "Permitted Encumbrances").
(c) Inventory. Schult and each Schult Subsidiary has good and marketable
fee simple title to all of their inventories of manufactured housing units
reflected on the balance sheet included in the consolidated financial
statements for Schult and the Schult Subsidiaries for the quarter ended
September 27, 1997 (the "September 27, 1997 Balance Sheet") and all furniture,
furnishings, raw materials, appliances, parts, tools and maintenance supplies
and other personal
<PAGE> 18
property related thereto as reflected in the September 27, 1997 Balance Sheet
plus additions made to such inventories and other personal property related
thereto since September 27, 1997 and less such inventories and other personal
property related thereto disposed of in the ordinary course of business since
September 27, 1997 (the "Inventory"), free and clear of all Encumbrances except
those set forth in the Disclosure Memorandum. Each item of Inventory is in
good condition, not obsolete or materially defective and useable or saleable in
the usual and ordinary course of business.
(d) Receivables. At the Closing, all accounts receivable of Schult and
any Schult Subsidiary reflected on the September 27, 1997 Balance Sheet plus
additional accounts receivable of Schult or any Schult Subsidiary arising after
September 27, 1997 and less any accounts receivables collected in full after
September 27, 1997 (the "Receivables") will constitute valid and enforceable
claims of Schult or the Schult Subsidiary, as the case may be, enforceable by
it in accordance with the terms of the instruments or documents creating them,
subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject to
the effect of general principles of equity, including without limitation
concepts of materiality, reasonableness, good faith and the possible
unavailability of specific performance or injunctive relief, regardless of
whether considered in a proceeding in equity or at law.
(e) Intangible Property. Schult has the right to use all material trade
names, trademarks, service marks, copyrights, patents, and registrations
thereof or applications therefor, and trade secrets, secret processes, customer
lists, inventions, formula and other intellectual property used by Schult, all
of which are set forth in the Disclosure Memorandum (collectively, the
"Intangible Property"), in connection with its business as and where now
conducted and as and where such Intellectual Property is now used, and, except
as set forth in the Disclosure Memorandum neither Schult nor any Schult
Subsidiary is a party to any agreement with any other person or entity with
respect to the use of any of the Intangible Property. Each of Schult and the
Schult Subsidiaries owns or possesses all licenses and permits, and all rights
to use all trademarks, trade names, software or copyrights necessary or being
used to conduct its business as and where now conducted and has not received
any notice of conflict with the asserted rights of any others. An accurate and
complete listing of all such trademarks, trade names, software or copyrights
owned by, registered, licensed or used by Schult or any Schult Subsidiary which
are material to the business of Schult and each Schult Subsidiary taken as a
whole is set forth in the Disclosure Memorandum. There are no instances where
it has been held or claimed, and, to the best knowledge of Schult and each
Schult Subsidiary, there is no basis upon which a valid claim may be made, that
any of the Intangible Property or any use of the Intangible Property by Schult
or any Schult Subsidiary infringes upon any rights of any third party. To the
best knowledge of Schult and the Schult Subsidiaries there has not been any
material infringement or alleged infringement by any person of any of the
Intangible Property.
(f) Contract Rights. The Disclosure Memorandum sets forth all of the
existing executory material contracts, agreements and commitments of Schult and
each Schult Subsidiary of any kind or nature (excluding "Dealer Agreements" as
hereinafter defined), including without limitation contracts, agreements and
commitments which require Schult or any Schult Subsidiary to make payments
thereunder during the next 12 months from the date of this Agreement in excess
of $500,000 and including without limitation all joint venture, partnership and
participation
<PAGE> 19
agreements, license agreements, leases, notes or other evidences of
indebtedness, security agreements, mortgages, noncompetition agreements, and
powers of attorney, whether written or unwritten, and all material supply
agreements (collectively, the "Material Contracts"). The rights of Schult or
any Schult Subsidiary, as the case may be, under all Material Contracts are
valid and enforceable by Schult or the Schult Subsidiary, as the case may be,
in accordance with their respective terms except as such enforceability may be
limited by applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally and by such principles of equity as may affect the
availability of equitable remedies. Neither Schult or the Schult Subsidiary,
as the case may be, is in default in any material respects (nor does any
circumstance exist which, with notice or the passage of time or both, would
result in such a default) under the Material Contracts (including without
limitation the Leases). To the best knowledge of Schult and each Schult
Subsidiary, the other party to each Material Contract is not in default
thereunder in any material respect (nor does any circumstance exist which, with
notice or the passage of time or both, would result in such a default). All
amendments or supplements to the Material Contracts and all notices with
respect to such Material Contracts are set forth in the Disclosure Memorandum.
4.13 Condition of Tangible Assets.
(a) Fixtures. The Fixtures are in good condition and repair, ordinary
wear and tear excepted.
(b) Environmental Matters.
For purposes of this Agreement, the following terms shall have the
following meanings:
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S. C. Sections 9601 et seq.;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations or proceedings relating in any way
to any Environmental Law (for purposes of (i) and (ii) below, "Claims") or to
any material provision of any permit issued under any such Environmental Law,
including without limitation:
(i) any and all Claims by governmental or regulatory authorities for
investigation, oversight, enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law; and
(ii) any and all Claims by any third party seeking damages, response
costs, contribution, indemnification, cost recovery, compensation or injunctive
relief resulting from Hazardous Materials, relating to violations or alleged
violations of Environmental Laws, or arising from alleged injury or threat of
injury to health, safety or the environment arising from Hazardous Materials;
"Environmental Law" means any federal, state or local statute, law, rule,
regulation, ordinance, code, written policy, or rule of common law now in
effect and as amended, and any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent, decree or
judgment, relating to the environment, health or safety, or Hazardous
Materials, including without limitation: CERCLA; the Toxic Substances Control
Act, as amended, 15 U.S.C. Sections 2601 et seq.; the Clean Air Act, as
amended, 42 U.S.C. Sections 7401 et seq.; the Federal Water Pollution
Control Act, as amended, 33 U.S.C. Sections 1251 et seq.; the Federal
Insecticide, Fungicide, and Rodenticide Act, as amended, 7 U.S.C. Sections 136,
et seq.; the Hazardous Materials
<PAGE> 20
Transportation Act, as amended, 49 U.S.C. Sections 1801 et seq.; the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. Sections
6901 et seq.; ("RCRA"); the Safe Drinking Water Act, 42 U.S.C. Sections
300f et seq.; the Occupational Safety and Health Act 29 U.S.C. Sections
651 et seq.; and any similar state or local law;
"Hazardous Materials" shall mean "hazardous substances" as defined in
Section 101(14) of CERCLA, "hazardous waste" and "hazardous constituents" as
defined in RCRA and its implementing regulations, and any other substances,
wastes or materials defined as pollutants, contaminants, toxic, hazardous or
harmful or dangerous to human health or the environment under any federal,
state or local law, rules, regulation, ordinance, code or written policy,
including, but not limited to:
(i) any petroleum or petroleum products, chlorinated solvents,
explosives, radioactive materials, asbestos, asbestos products,
urea formaldehyde foam insulation, polychlorinated biphenyl
(PCB's), including transformers or other equipment that contain
dielectric fluid containing detectable levels of polychlorinated
biphenyl's, and radon gas;
(ii) any hazardous, toxic or dangerous waste, substance or
material defined as such, or as harmful or dangerous to human
health or the environment, in (or for purposes of) any current
Environmental Law or currently listed as such pursuant to any
Environmental Law; and
(iii) any other chemical, material or substance, the addition of
which to the air, earth, surface water or groundwater is
prohibited, limited or regulated by any Environmental Law;
"Improperly" means done in any manner that poses threat to human health,
safety or the environment;
"Schult Property" shall mean (i) any real property and improvements
presently owned, leased, used, operated or occupied by Schult or any Schult
Subsidiary, and (ii) any other real property and improvements at any previous
time owned, leased, used, operated or occupied by Schult or any Schult
Subsidiary (the "Former Property"); provided, however, that the representations
and warranties in this Section 4.13 relating to the condition of any Former
Property during the periods occurring after Schult's or a Schult Subsidiary's
ownership, lease, use, operation or occupation thereof shall be made on the
basis of the best knowledge of Schult or the Schult Subsidiary;
"Release" means disposing, depositing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and
the like, into or upon any land or water (including surface or ground water) or
air, or otherwise entering into in to the environment.
Except as set forth in the Disclosure Memorandum, to the best knowledge of
Schult and each Schult Subsidiary:
<PAGE> 21
(i) Hazardous Materials have not at any time in any material
respect been illegally generated, used, treated or stored on, or
transported to or from, any Schult Property;
(ii) no asbestos-containing materials or other Hazardous
Materials have been installed in or affixed to structures on any
Schult Property;
(iii) Hazardous Materials have not at any time in any
material respect been disposed of or otherwise Released on any
Schult Property, and Hazardous Materials used on or generated at
any Schult Property have not at any time in any material respect
been illegally or Improperly disposed of on any other property;
(iv) Schult and each Schult Subsidiary is currently, and has
at all times in the past (except for such past infractions for
which Schult and the Schult Subsidiaries are expected to have no
current liability) been, in compliance in all material respects
with all applicable Environmental Laws and the material
requirements of any permits issued under such Environmental Laws
with respect to any Schult Property;
(v) there are no pending or threatened Environmental Claims
against Schult, any Schult Subsidiary or any Schult Property and
there have been no past Environmental Claims against Schult, any
Schult Subsidiary or any Schult Property except (A) those set
forth in the Disclosure Memorandum and (B) those which have been
finally settled more than ten (10) years from the date hereof and
for which Schult and the Schult Subsidiaries have no current
liability;
(vi) there are no facts or circumstances, conditions or
occurrences on any Schult Property or otherwise that could
reasonably be anticipated by Schult or any Schult Subsidiary:
(A) to form the basis of an Environmental Claim against
Schult or any Schult Property; or
(B) to materially interfere with the ownership,
occupancy or use of such Schult Property as currently used,
or the ability to transfer such Schult Property, or the
value of such Schult Property, under or as a result of any
Environmental Law;
(vii) there are not now, nor have there been at any time, any
aboveground or underground storage tanks located on any Schult Property.
(c) Equipment. All of the Equipment is in good condition and repair,
ordinary wear and tear excepted.
(d) Inventory. All of the Inventory consists of items of a quality and
quantity usable in the ordinary course of Schult's and any Schult Subsidiary's
business.
4.14 Leases.
Except as set forth in the Disclosure Memorandum, none of the Property or
Equipment is leased by Schult or any Schult Subsidiary to any other party and,
except for the premises subject to the Leases, none of the real or tangible
personal property with a value of $50,000 or more used in the business of
Schult or any Schult Subsidiary is leased by them from any other party.
<PAGE> 22
4.15 Adequacy of Assets.
Schult and the Schult Subsidiaries own or otherwise have the right to use
all of the assets and rights used in and forming a part of the business of
Schult and the Schult Subsidiaries. Except as set forth in the Disclosure
Memorandum (including the Schult capital expenditure budget for the current
fiscal year included therein) and capital expenditures for any building
expansions in Schult's 1999 fiscal year, Schult and the Schult Subsidiaries do
not have any current plans to make any individual capital expenditures in
excess of $250,000 during the two fiscal years beginning June 29, 1997.
4.16 Arms-Length Transaction.
Except as set forth in the Disclosure Memorandum, since June 28, 1997, all
of the material transactions with other persons by Schult or a Schult
Subsidiary have been conducted on an arms-length basis. Except as set forth in
the Disclosure Memorandum, to the best knowledge of Schult and each Schult
Subsidiary, none of the officers or directors of Schult or their respective
Affiliates or Relatives (as such capitalized terms are hereafter defined) has
any direct or indirect interest, ownership (other than through non-controlling
investments in securities of publicly-held corporations) or profit
participation in businesses which are competitors or potential competitors of
Schult or a Schult Subsidiary. Except as set forth in the Disclosure
Memorandum, neither Schult nor a Schult Subsidiary has any outstanding loans or
other advances to any officer, director or employee of Schult or a Schult
Subsidiary or their respective Affiliates or Relatives. Except as set forth in
the Disclosure Memorandum, to the best knowledge of Schult and each Schult
Subsidiary, none of the shareholders, officers or directors of Schult or any
Schult Subsidiary or their respective Affiliates or Relatives is an Affiliate
of any Dealer (as hereinafter defined) or of any other entity that has a
material business relationship with Schult or any Schult Subsidiary (a
"Material Business Entity"). "Affiliate" shall mean any person or entity which
(a) directly or indirectly controls, is controlled by or is under common
control with a specified person or entity, (b) owns or controls 5% or more of
the outstanding equity interests of a specified entity or (c) is an officer,
director, general partner, trustee, manager, administrator, representative or
agent of a specified entity. As used in this definition, the term "control"
means possession, directly or indirectly (through one or more intermediaries),
of the power to direct or cause the direction of management and policies of an
entity through ownership of voting securities or other ownership interests,
contract, voting trust or otherwise. "Relative" means any brother or sister
(whether by whole or half blood or adoption), spouse or lineal ascendant or
descendant.
4.17 Lawfully Operating.
Except as set forth in the Disclosure Memorandum, Schult and each Schult
Subsidiary have been and currently are conducting their business, and the
Property has been and now is being used and operated, in compliance with all
statutes, regulations, laws, orders, covenants, restrictions or plans of
federal, state, regional, county or municipal authorities, agencies or board
applicable to the same.
4.18 Litigation.
All pending and, to the best knowledge of Schult and each Schult
Subsidiary, threatened lawsuits or administrative proceedings or investigations
against Schult and any Schult Subsidiary are set forth in the Disclosure
Memorandum. There are currently no pending, or, to the best knowledge of
Schult and each Schult Subsidiary, threatened, lawsuits or administrative
<PAGE> 23
proceedings or investigations against Schult or any Schult Subsidiary or to
which any of their assets are subject, which, if adversely determined, could
have a Schult Material Adverse Effect or prevent or delay consummation of the
Merger in any material respect, or otherwise prevent Schult from performing its
obligations under this Agreement in any material respect. Neither Schult nor
any Schult Subsidiary is subject to any currently existing order, writ,
injunction, or decree relating to its operations. Except as set forth in the
Disclosure Memorandum there are no material "loss contingencies" (as defined in
Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975 ("SFAS 5")), which would be required
by SFAS 5 to be disclosed or accrued in consolidated financial statements of
Schult and the Schult Subsidiaries were such statements prepared at the time
this warranty is made or deemed made.
4.19 State Takeover Laws.
No action is necessary on the part of Schult or any Schult Subsidiary to
exempt any of the transactions contemplated by this Agreement from any
applicable "moratorium," "control share," "fair price," "business combination"
and other anti-takeover laws of any state, including Article 23-1-42 of the
IBCL.
4.20 Labor Matters.
Except as set forth in the Disclosure Memorandum, since December 31, 1992,
neither Schult nor any Schult Subsidiary has been a party to any collective
bargaining agreement or has been the subject of any union activity or labor
dispute, and there has not been any strike of any kind called or, to the best
knowledge of Schult and each Schult Subsidiary, threatened to be called against
Schult or any Schult Subsidiary. To the best knowledge of Schult and each
Schult Subsidiary, neither Schult nor any Schult Subsidiary has violated any
applicable federal or state law or regulation relating to labor or labor
practices or has any liability to any of its employees, agents, or consultants
in connection with grievances by, or the termination of, such employees, agents
or consultants.
4.21 No Brokers.
Except as set forth in the Disclosure Memorandum, neither Schult nor any
Schult Subsidiary has entered into any contract, arrangement or understanding
with any person or firm which may result in the obligation of Schult or a
Schult Subsidiary or Oakwood or Merger Sub to pay any finder's fees, brokerage
or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby. Neither Schult nor any Schult Subsidiary is aware of any
claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
4.22 Bank Accounts.
The Disclosure Memorandum sets forth all bank accounts, vaults and safe
deposit boxes used by, or in the name of, Schult or any Schult Subsidiary,
including the account, vault or box number, the institution at which the
account, vault or box is maintained, and the signatories authorized for the
account or persons authorized to have access to the vault or box.
4.23 Insurance.
Schult and the Schult Subsidiaries have fire and casualty insurance
policies with extended coverage (subject to certain deductibles) sufficient to
allow them to replace any of their properties or assets that might be damaged
or destroyed. Schult and the Schult Subsidiaries have business interruption
insurance policies with coverage sufficient to allow them to recover losses
associated with any business interruption. The Disclosure Memorandum sets
forth all policies of insurance now in effect covering the assets, properties
and business of Schult and the Schult Subsidiaries and all life insurance
policies maintained by them and Schult has delivered an accurate and complete
<PAGE> 24
copy of each of such policies to Oakwood. Neither Schult or any Schult
Subsidiary has done anything by way of action or inaction that invalidates any
of such policies in whole or in part where such invalidation would have,
individually or in the aggregate, a Schult Material Adverse Effect.
4.24 Warranty and Product Liability Matters.
Except as set forth in the Disclosure Memorandum, the products and
services provided by Schult and the Schult Subsidiaries are in compliance in
all material respects with and meet all express and implied warranties and the
requirements and standards of all federal and state laws and regulations
applicable to the sale or provision of such products and services, including
without limitation the National Manufactured Housing Construction and Safety
Standards Act of 1974, the Magnuson-Moss Warranty Federal Trade Commission
Improvement Act and the regulations promulgated by the Consumer Products Safety
Commission. Except as set forth in the Disclosure Memorandum, no product or
service warranty or liability claims are pending or, to the best knowledge of
Schult and each Schult Subsidiary, threatened against Schult or any Schult
Subsidiary or in respect of products or services sold or provided by it, except
such claims that in the aggregate would not have a Schult Material Adverse
Effect.
4.25 Warranty, Repurchase and Other Service Obligations.
To the best knowledge of Schult and each Schult Subsidiary, (a) all
material warranty obligations of Schult or any Schult Subsidiary and all
material warranty contracts, agreements, understandings or arrangements to
which Schult or any Schult Subsidiary is a party or by which any of its or
their property or assets is bound, including without limitation express
warranties, implied warranties and warranties established by a course of
dealing and (b) all material service and repurchase contracts, agreements,
understandings or arrangements to which Schult or any Schult Subsidiary is a
party or by which any of its or their property or assets is bound are set forth
in the Disclosure Memorandum and true and complete copies of any such
agreements have heretofore been delivered to Oakwood.
4.26 Dealer Arrangements.
The terms of any loans to any dealer to whom Schult or a Schult
Subsidiary currently sells manufactured homes (a "Dealer") are set forth in the
Disclosure Memorandum. Any agreement, understanding or arrangement between
Schult and/or any Schult Subsidiary, on the one hand, and a Dealer, on the
other hand, is referred to herein as a "Dealer Agreement". True and complete
copies of all written Dealer Agreements have heretofore been delivered to
Oakwood. The Disclosure Memorandum sets forth (a) a general description of the
arrangements generally applicable to the Dealers, including arrangements
providing for rebates, discounts or other payments or concessions to the
Dealers and (b) a list of the 25 Dealers who purchased the greatest number of
manufactured homes from Schult during the fiscal year ended June 28, 1997 and
during the 5 month period beginning June 29, 1997 (based on the dollar amount
of such purchases and ranked in descending order) and a description of the
specific arrangements to provide any rebates, discounts or other payments or
concessions to each such Dealer. The rights of Schult or any Schult Subsidiary
under each Dealer Agreement are valid and enforceable by Schult or the Schult
Subsidiary, as the case may be, in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights generally and by
such principles of equity as may affect the availability of equitable remedies.
Neither Schult nor any Schult Subsidiary, as the case may be, is in default
<PAGE> 25
in any material respect (nor does any circumstance exist which, with notice or
the passage of time or both, would result in such a default) under the Dealer
Agreements. To the best knowledge of Schult and each Schult Subsidiary, the
other party to each Dealer Agreement is not in default thereunder in any
material respect (nor does any circumstance exist which, with notice or the
passage of time or both, would result in such a default). All amendments or
supplements to the Dealer Agreements and all notices received since July 1,
1997 with respect to such Dealer Agreements are set forth in the Disclosure
Memorandum. Except as set forth in the Disclosure Memorandum, no Dealer has
indicated in any written or oral communication to Schult or a Schult Subsidiary
that such Dealer has ceased to sell or otherwise deal in manufactured housing
of Schult or any Schult Subsidiary, is experiencing financial difficulties, or
is considering the cessation of business (or the material reduction in its
level of business) with Schult or any Schult Subsidiary or with Oakwood
following the Closing Date, or that Schult's or any Schult Subsidiary's
relationship with such Dealer will be adversely affected by the transactions
contemplated by the Merger.
4.27 Guarantees.
Except as set forth in the Disclosure Memorandum, neither Schult or any
Schult Subsidiary is a guarantor or otherwise liable for any liability or
obligation (including indebtedness) of any other person.
4.28 Prospective Changes.
Except as set forth in the Disclosure Memorandum, Schult knows of no
impending changes in Schult's or any Schult Subsidiary's business, assets,
liabilities, relations with employees, competitive situation or relations with
suppliers or customers, or in any governmental actions or regulations affecting
Schult's and Schult Subsidiaries' business, which, if they occur, could have a
Schult Material Adverse Effect, except for (a) general economic conditions, (b)
matters having a similar effect on Oakwood and Schult, (c) matters of general
knowledge in the industry of which Oakwood should be aware due to the nature of
its business or (d) pending or adopted federal statutes, laws and regulations
with general applicability in the states where Oakwood currently does business.
4.29 Full Disclosure.
To the best knowledge of Schult and each Schult Subsidiary, all of the
information set forth in the Disclosure Memorandum and their representations
herein or in any Schedules and Exhibits hereto are true, correct, and complete
in all material respects and no written representation, warranty, or statement
made by Schult or any Schult Subsidiary in or pursuant to this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make such representation,
warranty, or statement, in light of the circumstances under which it was made,
not misleading to Oakwood.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF OAKWOOD AND MERGER SUB
Oakwood and Merger Sub hereby jointly and severally represent and
warrant Schult that:
5.1 Organization and Qualification.
Each of Oakwood and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Merger Sub has not
<PAGE> 26
engaged in any activities other than in connection with the transactions
contemplated by this Agreement.
5.2 Authority Relative to this Agreement.
Each of Oakwood and Merger Sub has all necessary power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated herein. The execution and delivery of
this Agreement by Oakwood and Merger Sub and the consummation by Oakwood and
Merger Sub of the transactions contemplated herein have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Oakwood or Merger Sub are necessary to authorize this Agreement
or to consummate the transactions contemplated herein (other than the filing
and recordation of the appropriate merger documents as required by Indiana
law). This Agreement has been duly and validly executed and delivered by
Oakwood and Merger Sub and, assuming the due authorization, execution and
delivery by Schult, constitutes a legal, valid and binding obligation of each
of Oakwood and Merger Sub, enforceable against them in accordance with its
terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally
and subject, as to enforceability, to the effect of general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
5.3 No Conflict: Required Filings and Consents.
(a) Except as set forth in Schedule 5.3 attached hereto, the execution
and delivery of this Agreement by Oakwood and Merger Sub do not, and the
performance of the transactions contemplated herein by Oakwood and Merger Sub
will not, (i) conflict with or violate the Articles of Incorporation or Bylaws
of Oakwood or Merger Sub, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Oakwood or Merger Sub or by
which any property or asset of Oakwood or Merger Sub is bound or affected, or
(iii) result in any breach of or constitute a default (or any event which with
notice or the passage of time or both would result in a default) under, result
in the loss of a material benefit under or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Oakwood or
Merger Sub pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Oakwood or Merger Sub is a party or by which Oakwood or Merger Sub or
any property or asset of Oakwood or Merger Sub is bound or affected.
(b) The execution and delivery of this Agreement by Oakwood and Merger
Sub do not, and the performance of this Agreement by Oakwood and Merger Sub
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Entity, except (i) for (A) the
pre-merger notification requirements of the HSR Act and (B) filing and
recordation of appropriate merger documents as required by Indiana law, and
(ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Merger in any material respect, or otherwise prevent
Oakwood or Merger Sub from performing its obligations under this Agreement in
any material respect.
<PAGE> 27
5.4 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated herein based upon arrangements made by, or on behalf
of, Oakwood.
5.5 Full Disclosure. To the best knowledge of Oakwood, all of the
written information provided by it and its representations herein or in the
Exhibits or any Schedules hereto are true, correct, and complete in all
material respects and no written representation, warranty, or statement made by
Oakwood in or pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make such representation, warranty, or statement, in light of the
circumstances under which it was made, not misleading to Schult.
ARTICLE 6
COVENANTS
6.1 Covenants of Oakwood and Schult. During the period from the date
hereof and continuing until the Effective Time (except as expressly
contemplated or permitted hereby, or to the extent Schult consents in writing
in the case of Oakwood's obligations and to the extent Oakwood consents in
writing in the case of Schult's obligations), each of Oakwood and Schult
covenants with the other that, insofar as the obligations relate to it:
(a) Except as and to the extent required by law, Oakwood and Schult and
their respective subsidiaries hereby agree not to disclose or use, and each
shall cause its representatives not to disclose or use, any confidential
information with respect to the other party(ies) hereto furnished, or to be
furnished, by such other party(ies) or their representatives in connection
herewith at any time or in any manner other than in connection with its
evaluation of the Merger. Except as required by law, none of Schult or Oakwood
or their respective representatives shall make any public statements regarding
the Merger or this Agreement without the prior approval of the other party.
(b) As soon as practicable Oakwood, Merger Sub and Schult shall
cooperate and use their respective best efforts to file a Notification and
Report Form for Certain Mergers and Acquisitions under the HSR Act with the
Department of Justice and the Federal Trade Commission. Oakwood and Schult
shall cooperate and consult with each other with respect to the preparation of
the Notification and Report Forms and any other submissions, including but not
limited to responses to written or oral comments or requests for additional
information or documenting material by the Federal Trade Commission or the
Antitrust Division of the Department of Justice, required to be made pursuant
to the HSR Act in connection with the transactions contemplated hereby.
(c) Oakwood, Merger Sub and Schult shall cooperate and use their
respective best efforts (i) to prepare all documentation, to effect all filings
and to obtain all permits, consents, approvals and authorizations of all third
parties and other governmental authorities necessary to consummate the
transactions contemplated by this Agreement and (ii) to cause the transactions
contemplated by this Agreement to be consummated as expeditiously as is
reasonably practicable.
(d) Until July 1, 1998, Oakwood and Schult and their respective
subsidiaries shall not solicit employment of any employees of the other party
or its respective subsidiaries.
6.2 Covenants of Schult.
<PAGE> 28
Schult covenants and agrees that between the date hereof and continuing until
the Effective Time (except as expressly contemplated or permitted hereby, or to
the extent that Oakwood shall otherwise consent in writing):
(a) Schult and each Schult Subsidiary shall carry on and conduct their
respective businesses only in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and shall use all
reasonable efforts to preserve intact their present business organizations,
maintain their rights and franchises and preserve their relationships with
Dealers, customers, suppliers and others having business dealings with them to
the end that their goodwill and ongoing businesses shall not be impaired in any
material respect at the Effective Time.
(b) From the date hereof to the Effective Time, each of Schult and the
Schult Subsidiaries shall allow all designated officers, attorneys, accountants
and other representatives of Oakwood access at all reasonable times during
regular business hours to the records and files, correspondence, audits,
properties, personnel and accountants, as well as to all information relating
to commitments, contracts, titles and financial position, or otherwise
pertaining to the business and affairs, of Schult and the Schult Subsidiaries.
(c) Schult agrees (i) that it shall not, and shall direct and use its
best efforts to cause Schult's directors, officers, employees, shareholders,
advisors, accountants and attorneys (the "Representatives"), including such
Representatives of any of Schult's affiliated entities or persons, not to
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its shareholders) with respect to a
merger, share exchange, acquisition, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities (whether to be sold by Schult or any of its shareholders)
of Schult or any Schult Subsidiary (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations or discussions concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal; (ii) that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing and will take
the necessary steps to inform the individuals or entities referred to above of
the obligations undertaken in this Section 6.2(c); and (iii) that it will
notify Oakwood immediately if any such inquiries or proposals are received by,
any such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with, it; provided, however, that
nothing contained in this Section 6.2(c) shall prohibit the Board of Directors
of Schult from furnishing information to, or entering into discussions or
negotiations with, or otherwise facilitating any effort or attempt to make or
implement an Acquisition Proposal with, any person or entity that after the
date hereof makes an unsolicited written, bona fide proposal (an "Unsolicited
Proposal") to acquire Schult or its assets pursuant to a merger, consolidation,
share exchange, sale of stock or sale of assets or other similar transaction,
if, and only to the extent that (A) the Board of Directors of Schult receives
the written opinion of counsel that such action is necessary for the Board of
Directors of Schult to comply with its fiduciary duties to shareholders under
applicable law and (B) prior to furnishing such information to, or entering
into discussions or negotiations with, such person or entity, Schult provides
reasonable notice to Oakwood to the effect that it is furnishing information
to, or entering into discussions or negotiations with, or
<PAGE> 29
otherwise facilitating any effort or attempt to make or implement an
Acquisition Proposal with, such person or entity.
(d) Schult shall use its best efforts to obtain and furnish to Oakwood
prior to the Effective Time the written consents required as a closing
condition pursuant to Section 7.3(f).
(e) Schult shall cause a meeting of its shareholders to be duly called
and held as soon as reasonably practicable after the date hereof for the
purpose of considering and acting upon approval of the Plan of Merger. Schult
will, through its Board of Directors, recommend to its shareholders approval of
the Plan of Merger, unless the Board of Directors determines, after
consultation with its legal and financial advisors, that such recommendation
would be inconsistent with its performance of its fiduciary duties under
applicable law. In connection with such meeting, Schult shall prepare and file
an appropriate proxy statement in accordance with the requirements of the
Exchange Act and the rules and regulations thereunder (the "Proxy Statement")
and mail it to Schult's shareholders. The form and content of the Proxy
Statement shall be reasonably satisfactory to Oakwood and its counsel. Schult
and Oakwood will promptly advise each other if, at any time before the date of
Schult's shareholders meeting or the Effective Time, it becomes aware that the
Proxy Statement contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements contained therein, in the light of the circumstances under which
they were made, not misleading. In such event, Schult or Oakwood, as the case
may be, will provide the others with the information needed to correct such
misstatement or omission. Oakwood will furnish to Schult for inclusion in the
Proxy Statement all such information relating to Oakwood or Merger Sub as
Schult or its counsel shall reasonably request. Schult shall notify Oakwood
promptly of the receipt by it of any comments of the SEC and of any requests or
supplements to the proxy Statement and will supply Oakwood with copies of all
correspondence between it and its representatives, on the one hand, and the SEC
or the members of its staff, on the other hand, with respect to the Proxy
Statement.
(f) Schult and the Schult Subsidiaries will make all normal and
customary repairs, replacements, and improvements to their facilities, and,
except with the prior consent of Oakwood, will not dispose of any capital
assets with a fair market value in excess of $50,000 other than Schult's idle
facility in Ellaville, Georgia and a tract of approximately 2 acres in Redwood
Falls, Minnesota.
(g) Without limiting the generality of the covenants set forth in
Section 6.2(a), neither Schult or any Schult Subsidiary will:
(i) change any provision of the Articles of Incorporation or the
Bylaws or equivalent organizational documents of Schult or any Schult
Subsidiary;
(ii) change the number of shares of the authorized, issued or
outstanding capital stock of Schult or any Schult Subsidiary other than
as the result of the issuance of shares of Schult Common Stock in
connection with the exercise of a vested Schult Stock Option, including
any issuance, purchase, redemption, split, combination or
reclassification thereof, or issue or grant any option, warrant, call,
commitment, subscription, right or agreement to purchase relating to the
authorized or issued capital stock of Schult or any Schult Subsidiary, or
declare, set aside or pay any dividend or other distribution in cash or
in kind with respect to the outstanding capital stock of Schult or any
Schult Subsidiary;
(iii) incur any liabilities or obligations, whether directly or
indirectly, or by way of guaranty, and whether or not evidenced by any
note, bond, debenture, or similar instrument, except in the ordinary
course of business consistent with past practices and prior periods;
<PAGE> 30
(iv) except as set forth in the Disclosure Memorandum (including the
Schult capital expenditure budget for the current fiscal year, make any
capital expenditures other than reasonable expenditures necessary to
maintain existing assets in good working order and repair, reasonable
wear and tear excepted;
(v) pay any bonuses to any executive officer of Schult or any Schult
Subsidiary except as set forth in the Disclosure Memorandum, enter into
any new or amend any existing employment agreement with any person; adopt
any new or amend in any respect any existing Plan, except as may be
otherwise required by law; grant any increase in compensation or benefits
of any kind to its employees, officers or directors, except regularly
scheduled general increases in the ordinary course of business and
consistent with past practices and policies; or effect any change in any
respect in retirement benefits to any class of employees or officers,
except as otherwise required by law;
(vi) sell, mortgage, pledge, or otherwise dispose of or encumber any
asset owned by Schult or any Schult Subsidiary, other than sales,
mortgages, pledges, or other dispositions or encumbrances occurring in
the ordinary and regular course of business consistent with past
practices and prior periods;
(vii) increase or deplete inventories, incur or collect receivables,
or incur or pay trade payables or accrued liabilities in any manner other
than consistent with past practices and prior periods, and in the
ordinary course of business;
(viii) cancel without payment or satisfaction in full, waive or
extend the time for performance of, any notes, loans, or other
obligations inuring to the benefit of Schult or any Schult Subsidiary;
(ix) make any material modification of or amendment to any of the
contracts set forth in the Disclosure Memorandum pursuant to this
Agreement;
(x) fail to maintain in full force and effect all insurance now
carried by Schult or any Schult Subsidiary;
(xi) institute any changes in management policy of a significant
nature;
(xii) take any action or fail to take any action that, if taken or
omitted, would be required to be disclosed under the provisions of
Section 4.9 of this Agreement; or
(xiii) make any agreement or commitment by or on behalf of Schult to
do or take any of the actions referred to in the foregoing subparagraphs
(i) through (xii).
(h) Without the prior written consent of Oakwood, Schult shall not take
any action which would cause or would be likely to cause the conditions upon
the obligations of the parties hereto to effect the transactions contemplated
hereby not to be fulfilled, including without limitation, taking, causing to be
taken, or permitting or suffering to be taken or to exist any action, condition
or thing which would cause the representations and warranties made by Schult or
any
<PAGE> 31
Schult Subsidiary herein not to be true, correct and accurate as of any time
between the date hereof and the Closing Date.
(i) Schult shall promptly provide to Oakwood monthly and quarterly
consolidated financial statements of Schult.
(j) Schult, prior to the Closing Date, shall deliver to Oakwood a copy of
any reports filed with the SEC subsequent to the date of this Agreement,
including without limitation its Quarterly Report on Form 10-Q for the quarter
ended in December 1997, a copy of which shall have been delivered to Oakwood
prior to its filing with the SEC and at least concurrently with a draft or copy
of such report being delivered to Schult's counsel.
6.3 Covenants of Oakwood. Oakwood covenants and agrees that between the
date hereof and continuing until the Effective Time (except as expressly
contemplated or permitted hereby, or to the extent that Schult shall otherwise
consent in writing):
(a) Oakwood shall not take any action which would cause or tend to cause
the conditions upon the obligations of the parties hereto to effect the
transactions contemplated hereby not to be fulfilled, including without
limitation, taking, causing to be taken, or permitting or suffering to be taken
or to exist any action, condition or thing which would cause the
representations and warranties made by Oakwood herein not to be true, correct
and accurate as of any time between the date hereof and the Closing Date.
(b) Oakwood shall not, and it shall cause its subsidiaries and affiliates
to not, purchase any equity interest in Schult between the date hereof and
February 15, 1998.
(c) Oakwood has secured a commitment letter from NationsBank, N.A., and
NationsBanc Montgomery Securities, Inc. dated January 2, 1998, and Oakwood
agrees to negotiate in good faith with the agents for the lenders thereunder to
obtain the financing contemplated thereby and to use its reasonable best
efforts to complete and satisfy the conditions to financing set forth in such
commitment letter.
ARTICLE 7
CONDITIONS
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) The Plan of Merger and the transactions contemplated hereby shall have
been approved in the requisite manner by the holders of the issued and
outstanding shares of capital stock of Schult entitled to vote thereon, which
approval and the voting thereon shall be certified by the Chief Executive
Officer of Schult.
(b) No action or proceeding shall have been instituted before a court or
other governmental body by any governmental agency or public authority to
restrain or prohibit the transactions contemplated by this Agreement or to
obtain an amount of damages or other material relief in connection with the
execution of the Agreement or the related agreements or the consummation of the
Merger; and no governmental agency shall have given notice to any party hereto
to the effect that consummation of the transactions contemplated by this
Agreement would
<PAGE> 32
constitute a violation of any law or that it intends to commence proceedings
to restrain consummation of the Merger.
(c) All consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board or other regulatory body
required in connection with the execution, delivery and performance of this
Agreement shall have been obtained or made, except for filings in connection
with the Merger and any other documents required to be filed after the
Effective Time and except where the failure to have obtained or made any such
consent, authorization, order, approval, filing or registration would not have
a material adverse effect on the business of Oakwood and Schult, taken as a
whole, following the Effective Time.
(d) The applicable waiting period under the HSR Act shall have expired or
been terminated.
(e) The Board of Directors of Schult shall have received the written
opinion of Chicago Corp., dated as of the date of the mailing of the Proxy
Statement, which opinion shall not have been withdrawn as of the Closing Date,
that the Merger Consideration is fair to the shareholders of Schult.
7.2 Conditions to Obligation of Schult to Effect the Merger. The
obligations of Schult to effect the Merger shall be subject to the fulfillment
at or prior to the Closing Date of the following conditions:
(a) Oakwood shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and the
representations and warranties of Oakwood and Merger Sub contained in this
Agreement shall be true and correct as of the Closing Date, and Schult shall
have received a certificate of the president or the chief financial officer of
Oakwood, dated the Closing Date, certifying to such effect.
(b) Schult shall have received a good standing certificate dated no
earlier than five days prior to the Effective Time for Oakwood from the
Secretary of State of North Carolina and for Merger Sub from the Secretary of
State of Indiana.
(c) Schult shall have received from Oakwood and Merger Sub certified
copies of all resolutions adopted by the Board of Directors and shareholders of
Oakwood and Merger Sub in connection with this Agreement and the transactions
contemplated hereby.
7.3 Conditions to Obligation of Oakwood and Merger Sub to Effect the
Merger. The obligations of Oakwood and Merger Sub to effect the Merger shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) Schult shall have performed its agreements contained in this Agreement
required to be performed on or prior to the Closing Date and the
representations and warranties of Schult contained in this Agreement shall be
true and correct as of the Closing and Oakwood shall have received a
certificate of the Chief Executive Officer of Schult, dated the Closing Date,
certifying to such effect to the best of such officer's knowledge and belief.
<PAGE> 33
(b) From the date of this Agreement through the Effective Time, there
shall not have occurred any material adverse change in the financial condition,
business, operations or prospects of Schult or the Schult Subsidiaries, other
than any such change that affects both Schult and Oakwood in a substantially
similar manner.
(c) Oakwood shall have received a written opinion letter, dated as of the
Closing Date, from Baker & Daniels substantially in the form of Exhibit C
attached hereto; provided, however, that such opinion letter may also contain
any additional opinions reasonably requested by Oakwood that relate to matters
that arise during Oakwood's due diligence review or otherwise in connection
with the consummation of this Agreement and the transactions contemplated
hereby.
(d) Oakwood shall have completed a review of Schult's business operations
and any matters disclosed pursuant to this Agreement and the Disclosure
Memorandum (which review shall be completed no later than the later of January
23, 1998 or ten (10) days after the date on which the Disclosure Memorandum in
satisfactory form is received by Oakwood (the "Due Diligence Completion
Date")), and such review shall not disclose (i) any information or conditions
not previously disclosed to the public which an investor would reasonably
expect, in the aggregate, to have a Schult Material Adverse Effect or (ii)
information or conditions, which even though previously generally disclosed to
the public in whole or in part, indicates that the business, financial
condition or results of operations of Schult and the Schult Subsidiaries, taken
as a whole and excluding any changes or effects caused by changes in general
economic conditions or changes generally affecting Schult's industry, is
materially adversely different from what would be reasonably expected by an
investor generally familiar with the Schult SEC Reports.
(e) Schult and the holder of each unexercised Schult Stock Option shall
have entered into agreements satisfactory to Oakwood as described in Section
3.5.
(f) Consents in form satisfactory to Oakwood shall have been obtained with
respect to those matters set forth in the Disclosure Memorandum as exceptions
to the representations in Section 4.5(a) other than those consents where the
failure to obtain such consents, in the aggregate or individually, would not,
in Oakwood's reasonable judgment, constitute or result in a Schult Material
Adverse Effect.
(g) Oakwood shall have received certificates of existence for Schult and
each Schult Subsidiary dated no earlier than five days prior to the Effective
Time from the Secretary of State of each of their respective states of
organization and from the Secretary of State of each state where Schult or any
Schult Subsidiary is qualified to do business.
(h) Oakwood shall have received Phase I environmental assessment reports
covering all of the real property owned or leased by Schult or any Schult
Subsidiary (which reports shall have been supplemented by additional Phases and
reports if deemed necessary by the environmental consultant preparing such
report to fully assess any environmental concerns) (the "Environmental
Assessment"), the completeness of which reports shall be acceptable to Oakwood
and shall not disclose remediation, clean-up, monitoring, removal and other
work deemed advisable by the consultant exceeding $500,000. The costs of any
Phase I environmental assessment reports (and any additional Phases and
reports) prepared at Oakwood's request will be paid by Oakwood. Oakwood shall
also have performed such additional due diligence with respect to any potential
environmental liability of Schult or any Schult Subsidiary as it deems
necessary or advisable and such additional due diligence shall not disclose any
condition, circumstance or liability that would have, in Oakwood's reasonable
judgment, either individually or in the aggregate, a Schult Material Adverse
Effect.
<PAGE> 34
(i) The number of holders of Schult Common Stock who shall have asserted
or are entitled to assert their rights as a dissenter with respect to their
shares of Schult Common Stock and who shall not have withdrawn or lost such
dissenters' rights shall not exceed 7.5% of the aggregate number of outstanding
shares of Schult Common Stock.
(j) Oakwood shall have received from Schult certified copies of all
resolutions adopted by the Board of Directors and shareholders of Schult in
connection with this Agreement and the transactions contemplated hereby.
(k) Each of the officers and directors of Schult shall have resigned from
Schult.
(l) The following five employees of Schult shall have executed agreements,
in form reasonably satisfactory to Oakwood and such employee, providing for (a)
a two-year noncompetition period from the Effective Time, (b) a salary
continuation through the second anniversary of the Effective Time at such
employee's salary for Schult's fiscal year ended June 28, 1997 if Oakwood
terminates such employee's employment for any reason, and (c) continuation of
Schult's current severance policy for payment of severance benefits upon
termination for other than cause in an amount equal to one-half week of pay for
each year of service: Walter E. Wells, Ervin L. Bontrager, John P.
Guequierre, William S. Reasor and Frederick A. Greenawalt.
(m) Oakwood shall have obtained financing, in the amount of $100 million
and on terms and conditions set forth in the commitment letter with
NationsBank, N.A., and NationsBanc Montgomery Securities, Inc. dated January 2,
1998.
(n) Oakwood shall have received a certificate dated the Closing Date from
Harris Trust, Schult's transfer agent, as to the aggregate number of shares of
capital stock of Schult issued and outstanding as of the Closing Date.
<PAGE> 35
ARTICLE 8
TERMINATION
8.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement, by the mutual consent of Oakwood and
Schult.
8.2 Termination by Either Oakwood or Schult. This Agreement may be
terminated and the Merger may be abandoned by action or authorization of the
Board of Directors of either Oakwood or Schult if (a) the Merger shall not have
been consummated by May 15, 1997, or (b) the approval of Schult's shareholders
required by Section 7.1(a) shall not have been obtained at a meeting duly
convened therefor or at any adjournment thereof, or (c) a United States federal
or state court of competent jurisdiction or United States federal or state
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action shall have
become final and nonappealable; provided, however, that the party seeking to
terminate this Agreement pursuant to this clause (c) shall have used all
reasonable efforts to remove such injunction, order or decree. In addition,
this Agreement is subject to termination by Oakwood as provided in the preamble
to Article IV.
8.3 Termination by Schult. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the shareholders of Schult, by action or authorization of
the Board of Directors of Schult if (a) there has been a material breach of any
of the covenants or agreements set forth in this Agreement on the part of
Oakwood, which breach is not curable or, if curable, is not cured within 10
days after written notice of such breach is given by Schult to Oakwood or (b)
prior to the approval by Schult's shareholders of the transactions contemplated
by this Agreement, Schult shall have received an Unsolicited Proposal and the
Board of Directors of Schult, after consulting with its counsel, determines
that to proceed with the Merger would violate its fiduciary duties and, not
later than the time of such termination, Schult has paid any amount due Oakwood
pursuant to Section 8.7.
8.4 Termination by Oakwood. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, by action or
authorization of the Board of Directors of Oakwood if (a) there has been a
breach by Schult or any Schult Subsidiary of any representation or warranty
contained in this Agreement which would have or would be reasonably likely to
have a Schult Material Adverse Effect, (b) there has been a material breach of
any of the covenants or agreements set forth in this Agreement on the part of
Schult or any Schult Subsidiary, which breach is not curable or, if curable, is
not cured within 10 days after written notice of such breach is given by
Oakwood to Schult or the Subsidiary.
8.5 Effect of Termination and Abandonment. Upon termination of this
Agreement pursuant to this Article or as provided in the preamble to Article
IV, this Agreement shall be void and of no other effect (other than with
respect to Sections 6.1(a) and 8.7 which shall remain in effect notwithstanding
the termination of this Agreement), and there shall be no liability by reason
of this Agreement or the termination thereof on the part of any party hereto
(other than for the willful breach by a party of any of its representations,
warranties, covenants or agreements contained herein), or on the part of the
respective directors, officers, employees or agents of any of them.
<PAGE> 36
8.6 Extension: Waiver.
At any time prior to the Effective Time, any party hereto may, to the
extent legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
8.7 Cost Reimbursement Agreement.
(a) Cost Reimbursement Agreement. Schult recognizes that Oakwood has and
will spend significant time and resources in effecting the Merger. In
recognition thereof, if, prior to July 15, 1998, Schult or its shareholders
publicly announce, enter into a letter of intent relating to, enter into a
definitive agreement providing for, or consummate, a transaction other than the
Merger (a "Subsequent Transaction"), which, as announced, or as provided in
such letter or agreement or as consummated, provides for or relates to
(including all prior distributions to shareholders after the date hereof) the
disposition of a controlling interest in Schult or any of the Schult
Subsidiaries, or the sale, transfer or other distribution of assets
constituting a majority (measured by fair market value) of the consolidated
assets of Schult and the Schult Subsidiaries, Schult agrees to pay to Oakwood
an amount equal to (1) 100 percent of the difference, up to $1 million, and
(2) 50 percent of the remaining difference above $1 million, between (i) the
consideration to be paid in the Subsequent Transaction (including any and all
distributions from Schult to its shareholders from the date hereof through the
later of such announcement, letter of intent, agreement or consummation) and
(ii) the amount of $22.50 multiplied by the number of outstanding shares of
Schult Common Stock on the date hereof; provided, however, the maximum amount
payable under this Section 8.7 shall not exceed $3 million. If such Subsequent
Transaction occurs following one or more distributions (including redemptions
of securities) to Schult's shareholders after the date hereof, the
consideration to be paid in such Subsequent Transaction shall be deemed to
include the fair market value of all assets so transferred to Schult's
shareholders. If such Subsequent Transaction involves less than all of the
outstanding securities or assets of Schult, the consideration to be paid in
such Subsequent Transaction shall be deemed to be the amount that would have
been attributable to all of such outstanding securities, or assets, as the case
may be, if all of the same had sold for total consideration proportionate to
that paid for the portion thereof actually sold (or with respect to which there
was an announcement, an agreement was reached or letter executed, as the case
may be).
(b) Any payment required to be made pursuant to this Section 8.7 shall be
made as promptly as practicable but not later than five business days after the
public announcement of the Subsequent Transaction, its consummation or the
execution of the letter of intent, agreement in principle or definitive
agreement, or understanding similar to the foregoing, for a Subsequent
Transaction, whichever is earlier.
<PAGE> 37
ARTICLE 9
GENERAL PROVISIONS
9.1 Notices. Any notice to be given to a party in connection with this
Agreement shall be in writing addressed to such party at such party's "Notice
Address" set forth below, which Notice Address may be changed from time to time
by such party by notice thereof to the other parties as herein provided. Any
such notice shall be deemed effectively given to a party on the first to occur
of (a) the third business day after the date of mailing thereof, if mailed to
such party by first class registered or certified United States mail, postage
prepaid, addressed to such party at such party's Notice Address, or (b) the
date on which such notice is actually delivered (whether by mail, courier, hand
delivery, facsimile transmission or otherwise) to such party's Notice Address
and addressed to such party, if such delivery occurs on a business day, or if
such delivery occurs on a day which is not a business day, then on the next
business day after the date of such delivery, or (c) the date on which such
notice is actually received by such party (or, in the case of a party that is
not an individual, actually received by the individual designated in the Notice
Address of such party). For purposes of the preceding sentence, a "business
day" is any day other than a Saturday, Sunday or legal holiday at the place
where the Notice Address of the recipient is located. The Notice Address of
each party is as follows:
(a) Oakwood or Merger Sub:
Oakwood Homes Corporation
7800 McCloud Road
Greensboro, North Carolina 27409-9634
Attention: Myles E. Standish
Facsimile No.: (910) 664-3224
with a copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center, Suite 4200
100 North Tryon Street
Charlotte, North Carolina 28202
Attention: Stephen K. Rhyne
Facsimile No.: (704) 331-7598
<PAGE> 38
(b) Schult:
Schult Homes Corporation
221 U.S. 20 West
P.O. Box 1512
Middlebury, Indiana 46540
Attention: Walter E. Wells
Facsimile No.: (219) 825-7569
with a copy to:
Baker & Daniels
301 South Main Street, Suite 307
Elkhart, Indiana 46516
Attention: Kennard R. Weaver
Facsimile No.: (219) 296-6001
9.2 Expenses.
All costs and expenses incurred by a party in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses; provided, however, that in no event shall
any costs and expenses incurred by any party hereto reduce the consideration to
be received by the shareholders of the Schult in exchange for their shares of
Schult Common Stock as provided in the Plan of Merger.
9.3 Assignment, Binding Effect, Benefit.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns.
9.4 Entire Agreement.
This Agreement, the Exhibits and the Schedules constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
9.5 Amendment.
This Agreement may be amended by the parties hereto at any time before or
after approval of matters presented in connection with the Merger by the
shareholders of Schult, but after any such shareholder approval, no amendment
shall be made which by law requires the further approval of shareholders
without obtaining such further approval. This Agreement may
<PAGE> 39
not be modified or amended except by an instrument in writing signed on behalf
of Oakwood, Merger Sub and Schult.
9.6 Governing Law.
The validity of this Agreement, the construction of its terms and the
determination of the rights and duties of the parties hereto shall be governed
by and construed in accordance with the laws of the United States and those of
the State of North Carolina applicable to contracts made and to be performed
wholly within such state.
9.7 Counterparts.
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
9.8 Headings.
Headings of the Articles and Sections of this Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
9.9 Interpretation.
In this Agreement, unless the context otherwise requires, words describing
the singular number shall include the plural and vice versa, and words denoting
any gender shall include all genders and words denoting natural persons shall
include corporations, partnerships, limited liability companies, trusts,
associations and other entities.
9.10 Waivers.
Except as provided in this Agreement, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
9.11 Severability.
Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the
extent of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
9.12 Enforcement of Agreement.
The parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement was not performed in accordance
with its specific terms or was otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of competent jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
9.13 Effectiveness.
<PAGE> 40
This Agreement shall be effective upon the execution hereof by Oakwood,
Merger Sub and Schult, and upon such execution shall constitute a legal, valid
and binding obligation of each of Oakwood, Merger Sub and Schult.
***
<PAGE> 41
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the any and year first written
above.
OAKWOOD HOMES CORPORATION
ATTEST:
By:___________________________ By:____________________________________
Name: _________________________________
Title: ________________________________
SCHULT HOMES CORPORATION
ATTEST:
By:___________________________ By:____________________________________
Name: _________________________________
Title: ________________________________
A & B ACQUISITION CORP.
ATTEST:
By:___________________________ By:____________________________________
Name: _________________________________
Title: ________________________________
<PAGE> 42
SCHEDULE 3.2
OPTIONS
<TABLE>
<CAPTION>
NAME YEAR NUMBER OF OPTIONS OPTION PRICE
- ---- ---- ----------------- ------------
<S> <C> <C> <C>
Walter E. Wells 1995 12,000 $12.71
Frederick A. Greenawalt 1995 3,600 $12.71
Francis M. Kennard 1995 6,000 $12.71
Ervin L. Bontrager 1995 9,000 $12.71
William S. Reasor 1995 6,000 $12.71
John P. Guequierre 1995 12,000 $12.71
James Jones 1995 4,800 $12.71
Lionel Clark 1995 4,800 $12.71
Warren Keyes 1995 2,100 $12.71
Pete Janatello 1995 4,800 $12.71
Don Swank 1995 4,800 $12.71
Tony Watson 1995 4,800 $12.71
Rod Cellmer 1995 4,800 $12.71
Jim Toth 1995 4,800 $12.71
Ron Schultz 1995 4,800 $12.71
Art Willard 1995 2,100 $12.71
Mike Wolf 1995 4,800 $12.71
Walter E. Wells 1996 6,000 $19.79
Frederick A. Greenawalt 1996 2,400 $19.79
Francis M. Kennard 1996 2,400 $19.79
Ervin L. Bontrager 1996 4,950 $19.79
William S. Reasor 1996 3,000 $19.79
John P. Guequierre 1996 6,000 $19.79
James Jones 1996 2,400 $19.79
Lionel Clark 1996 2,400 $19.79
Warren Keyes 1996 600 $19.79
Pete Janatello 1996 2,400 $19.79
Don Swank 1996 2,400 $19.79
Tony Watson 1996 2,400 $19.79
Rod Cellmer 1996 2,400 $19.79
Jim Toth 1996 2,400 $19.79
Alan Froehle 1996 4,800 $19.79
Ron Schultz 1996 2,400 $19.79
Art Willard 1996 1,050 $19.79
Mike Wolf 1996 2,400 $19.79
Lionel Clark 1997 9,000 $18.125
Pete Janatello 1997 9,000 $18.125
</TABLE>
<PAGE> 43
<TABLE>
<S> <C> <C> <C>
Don Swank 1997 9,000 $18.125
Tony Watson 1997 9,000 $18.125
Rod Cellmer 1997 9,000 $18.125
Jim Toth 1997 4,000 $18.125
Mike Wolf 1997 9,000 $18.125
Art Willard 1997 2,000 $18.125
Granted Under Employment Letter Dated December, 1997:
Mike Wolf subject to agreement 8,000 -----
</TABLE>
<PAGE> 44
SCHEDULE 5.3
Required Filings and Consents
None.
<PAGE> 45
EXHIBIT A
ARTICLES OF MERGER
OF
A & B ACQUISITION CORP.
WITH AND INTO
SCHULT HOMES CORPORATION
Pursuant to Section 23-1-40-5 of the Indiana Business Corporation Law,
the undersigned Indiana corporation, as the surviving corporation in a merger,
hereby submits the following Articles of Merger:
1. The name of the surviving corporation is Schult Homes Corporation, a
corporation organized under the laws of Indiana; and the name of the
merged corporation is A & B Acquisition Corp., a corporation organized
under the laws of Indiana.
2. Attached is a copy of the Plan of Merger that was duly adopted in the
manner prescribed by law.
3. The Plan of Merger was approved unanimously by the Board of Directors of
the surviving corporation. Prior to the consummation of the merger
effected hereby the surviving corporation had outstanding _____________
Common Shares, no par value, each of which entitled the holder thereof to
one vote with respect to approval of the Plan of Merger. ___________
shares were voted in favor of the Plan of Merger and _________ were voted
against the Plan of Merger.
4. The Plan of Merger was approved unanimously by the Board of Directors of
the merged corporation. Prior to the consummation of the merger effected
hereby the merged corporation had outstanding 1,000 shares of Common
Stock, $.50 par value, each of which entitled the holder thereof to one
vote with respect to approval of the Plan of Merger. All of the merged
corporation's outstanding shares were voted in favor of the Plan of
Merger.
This the _____ day of ___, 1998
SCHULT HOMES CORPORATION
By: _____________________________
Name:____________________________
Title:___________________________
<PAGE> 46
EXHIBIT B
PLAN OF MERGER
OF
A & B ACQUISITION CORP.
WITH AND INTO
SCHULT HOMES CORPORATION
This Plan of Merger sets forth the terms and conditions upon which,
at the Effective Time (as hereinafter defined), A & B Acquisition Corp.
shall be merged with and into Schult Homes Corporation:
1. Constituent Corporations; Surviving Corporation. The constituent
corporations party to this Plan of Merger (the "Constituent
Corporations") are Schult Homes Corporation, an Indiana Corporation
("Schult"), and A & B Acquisition Corp., an Indiana corporation ("Merger
Sub"). Merger Sub shall be merged with and into Schult (the "Merger"),
and Schult shall be the surviving corporation in the Merger (the
"Surviving Corporation"), with its corporate name continuing to be
"Schult Homes Corporation."
2. Effective Time. The Merger shall become effective at the time
appropriate Articles of Merger, including this Plan of Merger, are filed
with the Secretary of State of Indiana (the "Effective Time").
3. Terms and Conditions of Merger; Abandonment. The Merger shall be
effected in accordance with the terms and conditions set forth in this
Plan of Merger. The Merger may be abandoned at any time prior to the
Effective Time in the event that the Acquisition Agreement, dated as of
January 5, 1998 (the "Merger Agreement"), by and among the Constituent
Corporations and Oakwood Homes Corporation, a North Carolina corporation
("Oakwood"), shall be terminated. The obligations of the Constituent
Corporations to cause Articles of Merger to be filed to effect the Merger
are subject to the satisfaction or waiver of the conditions to the
closing under the Merger Agreement.
4. Effect of Merger. At the Effective Time, Merger Sub will be
merged with and into Schult with the effects set forth in Section
23-1-40-6 of the Indiana Business Corporation Law, and the separate
corporate existence of Merger Sub shall cease and the corporate existence
of Schult shall continue as the Surviving Corporation. The Articles of
Incorporation and Bylaws of Schult as in effect immediately prior to the
Effective Time shall continue to be the Articles of Incorporation and
Bylaws of the Surviving Corporation after the Effective Time until they
may be thereafter duly amended in accordance with applicable law. The
manner and basis of converting and exchanging the shares of the
Constituent Corporations is set forth in Section 5 hereof.
5. Conversion of Shares. At the Effective Time, (a) each Common Share
of Schult ("Schult Common Stock") issued and outstanding immediately prior
<PAGE> 47
to the Effective Time [(other than any Dissenting Shares, if applicable and
as defined in Section 6(f) below)] shall be automatically converted into the
right to receive a cash amount equal to $22.50 per share (the "Per Share
Amount"); and (b) each share of Common Stock of Merger Sub ("Merger Sub
Common Stock") issued and outstanding immediately prior to the Effective
Time shall be automatically converted into one share of Common Stock of the
Surviving Corporation. From and after the Effective Time, Oakwood, as
holder of all the outstanding shares of Merger Sub Common Stock, shall have
the right to receive a certificate evidencing ownership of all of the Common
Stock of the Surviving Corporation as provided hereinabove upon its
surrender of the certificate or certificates representing all shares of
Merger Sub Common Stock. Until such surrender, each certificate evidencing
ownership of any such shares of Merger Sub Common Stock shall, at the
Effective Time, evidence ownership of the same number of shares of the
Common Stock of the Surviving Corporation without any requirement for any
exchange of certificates or further action.
6. Exchange of Certificates and Cash.
(a) Deposit of Merger Consideration. Immediately prior to the
Effective Time, Oakwood shall deposit, or cause to be deposited, with or for
the account of a bank or trust company designated by Oakwood and mutually
acceptable to Oakwood and Schult (the "Exchange Agent"), for the benefit of
the holders of shares of Schult Common Stock [(other than any Dissenting
Shares (as defined in subsection (f) below)], for exchange in accordance
with this Section 6, cash in the aggregate amount required to be exchanged
for all outstanding shares of Schult Common Stock [(including for this
purpose Dissenting Shares)] pursuant to Section 5 hereof (the "Merger
Consideration"). The Exchange Agent shall, pursuant to irrevocable
instructions, hold the Merger Consideration pending remittance thereof to
holders of shares of Schult Common Stock [(or, with respect to Dissenting
Shares, to the Surviving Corporation)] in accordance with this Section 6.
The Merger Consideration shall not be used for any other purpose. The
Merger Consideration may be invested only in permitted investments specified
by Oakwood to the Exchange Agent prior to the Effective Time. In the event
that any such investments reduce the Merger Consideration to an amount which
is less than that required to be exchanged for all shares of Schult Common
Stock [(including for this purpose Dissenting Shares)] pursuant to Section 5
hereof which have not theretofore been exchanged, the Surviving Corporation
shall, upon written notice thereof from the Exchange Agent, promptly make up
any such shortfall. Any interest, dividends or other income earned on the
investment of the Merger Consideration while held by the Exchange Agent
shall be for the account of the Surviving Corporation.
(b) Surrender of Certificates; Payment of Merger Consideration. As
soon as reasonably practicable after the Effective Time, the Surviving
Corporation will instruct the Exchange Agent to mail to each holder of
record, as of immediately prior to the Effective Time, of the outstanding
shares of Schult Common Stock [(other than Dissenting Shares)] (a) a letter
of transmittal and (b) instructions to effect the surrender of such holder's
certificates for such holder's shares of Schult Common Stock (the
"Certificates") in exchange for the cash such holder is entitled to receive
hereunder, each in a form approved by Oakwood prior to the Effective Time.
Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with the duly executed letter of transmittal, the holder of record
of such Certificate shall be entitled to receive in exchange therefor cash
in an amount equal to the Per
xliv
<PAGE> 48
Share Amount multiplied by the number of shares of Schult Common Stock
evidenced by the Certificate. No interest from the Effective Time will
be accrued or paid on any cash payable upon surrender of Certificates.
In the event of a transfer of ownership of any shares of Schult Common
Stock which is not registered in the transfer records of Schult, cash may
be paid in accordance with this Section 6 to a transferee if the
Certificate evidencing such shares of Schult Common Stock is presented to
the Exchange Agent, accompanied by all documents necessary to evidence
and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 6(b), each Certificate shall be deemed at any time after the
Effective Time to evidence, and the holder of shares of Schult Common
Stock evidenced thereby shall have, only the right to receive upon such
surrender the appropriate portion of the Merger Consideration; and all
other rights of such holder as a shareholder of Schult shall cease at the
Effective Time, except as otherwise required by the Indiana Business
Corporation Law.
(c) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such Certificate to be
lost, stolen or destroyed and, if required by the Surviving Corporation,
the posting by such person of a bond in such amount as the Surviving
Corporation may reasonably direct as indemnity against any claim that may
be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the
cash deliverable in respect thereof pursuant to Section 5 hereof.
(d) Termination of Deposit with the Exchange Agent. Any portion of
the Merger Consideration deposited with the Exchange Agent which remains
undistributed to the holders of shares of Schult Common Stock for 270
days after the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any holders of shares of Schult Common
Stock who have not theretofore complied with this Section 6 shall
thereafter look only to the Surviving Corporation for the Merger
Consideration to which they are entitled pursuant to this Section 6.
Neither Oakwood nor the Surviving Corporation shall be liable to any
holder of shares of Schult Common Stock for any cash from the Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) Closing of Stock Transfer Books. At the Effective Time, the
stock transfer books of Schult shall be closed and there shall be no
further registration of transfers of shares of Schult Common Stock
thereafter on the records of Schult.
[(f) Dissenting Shares. Notwithstanding any other provision of this
Agreement, shares of Schult Common Stock that are outstanding immediately
prior to the Effective Time and which are held by a holder of shares of
Schult Common Stock who shall have (i) duly given written notice to
Schult, prior to the taking of the vote by Schult's shareholders on
approval of this Plan of Merger, of such holder's intent to dissent from
the Merger and demand payment of the "fair value" of such shares in
accordance with Sections 23-1-44 et seq. of the Indiana Business
Corporation Law (the "Dissenters' Rights Provisions"), (ii) not voted
such shares in favor of the Merger, and (iii) not withdrawn, waived or
otherwise lost or forfeited such holder's dissenter's rights under the
Dissenters' Rights Provisions prior to the
xlv
<PAGE> 49
Effective Time (collectively, the "Dissenting Shares"), shall not be
converted into or represent the right to receive any part of the Merger
Consideration. Such Dissenting Shares shall instead be converted into
the right to receive from the Surviving Corporation payment of the "fair
value" thereof in accordance with the Dissenters' Rights Provisions,
except that all Dissenting Shares held by holders who after the
Effective Time shall have failed to perfect or who effectively shall
have withdrawn, waived or otherwise lost or forfeited their dissenters'
rights under such Dissenters' Rights Provisions shall thereupon be
deemed to have been converted into and to become exchangeable, as of the
Effective Time, for the right to receive, without any interest thereon,
the appropriate part of the Merger Consideration, upon surrender, in the
manner provided in this Section 6, of the Certificate or Certificates
that formerly evidenced such shares of Schult Common Stock. Upon
application by the Surviving Corporation to the Exchange Agent therefor,
accompanied by the Certificate or Certificates formerly evidencing
Dissenting Shares and a certificate of the Surviving Corporation to the
effect that there has been paid, or will be paid contemporaneously with
the remittance to the Surviving Corporation of the Merger Consideration
otherwise allocable to such Dissenting Shares, the amount to which the
holder thereof is entitled, or has agreed with the Surviving Corporation
to receive, as payment for such Dissenting Shares pursuant to the
exercise of such holder's dissenters' rights, then the Exchange Agent
shall remit to the Surviving Corporation that part of the Merger
Consideration otherwise (but for the exercise of such dissenters'
rights) allocable to such Dissenting Shares. In such event, remittance
to the Surviving Corporation shall be a full acquittance of the Exchange
Agent with respect thereto, and, to the extent such payment was not
previously made, the holder of such Dissenting Shares shall look only to
the Surviving Corporation for the payment to which such holder is
entitled with respect to such Dissenting Shares.]
*****
End of Plan of Merger
xlvi
<PAGE> 50
EXHIBIT C
FORM OF OPINION OF SCHULT'S COUNSEL
[Date]
Oakwood Homes Corporation
7800 McCloud Road
Greensboro, North Carolina 27409
Ladies and Gentlemen:
We have acted as counsel to Schult Homes Corporation, an Indiana
corporation (the "Company"), in connection with the transactions
contemplated by the Acquisition Agreement dated January 5, 1997 (the
"Agreement") between the Company, Oakwood Homes Corporation, a North
Carolina corporation ("Oakwood"), and A & B Acquisition Corp., an Indiana
corporation ("Merger Sub"). This opinion letter is delivered pursuant to
Section 7.3(c) of the Agreement. All capitalized terms used herein and
not otherwise defined herein shall have the same meanings herein as are
ascribed to them in the Agreement.
As such counsel, we have examined originals or copies of the
Agreement, the Articles of Merger and the Plan of Merger (all of such
documents being referred to collectively herein as the "Transaction
Documents"). We have also examined the articles of incorporation and
bylaws of the Company and each Schult Subsidiary, certified resolutions
of the Board of Directors of the Company with respect to the transactions
contemplated by the Transaction Documents, certificates of officers of
the Company and public officials, and such other documents, and have made
such other investigations, as we have deemed necessary or appropriate for
the purpose of giving the opinions herein expressed. As such counsel, we
have participated in the preparation of the Transaction Documents and
have consulted with officers of the Company concerning the terms and
provisions thereof and the representations and warranties made by the
Company therein.
In giving the opinions expressed herein and making our investigations
in connection herewith, we have assumed (a) the due authorization,
execution and delivery by the parties thereto other than the Company and
the Schult Subsidiaries of the documents examined by us, (b) the
genuineness of all signatures of individuals, (c) the personal legal
capacity of all individual signatories, (d) the authenticity of all
documents presented to us as originals, (e) the conformity to the
originals of all documents presented to us as copies, and (f) the
integrity and completeness corporate minute books of the Company and each
Schult Subsidiary presented to us for our examination. We have also
assumed that the terms of the Transaction Documents have not been
modified, supplemented or qualified by any other agreements or
understandings (written or oral) of the parties thereto, or by any course
of dealing or trade custom or usage, in any manner affecting the opinions
expressed herein. Nothing has come to our attention in the course of our
representation of the Company in connection with the
xlvii
<PAGE> 51
Oakwood Homes Corporation
____________, 1998
Page xlviii of 5
transactions contemplated by the Transaction Documents that would cause us
to believe that the foregoing assumptions are unwarranted.
We note that the Agreement provides that it is to be governed by the
laws of North Carolina. Our opinion herein as to the legality, validity,
binding effect and enforceability of the Agreement is intended to address
both the effectiveness under Indiana law of such choice of law provision and
the legality, validity, binding effect and enforceability of the Agreement
under Indiana and federal law were the Agreement, notwithstanding such
provision, governed by the laws of the State of Indiana, and is not intended
to address matters of North Carolina law.
We express no opinion herein concerning the possible application to the
Transaction Documents, the transactions contemplated thereby, or the
obligations of the parties thereunder of Section 548 of the Bankruptcy Code,
11 U.S.C. Section 548 or other similar laws relating to "fraudulent
transfers" or "fraudulent conveyances."
Opinions or statements herein given "to the best of our knowledge" and
the factual matters on which we have relied in giving other opinions herein
(except for our opinions as to corporate matters that we have given in
reliance upon our own investigation of the Company's corporate minute books
and stock records and certificates of officers of the Company and public
officials) are based upon (a) information coming to our attention in the
course of our representation of the Company in connection with the
transactions contemplated by the Transaction Documents, or otherwise
actually known to the lawyers in our firm who have given substantive
attention to such transactions, (b) the Company's representations and
warranties contained in the Transaction Documents, and (c) inquiries of
representatives of the Company whom we believe to be reasonably well
informed as to the factual matters in question, but without any other
investigations made for purposes of giving such opinions or statements
unless otherwise stated herein. However, nothing has come to our attention
in the course of our representation of the Company in connection with the
transactions contemplated by the Transaction Documents that would cause us
to believe that our reliance thereon for purposes of such opinions is
unwarranted.
Based upon and subject to the foregoing and the further limitations and
qualifications hereinafter expressed, it is our opinion that:
1. The Company is a corporation duly organized and validly existing in
good standing under the laws of Indiana and has the full corporate power and
authority to own its properties and to carry on its business as now being
conducted. Each Schult Subsidiary is a corporation duly organized and
validly existing in good standing under the laws of its state of
incorporation and has the full corporate power and authority to own its
properties and to carry on business as now being conducted.
<PAGE> 52
Oakwood Homes Corporation
____________, 1998
Page xlix of 5
2. The Company is duly qualified and in good standing as a foreign
corporation to do business in ____________, _____________ and
_____________.[Add parallel for subsidiaries, if applicable]
3. The Company has full corporate power and authority to execute and
deliver and perform its obligations under the Transaction Documents, and
all corporate actions or approvals required for the execution, delivery
and performance thereof by the Company have been duly taken or obtained.
The Merger and the Plan of Merger have been duly and validly approved by
the Board of Directors and the shareholders of the Company in accordance
with the Indiana Business Corporation Law.
4. The authorized capital of the Company consists of (a) 10,000,000
Common Shares, without par value (the "Common Stock"), of which 4,475,875
shares are issued and outstanding, including __________ shares issued
pursuant to the Company's Employee Share Purchase Plan during January
1998 and __________ shares issued in connection with exercises of
outstanding Schult Stock Options since January 5, 1998, and __________
shares are reserved for issuance upon the exercise of options granted
under the Company's 1995 Share Incentive Plan and any other employee
stock option plan or program, ______ shares are reserved for issuance
upon the exercise of options granted under the Company's Directors
Deferred Compensation Plan and any other director stock option plan or
program and 8,000 shares are reserved for future issuance pursuant to an
option granted to Mike Wolf with an aggregate option price of $1.00 and
(b) 2,000,000 Preferred Shares, none of which are issued or outstanding.
All of the issued and outstanding shares of Common Stock were validly
issued, fully paid and nonassessble and were not issued in violation of
any preemptive rights. All shares of Common Stock subject to issuance
pursuant to a Schult Stock Option, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and
nonassessable and such options were not granted in violation of any
preemptive rights. Except for the Schult Stock Options, to the best of
our knowledge there are no outstanding options, warrants, or conversion,
subscription or similar rights which obligate or may in the future
obligate the Company to issue any additional shares of its capital stock.
The authorized capital stock of each Schult Subsidiary is as follows:
[insert name and capital structure]. Each outstanding share of capital
stock of a Schult Subsidiary has been duly authorized, validly issued,
and is fully paid and nonassessable, was not issued in violation of any
preemptive rights and is owned by the Company or a Schult Subsidiary free
and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements or limitations on the Company's or
such other Schult Subsidiaries' voting rights, charges, and other
encumbrances of any nature whatsoever.
5. Each of the Transaction Documents has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms.
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Oakwood Homes Corporation
____________, 1998
Page 1 of 5
i. Neither the execution and delivery by the Company of the Transaction
Documents nor its compliance with the provisions thereof constitute or
will constitute a violation of the articles of incorporation or bylaws of
the Company or any Schult Subsidiary or any applicable law or regulation,
or, to the best of our knowledge, conflict with or result in any breach of
any material contract or agreement to which either the Company or any
Schult Subsidiary is now a party or by which it or its property is bound,
or any judgment, writ, order or decree of any judicial or administrative
authority by which the Company, any Schult Subsidiary or their property is
bound. To the best of our knowledge, no consent, approval or
authorization of, or prior notice to or prior filing with, any
governmental authority or other third party, not heretofore obtained,
given or filed as required, is required of the Company in connection with
the execution and delivery by the Company of the Transaction Documents or
as a condition to the enforceability thereof, other than the filing of
Articles of Merger with the Indiana Secretary of State.
7. To the best of our knowledge, except as set forth in the
Disclosure Memorandum there are no pending or overtly threatened actions,
suits or proceedings against the Company or any Schult Subsidiary or its
properties, nor do any facts exist which could serve as the basis for any
such action, suit or proceeding, before any court, arbitrator or
governmental or administrative body or agency (a) seeking to enjoin,
prevent or challenge the transactions contemplated by the Transaction
Documents or claiming damages with respect thereto, or (b) in which the
likelihood of an outcome materially and adversely affecting the Company,
its business or financial condition, or its ability to duly perform its
obligations under the Transaction Documents, is not remote.
8. Upon the filing of the Articles of Merger, together with the Plan
of Merger attached thereto, with the Indiana Secretary of State, the
Merger shall be effective in accordance with the terms of the Plan of
Merger and the Indiana Business Corporation Law.
9. The Proxy Statement and the Company's Annual Report on Form 10-K
for the fiscal year ended June 28, 1997, when filed with the Securities
and Exchange Commission (the "Commission"), complied as to form in all
material respects with the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules and regulations of the Commission thereunder. We
participated in the preparation of the Proxy Statement and such Form 10-K
and, based solely on such participation, we advise you that we have no
reason to believe that, with respect to the Proxy Statement as of its date
and as of the date hereof, and with respect to the Form 10-K as of the
date it was filed with the Commission, either the Proxy Statement or the
Form 10-K contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements made therein, in
light of the circumstances in which they were made, not misleading.
10. The shareholders of Schult do not have dissenters' rights under
the Indiana Business Corporation Law in connection with the Merger.
This opinion letter is delivered solely for your benefit in
connection with the closing under the Agreement and may not be relied upon
by any other person or for any other purpose without our prior written
consent. The opinions set forth herein are limited to matters governed by
the laws of the State
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Oakwood Homes Corporation
____________, 1998
Page li of 5
of Indiana and the federal laws of the United States, and the laws of the
States of Incorporation of the Schult Subsidiaries with respect to which, with
your permission, we are relying on the opinions of counsel licensed to practice
in such jurisdictions attached hereto. Our opinions expressed herein are as of
the date hereof, and we undertake no obligation to advise you of any changes in
applicable law or any other matters that may come to our attention after the
date hereof that may affect our opinions expressed herein.
Very truly yours,
BAKER & DANIELS
<PAGE> 55
Oakwood Homes Corporation
____________, 1998
Page lii of 5
END OF ACQUISITION AGREEMENT
<PAGE> 1
EXHIBIT 99.2
Exhibit 2
January 5, 1998
Board of Directors
Schult Homes Corporation
221 U. S. 20, West
Middlebury, Indiana 46540
Members of the Board:
We understand that Schult Homes Corporation (the "Company"), Oakwood Homes
Corporation (the "Acquiror") and A&B Acquisition corp., a wholly-owned
subsidiary of the Acquiror (the "Merger Sub"), propose to enter into an
Acquisition Agreement dated January 5, 1998 (the "Agreement") pursuant to which
Acquisition Sub will be merged with and into the Company in a transaction (the
"Merger") in which each issued and outstanding share of common stock of the
Company, no par value per share (the "Company Common Stock"), will be converted
into the right to receive a cash amount equal to $22.50 per share (the "Merger
Consideration").
You have asked us whether, in our opinion, the Merger Consideration to be
received by the holders of Company Common Stock in the Merger is fair to such
stockholders from a financial point of view.
In connection with this opinion, we have reviewed the Agreement and
certain related documents and held discussions with certain senior officers and
other representatives and advisors of the Company concerning the business,
operations and prospects of the Company. We examined certain publicly
available business and financial information relating to the Company as well as
certain financial data and other data for the Company which were provided to or
otherwise discussed with us by the management of the Company. We reviewed the
financial terms of the Merger as set forth in the Agreement in relation to:
(i) current and historical market prices and trading volumes of the Company
Common Stock; (ii) the Company's financial and other operating data; and (iii)
the capitalization and financial condition of the Company. We also considered,
to the extent publicly available, the financial terms of certain other similar
transactions recently effected which we considered relevant in evaluating the
Merger and analyzed certain financial, stock market and other publicly
available information relating to the businesses of other companies whose
operations we considered relevant in evaluating those of the Company.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information reviewed by us and we have
not made or obtained or assumed any responsibility for independent verification
of such information. In
<PAGE> 2
Board of Directors -2- January 5, 1998
addition, we have not made an independent evaluation or appraisal of the assets
and liabilities of the Company or any of its subsidiaries. With respect to the
financial data, we have assumed that it has been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the
Company. We have assumed that the Merger will be consummated in accordance
with the terms of the Agreement.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or
any part of the Company.
ABN AMRO Chicago Corporation ("AACC"), as part of its investment banking
business, is continually engaged in the valuation of businesses in connection
with mergers and acquisitions, as well as public offerings and secondary market
transactions of securities and valuations for other purposes. We have acted as
financial advisor to the Board of Directors of the Company in connection with
this transaction and will receive a fee for our services, including rendering
this opinion, which is not contingent upon the consummation of the Merger. In
the ordinary course of our business, AACC and its affiliates may actively trade
securities of the Company for their own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
It is understood that this letter is for the benefit and use of the Board
of Directors of the Company in its consideration of the Merger and may not be
used for any other purpose or reproduced, disseminated, quoted or referred to
at any time, in any manner or for any purpose without our prior written
consent, except that this letter may be used as part of any proxy statement
relating to the Merger. This letter does not address the Company's underlying
business decision to enter into the Merger or constitute a recommendation to
any shareholder as to how such shareholder should vote with respect to the
proposed Merger. Finally, our opinion is necessarily based on economic,
monetary, market and other conditions as in effect on, and the information made
available to us as of, the date hereof, and we assume no responsibility to
update or revise our opinion based upon circumstances or events occurring after
the date hereof.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Merger Consideration is fair from a financial point of
view to the shareholders of the Company.
Very truly yours,
ABN AMRO CHICAGO CORPORATION
