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PROSPECTUS SUPPLEMENT
Filed pursuant to Rule 424(b)(1)
(Registration No.333-47053)
FEBRUARY 25, 1999
(TO PROSPECTUS DATED FEBRUARY 25, 1999)
[GRAPHIC]
$300,000,000
OAKWOOD HOMES CORPORATION
$125,000,000 7 7/8% SENIOR NOTES DUE 2004
$175,000,000 8 1/8% SENIOR NOTES DUE 2009
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THE COMPANY:
o We design, manufacture and market manufactured and modular homes, serving
retail customers and wholesale dealers throughout the United States. We
combine manufacturing, retail sales and financing of manufactured homes.
o Oakwood Homes Corporation
7800 McCloud Road
Greensboro, North Carolina 27409-9634
(336) 664-2400
THE OFFERING:
o We intend to use the net proceeds from the offering to repay outstanding
indebtedness.
o Closing: March 2, 1999
PROPOSED TRADING FORMAT:
o The Notes will not be listed on any securities exchange or included in any
automated quotation system.
THE NOTES:
o Maturity: The $125,000,000 7 7/8% Senior Notes Due 2004 will mature March 1,
2004 and the $175,000,000 8 1/8% Senior Notes Due 2009 will mature March 1,
2009.
o Interest Payments: Semi-annually in cash in arrears on March 1 and September
1, commencing on September 1, 1999.
o Redemption: We can redeem some or all of the Notes at our option on at least
30 days' notice at the redemption prices described on page S-15.
o Mandatory Offer to Repurchase: If we experience certain types of change in
control, holders of Notes have the option to require us to repurchase some
or all of their Notes.
o Ranking of Notes: The Notes rank equally with all of our other unsecured and
unsubordinated indebtedness.
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<TABLE>
<CAPTION>
PER NOTE DUE 2004 TOTAL PER NOTE DUE 2009 TOTAL
------------------- --------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Public offering price: 99.728% $124,660,000 99.435% $174,011,250
Underwriting fees: .60% $ 750,000 .65% $ 1,137,500
Proceeds to the Company: 99.128% $123,910,000 98.785% $172,873,750
</TABLE>
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BEFORE MAKING ANY INVESTMENT IN OUR COMPANY, YOU SHOULD CONSIDER CAREFULLY
CERTAIN RISKS THAT ARE DESCRIBED IN THE "RISK FACTORS" SECTION BEGINNING ON
PAGE S-8.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus supplement or the related base
prospectus. Any representation to the contrary is a criminal offense.
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NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST UNION CAPITAL MARKETS
MERRILL LYNCH & CO.
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<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Where You Can Find More Information ..................................... S-2
Forward-Looking Statements .............................................. S-3
Summary ................................................................. S-4
Risk Factors ............................................................ S-8
Use of Proceeds ......................................................... S-11
Capitalization .......................................................... S-11
Description of Notes .................................................... S-12
Underwriting ............................................................ S-19
Legal Matters ........................................................... S-20
Experts ................................................................. S-20
PROSPECTUS
Available Information ................................................... 2
Documents Incorporated By Reference ..................................... 2
The Company ............................................................. 3
Ratio of Earnings To Fixed Charges ...................................... 3
Use of Proceeds ......................................................... 3
Description of Debt Securities .......................................... 3
Plan of Distribution .................................................... 10
Legal Matters ........................................................... 12
Experts ................................................................. 12
</TABLE>
---------------
This document is in two parts. The first part is the prospectus
supplement, which describes the specific terms of the Notes we are offering and
certain other matters relating to us and our business. The second part, the
base prospectus, gives more general information, some of which does not apply
to the Notes we are offering. Generally, when we refer to the prospectus, we
are referring to both parts combined. If the description of your Notes varies
between the prospectus supplement and the accompanying base prospectus, you
should rely on the information in the prospectus supplement.
---------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the base prospectus. We have not,
and the underwriters have not, authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not, and the underwriters are
not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information
appearing in this prospectus supplement and the base prospectus, as well as
information we previously filed with the Securities and Exchange Commission and
incorporated by reference, is accurate as of the date on the front cover of
this prospectus supplement only. Our business, financial condition, results of
operations and prospects may have changed since that date.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. These filings are
available to the public over the Internet at the SEC's website at
http://www.sec.gov. You may also read and copy any document filed by Oakwood
with the SEC at the SEC's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. The SEC's public reference room in Washington,
D.C. is located at 450 Fifth Street, N.W., Washington, D.C. 20549. You can call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms
and their copy charges. Oakwood's common stock is listed on the New York Stock
Exchange. You can obtain information about Oakwood from the New York Stock
Exchange at 20 Broad Street, New York, New York 10005.
This prospectus supplement "incorporates by reference" information filed
or to be filed by Oakwood with the SEC. The information incorporated by
reference is an important part of the prospectus. The following documents that
have been
S-2
<PAGE>
filed with the SEC, as well as all other documents filed by Oakwood with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, after the date of this prospectus supplement and prior to the
closing of this offering, are incorporated by reference into the prospectus:
o Oakwood's Annual Report on Form 10-K for the fiscal year ended September
30, 1998;
o Oakwood's Current Report on Form 8-K dated October 13, 1998; and
o Oakwood's Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 1998.
All documents incorporated by reference are available from Oakwood without
charge. You may obtain these documents free of charge by making a request to
Oakwood by telephone at (336) 664-2400 or in writing at the following address:
Oakwood Homes Corporation
P.O. Box 27081
Greensboro, North Carolina 27425-7081
Attn: Secretary
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying base prospectus contain or
incorporate by reference forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about Oakwood, including, among other things,
those described in the "Risk Factors" section of this prospectus supplement. We
caution you that forward-looking statements are necessarily estimates that
reflect the best current judgment of our senior management. These
forward-looking statements involve a number of risks and uncertainties that
could cause actual results to differ materially from those suggested by the
forward-looking statements. We recommend that you consider these forward-looking
statements in light of various important factors, including those set forth in
this prospectus supplement (see "Risk Factors") and other factors set forth
from time to time in the information that we file with the SEC. To identify
forward-looking statements, you should look for words such as "estimate,"
"project," "intend," "expect" or "believe." These forward-looking statements
are found at various places throughout this prospectus supplement, the base
prospectus and the documents incorporated by reference herein. You are
cautioned not to rely to a great extent on these forward-looking statements,
which speak only as of the date of such documents.
We do not undertake to update these forward-looking statements to reflect
actual results, changes and assumptions or other factors that could affect
these statements. In addition, we may from time to time make additional or
revised forward-looking statements about us or our business or about the
matters described or incorporated by reference in this document.
S-3
<PAGE>
SUMMARY
IN THIS PROSPECTUS SUPPLEMENT, THE WORDS "COMPANY," "OAKWOOD," "WE," "OUR"
AND "US" REFER TO OAKWOOD HOMES CORPORATION, A NORTH CAROLINA CORPORATION, AND
ITS SUBSIDIARIES AND PREDECESSORS, UNLESS THE CONTEXT OTHERWISE REQUIRES. THE
FOLLOWING SUMMARY CONTAINS BASIC INFORMATION ABOUT THIS OFFERING. IT MAY NOT
CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. THE "DESCRIPTION OF
NOTES" SECTION OF THIS PROSPECTUS SUPPLEMENT CONTAINS MORE DETAILED INFORMATION
REGARDING THE TERMS AND CONDITIONS OF THE NOTES.
THE COMPANY
We design, manufacture and market manufactured and modular homes, serving
retail customers and wholesale dealers throughout the United States. We operate
32 manufacturing plants across the United States. We sell manufactured homes
primarily through 362 company-owned sales centers and over 100 exclusive
retailers and key dealers. We operate our sales centers under the names
Oakwood(R) Mobile Homes, Freedom Homes(R), Victory Homes, Schult(R) Homes and
Golden West Homes(R). During fiscal 1998, approximately 96% of our retail sales
of new homes were homes that we manufactured. We believe that our company is
the largest retailer and the third largest manufacturer of manufactured homes
in the United States. Through our captive reinsurance subsidiary, we also
reinsure risks with respect to homeowners insurance, credit life insurance and
other insurance policies written for customers in connection with our retail
sales activities.
We combine manufacturing, retail sales and financing of manufactured
homes. We believe that the extent of our integration provides us with a
competitive advantage over many others in the industry. Our ability to control
the design, manufacture and distribution of our homes enables us to plan our
inventory requirements, control the quality and servicing of our products and
respond promptly to changes in the retail market. Additionally, our ability to
finance our sales allows us to make credit decisions promptly and minimize the
inconvenience to the customer of obtaining credit.
We provide financing for a majority of the homes we sell through loans
that we originate. During fiscal 1998, approximately 87% of our retail unit
sales were financed by installment sale contracts or loans that we originated.
We have historically obtained funds to finance loans primarily through sales of
real estate mortgage investment conduit ("REMIC") trust certificates to
institutional investors. We also use short-term credit facilities and
internally-generated funds to support loans until a pool of loans is
accumulated to provide for permanent financing. Internal financing of loans has
allowed us to broaden our sources of financing by obtaining funds secured by
loans directly from institutional investors and from the public markets. Our
ability to continue to finance loans is dependent upon the continued
availability of adequate sources of capital.
Our company was founded in 1946 and our principal executive offices are
located at 7800 McCloud Road, Greensboro, North Carolina 27409-9634. Our
telephone number at this location is (336) 664-2400.
S-4
<PAGE>
THE OFFERING
Issuer.......................... Oakwood Homes Corporation.
Securities Offered.............. $125.0 million principal amount of 7 7/8%
Senior Notes Due 2004 and $175.0 million
principal amount of 8 1/8% Senior Notes Due
2009 (referred to collectively in this
prospectus supplement as the "Notes").
Maturity........................ The $125,000,000 7 7/8% Senior Notes Due
2004 will mature March 1, 2004 and the
$175,000,000 8 1/8% Senior Notes Due 2009
will mature March 1, 2009.
Interest Rate................... The Senior Notes Due 2004 will bear
interest at 7 7/8% per annum and the Senior
Notes Due 2009 will bear interest at 8 1/8%
per annum.
Interest Payment Dates.......... We will pay interest on the Notes
semi-annually on March 1 and September 1
beginning September 1, 1999.
Optional Redemption............. We may redeem all or part of the Notes, on
at least 30 days' notice, at the redemption
prices described herein, plus any accrued and
unpaid interest to the date fixed for
redemption.
Change in Control............... If a change in control were to occur, each
holder of Notes would have the option to
require us to repurchase such Notes, in whole
or in part, at a price equal to 101.0% of the
principal amount of those Notes, plus any
accrued and unpaid interest.
Ranking......................... The Notes will be unsecured senior debt
securities of ours. As of December 31, 1998
and giving effect to this offering, we would
have had outstanding approximately $623.2
million aggregate principal amount of
indebtedness, $291.2 million of which would
have been secured. Additionally, we have
pledged the stock of Tarheel Insurance
Company, Ltd. to support our $175.0 million
revolving credit facility. None of that
indebtedness would have been senior to the
Notes and the Notes would not have been
senior to that indebtedness. The Notes,
however, effectively will be subordinated to
secured indebtedness of ours with respect to
the assets pledged as collateral for that
indebtedness. The Notes will rank equally in
right of payment with all unsecured and
unsubordinated indebtedness of ours.
Certain Covenants............... The Indenture governing the Notes will
contain covenants that will, among other
things, limit our ability to:
o incur secured indebtedness;
o permit our subsidiaries to incur
indebtedness;
o engage in certain sale-leaseback
transactions; and
o enter into certain mergers or
consolidations or dispose of stock or
certain assets.
Use of Proceeds................. The net proceeds of this offering will be
used to repay outstanding indebtedness.
Risk Factors.................... See "Risk Factors" on page S-8 for a
discussion of certain factors you should
consider carefully before deciding whether to
invest in the Notes.
S-5
<PAGE>
SUMMARY FINANCIAL DATA
We derived the summary financial data presented below for each of the five
fiscal years in the period ended September 30, 1998 from our audited
consolidated financial statements. We derived the summary financial data for
the three month periods ended December 31, 1997 and 1998 from our unaudited
consolidated financial statements, which in management's opinion include all
normal, recurring adjustments necessary for a fair statement of the information
for the periods presented. Results of operations for a three month period are
not necessarily indicative of results of operations for a full year.
You should read the financial data presented below in conjunction with the
consolidated financial statements, the related notes and other financial
information contained in our Annual Report on Form 10-K for the year ended
September 30, 1998 and our Quarterly Report on Form 10-Q for the quarter ended
December 31, 1998, which are incorporated in this prospectus summary by
reference. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------
1994 1995 1996 1997 1998(1)
------------- ------------- ------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA(2):
Net sales ........................ $ 595,127 $ 741,521 $ 862,079 $ 952,704 $ 1,404,432
Total revenues ................... 664,610 821,412 973,922 1,070,051 1,482,553
Net income ....................... 35,655 45,318 68,255 81,913 55,353
Earnings per common share:
Basic ........................... .82 1.03 1.53 1.79 1.20
Diluted ......................... .78 .99 1.47 1.75 1.17
Ratio of earnings to fixed
charges(3) ...................... 3.16 3.62 5.12 5.91 3.44
Pro forma ratio of earnings to
fixed charges(4) ................ -- -- -- -- 2.69
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
---------------------------
1997 1998
------------- -------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA AND
RATIOS)
<S> <C> <C>
STATEMENT OF INCOME DATA(2):
Net sales ........................ $ 221,893 $ 359,814
Total revenues ................... 254,663 389,384
Net income ....................... 17,802 11,459
Earnings per common share:
Basic ........................... .39 .25
Diluted ......................... .38 .24
Ratio of earnings to fixed
charges(3) ...................... 4.82 2.82
Pro forma ratio of earnings to
fixed charges(4) ................ -- 2.41
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF SEPTEMBER 30, DECEMBER 31, 1998
------------------------------------------------------------- -----------------------------
1994 1995 1996 1997 1998 ACTUAL AS ADJUSTED(5)
----------- ----------- ----------- ----------- ------------- ------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets ................ $590,397 $782,640 $841,977 $904,506 $1,283,376 $1,455,889 $1,458,246
Short-term borrowings ....... 25,000 154,400 145,506 175,800 375,023 551,505 255,191
Notes and bonds payable ..... 207,990 198,812 134,379 78,815 61,875 69,367 368,038
Shareholders' equity ........ 276,330 318,408 391,974 483,882 547,675 561,854 561,854
</TABLE>
- ---------
(1) Includes special charges of approximately $51.3 million (or $.67 per share
after tax) primarily relating to residual interests retained in certain
REMIC securitizations.
(2) On April 1, 1998, we acquired Schult Homes Corporation in a transaction
accounted for as a purchase. Prior to its acquisition, Schult Homes
Corporation was the eighth largest manufacturer of manufactured homes in
the United States. On June 30,1995, we acquired Destiny Industries, Inc.
and on September 30, 1994, we acquired Golden West Homes. Both of these
acquisitions were accounted for as "pooling of interests," and,
accordingly, the table set forth above reflects the combined results of
operations and financial position of the Company, Destiny Industries, Inc.
and Golden West Homes for all periods presented.
(3) In calculating the ratio of earnings to fixed charges, earnings consist of
earnings before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense (which includes
amortization of deferred financing costs), whether expensed or
capitalized, and that portion of rental expense estimated to be attributed
to interest.
(4) The pro forma ratio of earnings to fixed charges for the fiscal year ended
September 30, 1998 and the three months ended December 31, 1998 sets forth
our ratio of earnings to fixed charges on a pro forma basis assuming the
offering
S-6
<PAGE>
had been completed as of the beginning of each period, and that the
estimated net proceeds thereof of approximately $296.3 million had been used
to repay our $100.0 million term loan from NationsBank, N.A. and the balance
had been used to repay borrowings outstanding under short-term credit
facilities as described under "Use of Proceeds." The pro forma reduction in
interest expense relating to the repayment of the $100.0 million of
indebtedness to NationsBank, N.A. has been reflected only from April 1,
1998, the date on which we incurred such indebtedness in connection with the
acquisition of Schult Homes Corporation.
(5) As adjusted to give effect to this offering and the application of the
estimated net proceeds as described under "Use of Proceeds."
S-7
<PAGE>
RISK FACTORS
You should carefully read this entire prospectus supplement, the
accompanying base prospectus and the documents incorporated by reference herein
and therein before investing in the Notes. A number of factors may adversely
impact your investment in the Notes, including, without limitation, the
following:
OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS AND PREVENT US
FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We currently have a significant amount of indebtedness. At December 31,
1998, after giving effect to this offering, our total consolidated indebtedness
would have been approximately $623.2 million. See "Capitalization."
Our indebtedness could have important consequences for the holders of the
Notes, including:
o limiting our ability to satisfy our obligations with respect to the
Notes;
o increasing our vulnerability to general adverse economic and industry
conditions;
o limiting our ability to obtain additional financing to fund our future
retail financing activities as well as our working capital, capital
expenditure and other general corporate requirements;
o requiring a substantial portion of our cash flow from operations for the
payment of principal of, and interest on, our indebtedness and reducing
our ability to use our cash flow to fund our retail financing activities
as well as our working capital, capital expenditure and other general
corporate requirements;
o limiting our flexibility in planning for or reacting to changes in our
business and industry; and
o placing us at a disadvantage compared to our competitors with less
indebtedness.
SERVICING OUR INDEBTEDNESS WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. OUR
ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.
Our ability to make payments on our indebtedness, including the Notes, and
to fund our capital needs will depend on our ability to generate cash in the
future. Based on our current level of operations, we believe our securitization
and other financing activities together with cash flow from operations will be
adequate to meet our liquidity needs for the foreseeable future. We cannot
assure you, however, that we will be able to consummate any such
securitizations or financings or that our business will generate sufficient
cash flow from operations so that we will be able to pay our indebtedness,
including the Notes, or meet our other liquidity needs. We may need to
refinance all or a portion of our indebtedness, including the Notes, on or
before maturity. We cannot assure you that we will be able to refinance any of
our indebtedness either on commercially reasonable terms or at all.
OUR RETAIL FINANCING ACTIVITIES REQUIRE SUBSTANTIAL AMOUNTS OF CAPITAL AND WE
ARE DEPENDENT UPON OUR ABILITY TO SECURITIZE LOANS THAT WE ORIGINATE
Retail financing of sales of the manufactured homes that we manufacture is
an integral part of our vertical integration strategy. This financing requires
substantial amounts of capital. We have successfully financed these consumer
lending activities in the past by securitizing the loans that we originate,
primarily using REMICs. Since 1994, we generally have sold to investors
securities having a principal balance approximately equal to the principal
balance of the loans securitized and, accordingly, we have not been required to
fund our consumer finance business outside of the asset-backed securities
market. Late in 1998, however, global economic conditions significantly reduced
the liquidity in the asset-backed securities market and the credit spreads over
treasury securities demanded by the purchasers of our asset-backed securities
rose significantly. Additionally, demand for the most deeply subordinated
asset-backed securities we offer for sale has significantly decreased and, as a
result, we have retained more of these deeply subordinated securities in our
recent securitizations than we have in previous securitizations. These widening
credit spreads adversely affect our permanent funding costs and could adversely
affect our profitability if we are unable to increase the interest rates we
charge customers to compensate for these higher costs. Moreover, decreased
demand for asset-backed securities could require us either to seek alternative,
less attractive sources of financing for the loans originated by our consumer
finance business or to curtail our retail financing activities.
S-8
<PAGE>
Several other factors affect our ability to securitize our loans,
including:
o conditions in the securities markets, in general;
o the credit quality of our loans; and
o compliance of our loans with the eligibility requirements established by
the securitization documents for the loans and the absence of any
downgrading or withdrawal of ratings given to securities issued in our
previous securitizations.
Adverse changes in any of these factors could impair our ability to originate
and sell loans on a favorable or timely basis. Our inability to sell or
securitize loans or otherwise finance our retail financing activities could
materially and adversely affect our financial performance and growth prospects.
WE RETAIN RESIDUAL INTERESTS IN CONNECTION WITH OUR REMIC SECURITIZATIONS. IF
WE ARE REQUIRED TO RECOGNIZE SPECIAL CHARGES TO REDUCE THE CARRYING VALUE OF
THESE RESIDUAL INTERESTS, OUR EARNINGS COULD BE MATERIALLY AND ADVERSELY
IMPACTED.
In connection with our REMIC securitizations, we retain a residual
interest in the trusts that are formed to acquire the loans and issue the
asset-backed securities. Our ownership of this residual interest entitles us to
all of the cash proceeds from the securitized loans after the bondholders and
the servicers have been paid. Accounting rules require that we estimate the
fair value of these retained residual interests based, in part, upon default
and prepayment assumptions that we believe market participants would use for
similar instruments. The actual rates of voluntary prepayments and the amount
and timing of credit losses affect our yield on retained REMIC residual
interests and the fair value of such interests in periods subsequent to the
securitization. The actual rates of voluntary prepayments and credit losses
typically vary over the life of each transaction and from transaction to
transaction. If, over time, our actual experience is more favorable than that
assumed, our yield on the retained residual interests will be enhanced.
However, if over time our actual experience is less favorable than that
assumed, our yield on these retained interests will be reduced or impairment
may result.
During 1998, we experienced increases in the rates of voluntary
prepayments of, and credit losses with respect to, loans in a number of our
securitized loan pools. These higher rates of voluntary prepayments and credit
losses adversely affected our ability to recover the carrying value of our
residual interests in these securitizations. As a result, we recognized special
charges of approximately $51.3 million primarily related to reducing the
carrying value of retained residual interests in these securitizations. We
cannot assure you that we will not be required to recognize additional material
charges in the future. If this happens, our earnings could be materially and
adversely impacted.
WE COULD BE ADVERSELY IMPACTED BY GOVERNMENTAL REGULATION
Our business is subject to numerous federal and state consumer protection
and other laws and regulations that are subject to change. These laws relate
to, among other things, virtually all aspects of our consumer finance and
insurance businesses as well as numerous aspects of our manufacturing and
retail operations. Any of the following could have a material and adverse
impact on our business and financial condition:
o an adverse change in or interpretation of existing laws or regulations;
o the promulgation of new laws or regulations; or
o our failure to comply with any of these laws or regulations.
Our insurance activities in the United States are subject to
state-by-state regulation that is primarily intended to protect policyholders.
No assurance can be given that we will be able to maintain licenses that are
required or to procure additional licenses as necessary in the future.
Tarheel Insurance Company, Ltd., our captive reinsurance subsidiary
("Tarheel"), reinsures risks on property and casualty and credit life insurance
policies and extended service contracts written by an unrelated insurance
company in connection with sales of our products. Tarheel is subject to
regulation and supervision in Bermuda and is required, among other things, to
maintain minimum solvency and liquidity standards and to comply with auditing
and reporting requirements. The insurance laws of each state of the United
States regulate the sale of insurance and reinsurance within that jurisdiction
by foreign insurance companies such as Tarheel that are not authorized or
admitted to do business in that jurisdiction. In addition, Tarheel is required
to make certain security arrangements for United States insurance companies to
receive "credit for reinsurance" on risks assumed by it. There can be no
assurance that Tarheel will be able to meet, or to continue to meet, these
requirements.
S-9
<PAGE>
WE COULD BE ADVERSELY IMPACTED BY LITIGATION
Participants in our industry (including us) are frequently named as
defendants in litigation involving alleged violations of federal and state
consumer protection or other similar laws and regulations. A judgment against
us in connection with any litigation could have a material adverse effect on
our financial condition and results of operations. In addition, if it were
determined that we failed to comply with applicable laws, our financial
condition and results of operations could be adversely impacted. Finally, an
adverse judgment against a competitor relating to a standard business practice
in the manufactured housing industry or the consumer finance or insurance
business could have an adverse effect on both us and our industry. There can be
no assurances that any such litigation will not have a material adverse effect
on us or our operations in the future.
In November 1998, we, along with certain of our present and former
officers and directors, were named as defendants in lawsuits filed on behalf of
purchasers of our common stock for various periods between April 11, 1997 and
July 21, 1998. These complaints, which seek class action certification, allege
violations of federal securities laws based on alleged false and misleading
financial statements, reports filed by us and other representations made by us
during this period. While we intend to defend these lawsuits vigorously, there
can be no assurances that we will be successful in doing so or that they or any
associated regulatory actions will not have a material adverse effect on us.
OUR BERMUDA CAPTIVE REINSURANCE SUBSIDIARY COULD EXPERIENCE SIGNIFICANT LOSSES
Tarheel, our captive reinsurance subsidiary, establishes loss reserves
when insured events occur for the ultimate settlement costs of all losses and
loss expenses incurred in connection with reinsurance written by it. Under
GAAP, Tarheel is not permitted to establish loss reserves until an insured
event occurs. As a result, only loss reserves applicable to insured events up
to the reporting date may be set aside, with no allowance for the provision of
a contingency reserve to account for future losses.
To protect against the adverse consequences of the accumulation of losses
from catastrophic occurrences, Tarheel purchases reinsurance under which other
reinsurers agree to pay all claims and related expenses for certain specified
amounts, subject to an aggregate maximum amount. If a reinsurer is unable to
meet any of its obligations to Tarheel under the reinsurance agreements,
Tarheel will be responsible for the payment of all claims and claim settlement
expenses ceded to the reinsurer by Tarheel. Any such failure by a reinsurer,
the inability to obtain reinsurance, or any claims in excess of the maximum
aggregate amount of reinsurance coverage could have a material adverse effect
on us.
OUR BUSINESS IS EXTREMELY COMPETITIVE AND WE COULD LOSE BUSINESS TO OUR
COMPETITORS
The manufactured housing industry is highly competitive with particular
emphasis on price, financing terms and features offered. There are many retail
dealers and financing sources in most locations where we have retail and
financing operations. Several of these financing sources are larger than we are
and have significantly greater access to capital. There are numerous companies
producing manufactured homes in our market area, many of which are in direct
competition with us. Certain of these manufacturers, which sell the majority of
their homes through independent dealers, are larger than we are and have
greater financial resources. A number of our manufacturing competitors are
establishing their own retail distribution systems. To the extent these
competitors successfully enter the retail market, we could face increased
competition at that level. There can be no assurance that any of this
competition will not have a material adverse effect on us.
ALTHOUGH THESE NOTES ARE REFERRED TO AS "SENIOR NOTES," THEY EFFECTIVELY WILL
BE SUBORDINATED TO OUR SECURED INDEBTEDNESS AND THE INDEBTEDNESS OF OUR
SUBSIDIARIES.
The Notes are unsecured and therefore effectively will be subordinated to
any secured indebtedness we may incur to the extent of the value of the assets
securing such indebtedness. In the event of a bankruptcy or similar proceeding
involving us, our assets that serve as collateral will be available to satisfy
the obligations under any secured indebtedness before any payments are made on
the Notes. In addition, our subsidiaries will not guarantee the Notes. In the
event of a bankruptcy, liquidation or reorganization of any of our
subsidiaries, creditors of our subsidiaries will generally be entitled to
payment of their claims from the assets of those subsidiaries before any assets
are made available for distribution to us, except to the extent we may also
have a claim as a creditor. Assuming this offering had been completed on
December 31, 1998, the Notes would have effectively been subordinated to
approximately $291.2 million of secured indebtedness (which would have included
approximately $213.0 million of secured indebtedness of our subsidiaries). Our
subsidiaries have also guaranteed our obligations under our $175.0 million
revolving credit facility and our $20.0 million swingline
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<PAGE>
credit facility. Additionally, we have pledged all of the stock of Tarheel
Insurance Company, Ltd. to support our $175.0 million revolving credit
facility.
YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NOTES.
Prior to this offering, there was no public market for the Notes. The
Notes will not be listed on any securities exchange or included in any
automated quotation system. We have been informed by the underwriters that they
intend to make a market in the Notes after this offering is completed. However,
the underwriters are not obligated to do so and may cease their market-making
at any time without notice. In addition, the liquidity of the trading in the
Notes, and the market price quoted for the Notes, may be adversely affected by
changes in the overall market for these types of securities and by changes in
our financial performance, in the market for our asset-backed securities or in
the prospects for our company or for companies in our industry generally. As a
result, you cannot be sure that a trading market will develop for the Notes.
USE OF PROCEEDS
We estimate our net proceeds from the sale of the Notes will be
approximately $296.3 million after deducting underwriting discounts and
commissions and estimated offering expenses. We intend to use the proceeds from
this offering as follows:
o $100.0 million to repay a term loan from NationsBank, N.A. made on April
1, 1998 to finance the acquisition of Schult Homes Corporation, a producer
of manufactured and modular housing. This term loan bears interest at
LIBOR plus 1% (6.56% at December 31, 1998) and matures on March 30, 1999.
o To repay borrowings under our $175.0 million revolving credit facility
(the "Revolving Credit Facility") with First Union National Bank, as
agent. At December 31, 1998, $140.0 million was outstanding under the
Revolving Credit Facility. NationsBank, N.A. and First Union National Bank
are both lenders under the Revolving Credit Facility, which matures on
November 7, 1999. Borrowings under the Revolving Credit Facility currently
bear interest at LIBOR plus .5%. The weighted average interest rate with
respect to borrowings under this facility was 6.07% at December 31, 1998.
o All remaining amounts will be used to repay borrowings under our $325.0
million revolving warehouse financing facility (the "Warehouse Facility")
with a multi-seller conduit commercial paper issuer sponsored by
NationsBank, N.A. At December 31, 1998, $220.8 million was outstanding
under this facility and the weighted average interest rate with respect to
borrowings thereunder was 6.32%. The Warehouse Facility terminates March
25, 1999.
Borrowings under both the Revolving Credit Facility and the Warehouse
Facility during the past twelve months were used to fund our consumer finance
activities and general working capital requirements. We are permitted under the
terms of these facilities to subsequently reborrow amounts repaid.
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998
on a historical basis and as adjusted to give effect to this offering and the
application of the estimated net proceeds as described under "Use of Proceeds."
You should read this table in conjunction with our summary financial data
presented elsewhere in this prospectus supplement along with our consolidated
financial statements and the related notes incorporated by reference in this
prospectus supplement.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-------------------------
ACTUAL AS ADJUSTED
------------ ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents ......... $ 29,287 $ 29,287
========== ==========
Short-term borrowings ............. $ 551,505 $ 255,191
Notes and bonds payable ........... 69,367 368,038
Shareholders' equity .............. 561,854 561,854
---------- ----------
Total capitalization ............. $1,182,726 $1,185,083
========== ==========
</TABLE>
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DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements and, to the extent inconsistent therewith, supersedes the
description of the general terms of the debt securities, of which the Notes are
a part, set forth under the heading "Description of Debt Securities" in the
accompanying base prospectus, which should be read in conjunction with this
prospectus supplement. Because this is a summary, it does not contain all the
information that may be important to you. You should read the entire indenture,
including the definitions of certain terms, and the applicable prospectus
supplement before you make any investment decision. Capitalized terms used
below and not otherwise defined have the meanings set forth in the indenture.
All references to "Notes" include both the $125,000,000 7 7/8% Senior Notes Due
2004 and the $175,000,000 8 1/8% Senior Notes Due 2009.
The covenants in the indenture do not necessarily protect you from a
decline in our credit quality due to highly leveraged or other transactions
involving the Company.
GENERAL
The Notes will be unsecured obligations of ours and are to be issued under
an Indenture, to be dated as of March 2, 1999 (the "indenture"), among us, as
issuer, and The First National Bank of Chicago, as trustee (the "trustee"). The
First National Bank of Chicago is a lender under our Revolving Credit Facility.
The principal corporate trust office of the trustee is located at One North
State Street, 9th Floor, Chicago, Illinois 60602.
The Notes Due 2004 and the Notes Due 2009 are each a separate series of
debt securities under the indenture. The Notes Due 2004 will mature on March 1,
2004 and the Notes Due 2009 will mature on March 1, 2009. Interest on the Notes
will accrue from March 2, 1999 and will be payable semi-annually on March 1 and
September 1, beginning September 1, 1999, and at maturity to the persons in
whose names the Notes are registered at the close of business on the February
15 or August 15 prior to the applicable payment date, at the annual rate set
forth on the cover page of this prospectus supplement.
Payments on the Notes will be made to DTC (as defined below). See the
provisions under the heading "Description of Debt Securities -- Book-Entry,
Delivery and Form" in the accompanying base prospectus.
The Notes will not be listed on any securities exchange. The Notes will be
new issues of securities with no established trading market and there can be no
assurance as to whether any market will develop, the liquidity of any markets
that may develop or the prices at which holders of the Notes would be able to
sell the Notes.
BOOK-ENTRY, DELIVERY AND FORM
The Notes Due 2004 and the Notes Due 2009 will each be issued in whole or
in part in the form of one or more global debt securities that will be
deposited with, or on behalf of The Depository Trust Company, New York, New
York ("DTC"), and registered in the name of a nominee of DTC. Global debt
securities may not be transferred except as a whole by DTC to a nominee of DTC
or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any
nominee to a successor of DTC or a nominee of the successor. A further
description of DTC's procedures with respect to global debt securities
representing the Notes is set forth in the accompanying prospectus under
"Description of Debt Securities -- Book-Entry, Delivery and Form."
RANKING
The Notes will rank pari passu with all our other unsecured and
unsubordinated indebtedness.
COVENANTS
The Notes will be subject to the restrictive covenants described below and
the defeasance provisions described under "Description of Debt Securities --
Defeasance" in the accompanying base prospectus.
RESTRICTIONS ON SECURED DEBT
So long as any Notes are outstanding, we will not be permitted to issue,
assume or guarantee, and will not permit any restricted subsidiary to issue,
assume or guarantee, any indebtedness secured by a mortgage, pledge, security
interest, lien or encumbrance (referred to in this section as "liens") on or of
any of our or any restricted subsidiary's property, or on the shares of stock
or debt of any restricted subsidiary now owned or later acquired by us.
However, this restriction
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<PAGE>
will not apply if the Notes are secured by a lien ranking ratably with and
equal to (or at our option, prior to) the secured indebtedness. In any event,
the foregoing restriction will not apply to the following:
(i) liens relating to indebtedness outstanding or available to us under
facilities existing on the date of original issuance of the Notes;
(ii) liens relating to indebtedness secured by the stock of a restricted
subsidiary and indebtedness of a restricted subsidiary existing when the
restricted subsidiary becomes a subsidiary, other than indebtedness
created in connection with the transaction by which the restricted
subsidiary becomes a subsidiary of ours;
(iii) liens relating to indebtedness of ours or any subsidiary of ours
having a term of less than 365 days arising from any funding arrangement
with one or more financial institutions or other lenders or purchasers
exclusively to finance the purchase, origination or production of loans
held or to be held for sale by us or by any of our subsidiaries for the
purpose of pooling those loans prior to securitization or sale of those
loans in the ordinary course of our or our subsidiaries' business;
(iv) liens on property at the time of its acquisition by us or a
restricted subsidiary that secure obligations assumed by us or a
restricted subsidiary, or on the property of an entity at the time it is
merged into us or a restricted subsidiary (other than indebtedness
created in contemplation of the acquisition of the property or the
consummation of such a merger);
(v) liens to secure the payment of some or all of the purchase price of
property or loan portfolios upon the acquisition of that property or
those loan portfolios by us or a restricted subsidiary;
(vi) liens relating to indebtedness arising from conditional sales
agreements or title retention agreements relating to property acquired
by us or a restricted subsidiary;
(vii) liens relating to indebtedness owed by a restricted subsidiary to us
or to another restricted subsidiary that is wholly-owned (directly or
indirectly) by us;
(viii) mechanics', materialmen's, carriers' or similar liens arising in the
ordinary course of business (including in the construction of
facilities) relating to obligations not due or which are being
contested;
(ix) liens for taxes not due or being contested, landlords' liens,
tenants' rights under leases, and similar liens not impairing the use or
value of the property involved;
(x) liens on any property to secure all or part of the cost of
improvements or construction on the property or indebtedness incurred to
provide funds for that purpose in a principal amount not exceeding the
cost of the improvements or construction;
(xi) liens incurred in connection with any amendment, restatement,
supplement, renewal, replacement, extension, refinancing or refunding in
whole or in part, of indebtedness, provided that the principal amount of
the indebtedness secured by a lien will not exceed the principal amount
of indebtedness secured at the time any such action is taken (other than
with respect to the Revolving Credit Facility, as to which the principal
amount of indebtedness may be increased) and that any such action will
be limited to the portion of assets that secured the lien at the time
any such action was taken.
In addition, the Company and its restricted subsidiaries may issue, assume
or guarantee indebtedness that would be subject to the foregoing restrictions
without equally and ratably securing the Notes if immediately thereafter the
sum of (i) the aggregate principal amount of all indebtedness outstanding that
would be subject to the foregoing restrictions (excluding indebtedness
permitted under the exceptions to the restriction set forth above), and (ii)
all "attributable debt from a sale and leaseback" (as defined below) (excluding
any sale and leaseback as to which the net proceeds of the
property sold or transferred are applied to retire indebtedness or to the
purchase of property as described under " -- Restrictions on Sale and Leaseback
Transactions" below) as of the date of determination would not exceed 15% of
Consolidated Net Tangible Assets (as those terms are defined below).
RESTRICTIONS ON DEBT OF RESTRICTED SUBSIDIARIES
So long as any Notes are outstanding, none of our restricted subsidiaries
will be permitted to issue, assume or guarantee any indebtedness. The foregoing
restriction will not apply to the following:
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<PAGE>
(i) any indebtedness of any restricted subsidiary permitted under the
provisions described under the heading "Restrictions on Secured Debt"
above;
(ii) indebtedness existing on the date of original issuance of the Notes;
(iii) indebtedness of a restricted subsidiary existing when the restricted
subsidiary becomes a subsidiary, other than indebtedness created in
connection with the transaction by which the restricted subsidiary
becomes a subsidiary of ours;
(iv) indebtedness owed by a restricted subsidiary to us or to another
restricted subsidiary that is wholly-owned (directly or indirectly) by
us; and
(v) any amendment, restatement, supplement, renewal, replacement, extension
or refunding in whole or in part, of indebtedness permitted at the time
of its original incurrence.
In addition, any restricted subsidiary may issue, assume or guarantee
indebtedness if immediately thereafter the sum of (i) the aggregate principal
amount of all indebtedness outstanding (excluding indebtedness permitted under
the exceptions to the restriction set forth above and under the heading
"Restrictions on Secured Debt"), and (ii) all "attributable debt from a sale and
leaseback" (as defined below) (excluding any sale and leaseback as to which the
net proceeds of the property sold or transferred are applied to retire
indebtedness or to the purchase of property as described under " -- Restrictions
on Sale and Leaseback Transactions" below) as of the date of determination would
not exceed 15% of Consolidated Net Tangible Assets (as those terms are defined
below).
RESTRICTIONS ON SALE AND LEASEBACK TRANSACTIONS
We will not, and will not permit any restricted subsidiary to, sell or
transfer, except to one another, any property if such a sale or transfer is
made with the agreement, commitment or intention of leasing that property back
to us or to a restricted subsidiary for a period of more than three years
(referred to herein as a "sale and leaseback"), unless:
(i) notice is promptly given to the Trustee of the sale and leaseback;
(ii) we or the restricted subsidiary receives fair value for the property
sold (as determined in good faith by the Board of Directors of the
Company and a copy of the resolution setting forth that determination is
delivered to the Trustee); and
(iii) we or a restricted subsidiary, within 180 days after completion of the
sale and leaseback, applies an amount equal to the net proceeds from the
sale and leaseback to either (A) the redemption or retirement of the Notes
or the repayment of other funded indebtedness ranking pari passu with the
Notes, or (B) the purchase by us or the restricted subsidiary of property
substantially similar to the property sold or transferred. In lieu of
applying any or all of the net proceeds from a sale or leaseback to the
redemption or retirement of indebtedness, the Company may deliver Notes to
the Trustee for cancellation and reduce the amount to be applied to the
redemption of Notes by an amount equal to the aggregate principal amount
of Notes delivered.
In addition, the Company and its restricted subsidiaries may enter into a
sale and leaseback if immediately afterward the sum of (i) the aggregate amount
of all indebtedness outstanding (excluding indebtedness permitted under the
exceptions to the restriction set forth in " -- Restrictions on Secured Debt"
above) and (ii) all attributable debt from a sale and leaseback (as defined
below) (excluding any sale and leaseback as to which the net proceeds of the
property sold or transferred are applied to retire indebtedness or to the
purchase of property as described in clause (B) of the immediately preceding
paragraph) as of the date of determination would not exceed 15% of Consolidated
Net Tangible Assets.
As used in this section, "attributable debt from a sale and leaseback"
means the present value (discounted at the weighted average effective interest
cost of the outstanding Notes) of all remaining rental payments under the lease
due through the date through which the lease has been or may, at the option of
the lessor, be extended or, if earlier, through the earliest date on which the
lessee may terminate the lease upon payment of a penalty (which penalty will be
considered in calculating the present value), after excluding all amounts
required to be paid on account of maintenance and repairs, insurance, taxes,
assessments, water and utility rates and similar charges.
RESTRICTIONS ON MERGERS, CONSOLIDATIONS AND TRANSFERS OF ASSETS
The restrictions described under the heading "Restrictions on
Consolidation, Merger and Certain Sales of Assets" in the accompanying
prospectus are superseded in their entirety by this section entitled
"Restrictions on Mergers, Consolidations and Transfers of Assets."
S-14
<PAGE>
We will not, and will not permit any restricted subsidiary to, consolidate
or merge into or sell, assign, transfer, lease or otherwise dispose of all or
substantially all of its assets other than in the ordinary course of its
business or any of the capital stock or other equity interests of any
restricted subsidiary held by us or a restricted subsidiary to another person
unless:
(a) (i) the person is a corporation organized under the laws of the United
States of America or any state thereof or the District of Columbia;
(ii) the person assumes by supplemental indenture all of our obligations
or the obligations of the restricted subsidiary, as the case may be,
relating to the Notes and the Indenture; and
(iii) immediately after the transaction no event of default, and no event
which, after notice or lapse of time or both, would become an event of
default, exists; provided that this clause (iii) will not restrict or
be applicable to a merger, consolidation or liquidation of a restricted
subsidiary with or into us or with or into another subsidiary that is
wholly-owned, directly or indirectly, by us; or
(b) in the case of the sale, assignment, transfer, lease or other
disposition of all or substantially all of the assets or any capital
stock or other equity interests of any restricted subsidiary, we (A)
receive, upon the occurrence of such an event, cash consideration at
least equal to the fair market value of the assets, stock or equity
interests sold, as determined in good faith by our Board of Directors,
and (B) apply within 180 days of such an action the proceeds received to
(1) permanently repay indebtedness of ours or of a restricted subsidiary
ranking pari passu with the Notes, (2) the purchase of property or assets
(including the origination of consumer loans) of a business related to
any business that we or any of our restricted subsidiaries conduct at
that time, (3) redemption of the Notes, or (4) any combination of clauses
1, 2 and 3.
The procedures to be followed by us in making an offer to purchase Notes
from the holders under this section, and for the acceptance of the offer by the
holders, will be the same as those set forth below under "Purchase of the Notes
at the Option of the Holder" relating to a Change in Control.
Except as set forth in clause (b) above, upon any such consolidation,
merger, sale, assignment, transfer, lease or other disposition, the successor
corporation will be substituted for us or the restricted subsidiary, as the
case may be, under the Indenture. The successor corporation may then exercise
every power and right of ours or of the restricted subsidiary under the
Indenture, and we or the restricted subsidiary, as the case may be, will be
released from all of our or its liabilities and obligations relating to the
Notes and the Indenture. If we or any restricted subsidiary leases all or
substantially all of our or its assets, the lessee corporation will be the
successor to us or the restricted subsidiary and may exercise every power and
right of ours or of the restricted subsidiary, as the case may be, under the
Indenture, but we or the restricted subsidiary, as the case may be, will not be
released from our or its obligations to pay the principal of and premium, if
any, and interest, if any, on the Notes.
OPTIONAL REDEMPTION
Each of the Notes Due 2004 and the Notes Due 2009 will be redeemable, in
whole or in part, at our option at any time at a redemption price equal to the
greater of (i) 100% of the principal amount of the applicable series of Notes,
and (ii) as determined by the Quotation Agent (as defined below), the sum of
the present values of the remaining scheduled payments of principal and
interest on the applicable series of Notes (not including any portion of those
payments of interest accrued as of the redemption date) discounted to the
redemption date on a semi-annual basis assuming a 360 day year consisting of
twelve 30 day months at the Adjusted Treasury Rate (as defined below) plus 25
basis points plus, in each case, accrued and unpaid interest on the applicable
series of Notes to the redemption date.
In the case of a partial redemption, selection of the Notes for redemption
will be made pro rata, by lot or such other method as the trustee in its sole
discretion deems appropriate and fair; however, any redemption relating to a
public equity offering of equity securities will be made on a pro rata basis or
on as nearly a pro rata basis as practicable (subject to DTC procedures). No
Notes of a principal amount of $1,000 or less will be redeemed in part. Notice
of any redemption will be mailed by first class mail at least 30 days but not
more than 60 days before the redemption date to each holder of the Notes to be
redeemed at its registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to the Note will state the portion of the
principal amount of the Note to be redeemed. A new Note in a principal amount
equal to the unredeemed portion of the Note will be issued in the name of the
holder of the Note upon surrender for cancellation of the original Note. Unless
we default in payment of the redemption price, on and after the redemption
date, interest will cease to accrue on the Notes or the portions of the Notes
called for redemption.
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<PAGE>
MANDATORY REDEMPTION
We will not be required to make any mandatory sinking fund payments with
regard to the Notes.
PURCHASE OF THE NOTES AT THE OPTION OF THE HOLDER
If any Change in Control Triggering Event regarding us occurs on or prior
to maturity of the Notes, each holder of Notes will have the right, at the
holder's option, subject to the terms and conditions of the indenture, to
require us to purchase all or any part of the holder's Notes (so long as the
principal amount is $1,000 or an integral multiple of $1,000) on the date that
is 30 business days after the occurrence of the Change in Control Triggering
Event (the "Purchase Date"). If a holder exercises this option, we will
purchase that holder's Notes for cash equal to 101% of the principal amount of
the Notes plus any interest accrued and unpaid on the Notes through the
Purchase Date (the "Purchase Price").
Within 15 business days after a Change in Control Triggering Event, we are
obligated to mail to the Trustee and to all holders of the Notes at their
addresses shown in the securities register (and to beneficial owners as
required by applicable law) a notice regarding the Change in Control Triggering
Event. The notice shall state, among other things:
(i) the date by which the holder must give the Purchase Notice (as
defined below);
(ii) the Purchase Price;
(iii) the Purchase Date;
(iv) the name and address of the trustee and of any other office or
agency maintained for the purpose of the surrender of the Notes for
purchase;
(v) the procedures for withdrawing a Purchase Notice; and
(vi) the procedures that a holder must follow to exercise these rights.
We will have the notice published in a daily newspaper of national circulation.
To exercise the right to have us purchase the Notes, a holder must deliver
written notice (a "Purchase Notice") to the trustee or to any other office or
agency maintained for that purpose of the holder's exercise of that right
before the close of business on the business day immediately prior to the
Purchase Date. The Purchase Notice must state:
(i) the certificate number of the Note to be delivered by the holder for
purchase by us;
(ii) the portion of the principal amount of the Notes to be purchased
(which must be $1,000 or an integral multiple of $1,000); and
(iii) that the Notes will be submitted to us for purchase on the Purchase
Date pursuant to the applicable provisions of the Notes.
A holder may withdraw any Purchase Notice by written notice of withdrawal
delivered to the trustee or to any other office or agency maintained for such
purpose no later than the business day immediately prior to the Purchase Date.
The notice of withdrawal must state the principal amount and the certificate
numbers of the Notes as to which the withdrawal notice relates and the
principal amount, if any, of the holder's Notes which remains subject to the
original Purchase Notice.
Payment of the Purchase Price for a Note for which a Purchase Notice has
been delivered and not withdrawn is conditioned on delivery of the Note
(together with any endorsements) to the trustee or to any other office or
agency maintained for that purpose, at any time (whether prior to, on or after
the Purchase Date) after delivery of the Purchase Notice. Payment of the
Purchase Price for the Note will be made promptly following the later of the
Purchase Date or the time of delivery of the Note. If we have deposited with
the trustee, in accordance with the indenture, money sufficient to pay the
Purchase Price of the Note on the Purchase Date, then, on and after the
Purchase Date, the Note will cease to be outstanding and interest on the Note
will cease to accrue, whether or not the Note is delivered to the trustee or to
any other office or agency maintained for that purpose, and all other rights of
the holder will terminate (other than the right to receive the Purchase Price
on delivery of the Note). In accordance with the indenture, no Notes may be
purchased pursuant to a Change in Control Triggering Event if there has
occurred and is continuing an event of default other than a default in the
payment of the Purchase Price, relating to the Notes.
We will comply with and make all filings required under all federal and
state securities laws regulating the purchase of the Notes at the option of
holders upon a Change in Control Triggering Event, including, if applicable,
Section 14(e)
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of the Securities and Exchange Act of 1934, as amended, (the "Exchange Act")
and Rule 14e-1 promulgated under the Exchange Act and any other applicable
tender offer rules.
The Change in Control Triggering Event purchase feature of the Notes may
in certain circumstances make more difficult or discourage a takeover of us
and, as a result, the removal of incumbent management. If a Change in Control
Triggering Event were to occur, we cannot assure you that we would have
sufficient funds to pay the Purchase Price for all Notes tendered by the
holders. A default by us on our obligation to pay the Purchase Price could
result in acceleration of the payment of other indebtedness of ours that is
outstanding at the time.
SAME-DAY SETTLEMENT AND PAYMENT
We will make all payments of principal and interest under the Notes in
immediately available funds. Secondary trading in the long-term notes and notes
of corporate issuers is generally settled in clearing house or next-day funds.
In contrast, the Notes will trade in DTC's Same-Day Funds Settlement System
until maturity or until the Notes are issued in certificated form, and
secondary market trading activity in the Notes will therefore be required by
DTC to settle in immediately available funds. No assurance can be given as to
the effect, if any, of settlement in immediately available funds on trading
activity in the Notes.
DEFINITIONS
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price of the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for that redemption date.
"Change in Control" means, with regard to us, the occurrence of:
(i) any consolidation, share exchange or merger regarding us in which we
are not the continuing or surviving corporation or where our voting stock
would be converted into cash, securities or other property, other than a
merger in which the holders of our voting stock immediately prior to the
merger have the same or greater direct or indirect proportionate ownership
of the surviving corporation's voting stock immediately after the merger
as they had of our voting stock immediately before the merger, or
(ii) any person, including affiliates of ours (but not including us, our
restricted subsidiaries, employee stock ownership plans or employee
benefit plans of ours or our subsidiaries), filing a Schedule 13D or
14D-1 (or any successor schedule, form or report under the Exchange Act)
disclosing that such a person has become the beneficial owner of 50% or
more of the our voting stock.
"Change in Control Triggering Event" means the occurrence of both a Change
in Control and a Rating Decline.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the
remaining term of the Notes to be redeemed that would be utilized, at the time
of a selection and in accordance with customary financial practice, in pricing
new issues of corporate debt securities of comparable maturity to the remaining
term of the Notes.
"Comparable Treasury Price" means, with respect to any redemption date,
(i) the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest Reference Treasury Dealer
Quotation, or (ii) if the Trustee obtains fewer than three Reference Treasury
Dealer Quotations, the average of the quotations.
"Consolidated Net Tangible Assets" means, at any date, the total assets
appearing on our and our subsidiaries' most recently prepared consolidated
balance sheet at the end of a fiscal quarter, prepared in accordance with GAAP
at the time of calculation, less (a) all current liabilities as shown on the
balance sheet and (b) Intangible Assets.
"Intangible Assets" means the value (net of applicable reserves), as shown
on or reflected in our and our subsidiaries' most recent consolidated balance
sheet, of (a) all trade names, trademarks, licenses, patents, copyrights, and
goodwill; (b) organizational costs; and (c) deferred charges (other than
prepaid items such as insurance, taxes, interest, commissions, rents and
similar items and intangible assets being amortized). In no event, however,
will the term "Intangible Assets" include product development costs.
"Investment Grade" means a rating of BBB- or higher by Standard & Poor's
Corporation ("S&P") and Baa3 or higher by Moody's Investors Service ("Moody's")
or the equivalent of those ratings by either of those Rating Agencies.
"Quotation Agent" means the Reference Treasury Dealer appointed by us.
S-17
<PAGE>
"Rating Agency" means (i) S&P, (ii) Moody's, or (iii) if S&P or Moody's or
both shall not make a rating of the Notes publicly available, a nationally
recognized securities rating agency or agencies selected by us.
"Rating Category" means (i) regarding S&P, any of the following
categories: BB, B, CCC, CC, C and D (or equivalent successor categories), (ii)
regarding Moody's, any of the following categories: Ba, B, Caa, Ca and C (or
equivalent successor categories), and (iii) the equivalent of any such category
of S&P or Moody's used by another Rating Agency. Gradations within Rating
Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or the equivalent
gradations for another Rating Agency) will be taken into account in determining
whether the rating of the Notes has decreased by one or more gradations. For
example, regarding S&P, a decline in rating from BB+ to BB will constitute a
decrease of one gradation.
"Rating Date" means the date that is 30 days prior to the earliest of (i)
a Change in Control, (ii) public notice of a Change in Control and (iii) public
notice of the intention by us to effect a Change in Control.
"Rating Decline" means the occurrence on or within 30 days after the
earlier of the date of public notice of the occurrence of a Change in Control
or the public announcement of our intention to effect a Change in Control
(which period will be extended so long as the rating of the Notes is under
publicly announced consideration for possible downgrade by any of the Rating
Agencies) of:
(i) If the Notes are rated by either Moody's or S&P on the Rating Date as
Investment Grade, the rating of the Notes by both Moody's and S&P below
Investment Grade, or
(ii) If the Notes are rated below Investment Grade by both Moody's and S&P
on the Rating Date, the rating of the Notes is decreased by either
Moody's or S&P by one or more gradations (including gradations within
Rating Categories as well as between Rating Categories).
"Reference Treasury Dealer" means (i) each of NationsBanc Montgomery
Securities LLC, First Union Capital Markets Corp. and Merrill Lynch & Co. and
their respective successors; however, if any of the foregoing shall cease to be
a primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer"), we will substitute another Primary Treasury Dealer; and (ii)
any other Primary Treasury Dealer selected by us.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by us, of the bid and asked prices for the Comparable Treasury Issue (expressed
in each case as a percentage of its principal amount) quoted in writing to the
trustee by the Reference Treasury Dealer at 5:00 p.m., New York City time, on
the third business day preceding the redemption date.
"restricted subsidiary" means any corporation or other entity of which we
hold capital stock or other equity interests representing at least a majority
of the outstanding aggregate voting power.
S-18
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
among us and the underwriters named below, we have agreed to sell to each of
the underwriters and each of the underwriters severally has agreed to purchase
from us the principal amount of the Notes set forth opposite its name below.
The underwriting agreement provides that the obligations of the underwriters
are subject to certain conditions and that the underwriters will be obligated
to purchase all of the Notes if any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF NOTES AMOUNT OF NOTES
UNDERWRITERS DUE 2004 DUE 2009
- --------------------------------------------------- ----------------- ----------------
<S> <C> <C>
NationsBanc Montgomery Securities LLC ............. $ 75,000,000 $105,000,000
First Union Capital Markets Corp. ................. 25,000,000 35,000,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 25,000,000 35,000,000
------------ ------------
Total ............................................ $125,000,000 $175,000,000
============ ============
</TABLE>
The underwriters propose to offer the Notes to the public at the public
offering price set forth on the cover page of this prospectus supplement and to
dealers at that price less a concession of no more than .35% of the principal
amount of the Notes Due 2004 and .40% of the principal amount of the Notes Due
2009. The underwriters may allow, and the dealers may reallow, a discount of no
more than .25% of the principal amount of the Notes Due 2004 and no more than
.275% of the Notes Due 2009 to other dealers. The public offering price,
concession and discount may be changed after the offering to the public of the
Notes.
The Notes are new issues of securities with no established trading market.
We do not intend to apply for listing of the Notes on any national securities
exchange or for quotation of the Notes on any automated dealer quotation
system. The underwriters have advised us that they intend to make a market in
the Notes after the offering, although they are under no obligation to do so.
The underwriters may discontinue any market-making activities at any time
without any notice. We can give no assurance as to the liquidity of the trading
market for the Notes or that a public trading market for the Notes will
develop. If no active public trading market develops, the market price and
liquidity of the Notes may be adversely affected. If the Notes are traded, they
may trade at a discount from their initial offering price, depending on factors
such as prevailing interest rates, the market for similar securities, the
performance of our company as well as other factors not listed here.
We have agreed to indemnify the underwriters against, or to contribute to
payments that the underwriters may be required to make with respect to, certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
The underwriters, as well as dealers and agents, may purchase and sell
Notes in the open market. These transactions may include stabilizing
transactions and purchases to cover syndicate short positions created in
connection with the offering. Stabilizing transactions consist of bids and
purchases made to prevent or slow a decline in the market price of the Notes.
Syndicate short positions arise when the underwriters or agents sell more Notes
than we are required to sell to them in the offering. The underwriters may also
impose penalty bids whereby the underwriting syndicate may reclaim selling
concessions allowed either syndicate members or broker dealers who sell Notes
in the offering for their own account if the syndicate repurchases the Notes in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Notes, which may be higher as a
result of these activities than it might otherwise be in the open market. These
activities, if commenced, may be discontinued at any time without notice.
We and the underwriters make no representation or prediction as to the
direction or magnitude of any effect that the transactions described above may
have on the price of the Notes. In addition, we and the underwriters make no
representation that the underwriters will engage in those types of transactions
or that those transactions, once commenced, will not be discontinued without
notice.
NationsBank, N.A., an affiliate of NationsBanc Montgomery Securities LLC,
has made a $100.0 million term loan to us and received customary fees in
connection therewith. This term loan will be repaid from the proceeds of this
offering.
Our $175.0 million Revolving Credit Facility is with First Union National
Bank, as agent. First Union National Bank and NationsBank, N.A. are both
lenders under the Revolving Credit Facility. First Union Capital Markets Corp.
is an affiliate of First Union National Bank. Borrowings under the Revolving
Credit Facility will be repaid from the proceeds of this offering. At December
31, 1998, $140.0 million was outstanding under the Revolving Credit Facility.
S-19
<PAGE>
We have a $325.0 million Warehouse Facility with a multi-seller conduit
commercial paper issuer sponsored by NationsBank, N.A. NationsBank, N.A. is an
affiliate of NationsBanc Montgomery Securities LLC. A portion of the proceeds
of this offering will be used to repay borrowings under the Warehouse Facility.
Each of the underwriters, and certain of their affiliates, have provided,
and may continue to provide, investment banking, financial advisory, commercial
banking and other services to us and have received, and may continue to
receive, customary fees in connection with those services.
We estimate that our share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$500,000.
LEGAL MATTERS
Kennedy Covington Lobdell & Hickman, L.L.P. will issue opinions about the
validity of the Notes and certain other legal matters for us in connection with
this offering. Kennedy Covington Lobdell & Hickman, L.L.P. is located at 100
North Tryon Street, Suite 4200, Charlotte, North Carolina 28202. Clarence W.
Walker, a partner in the firm of Kennedy Covington Lobdell & Hickman, L.L.P.,
is a member of the Board of Directors of the Company. As of February 15, 1999,
partners, counsel and associates of Kennedy Covington Lobdell & Hickman, L.L.P.
and their spouses and minor children beneficially owned an aggregate of 115,545
shares of common stock of the Company (which includes 56,488 shares subject to
options that are presently exercisable or exercisable within 60 days).
McGuire, Woods, Battle & Boothe LLP will issue opinions regarding certain
legal matters with respect to the Notes for the underwriters. McGuire, Woods,
Battle & Boothe LLP is located at 100 North Tryon Street, Suite 2900,
Charlotte, North Carolina 28202.
EXPERTS
The Company's consolidated financial statements appearing in our Annual
Report on Form 10-K for the fiscal year ended September 30, 1998 have been
audited by PricewaterhouseCoopers LLP, independent public accountants. These
financial statements are incorporated by reference in this prospectus
supplement in reliance on the report of PricewaterhouseCoopers LLP, given on
the authority of such firm as experts in auditing and accounting.
S-20
<PAGE>
PROSPECTUS
[GRAPHIC]
$400,000,000
OAKWOOD HOMES CORPORATION
DEBT SECURITIES
---------------
Oakwood Homes Corporation (the "Company") intends to issue, from time to
time in one or more series, its unsecured debt securities (the "Debt
Securities") with an aggregate initial public offering price or purchase price
of up to $400,000,000 or the equivalent thereof in one or more foreign or
composite currencies. The Debt Securities will be offered for sale on terms to
be determined when the agreement to sell is made or at the time of sale, as the
case may be. For each issue of Debt Securities in respect of which this
Prospectus is being delivered, there is an accompanying prospectus supplement
(the "Prospectus Supplement"). The Prospectus Supplement sets forth for each
series the designation, designated currency (which may be U.S. dollars, any
other currency or a composite currency), aggregate principal amount, rate
(which may be fixed, floating or adjustable) or method of calculation of
interest, if any, and dates for payment thereof, premium, if any, maturity,
authorized denominations, any subordination terms, initial price, any
exchangeability, redemption or prepayment rights at the option of the Company
or the holder, any covenants or events of default that are in addition to or
different from that described herein, and other special terms of the Debt
Securities, together with the terms of the offering of the Debt Securities and
the net proceeds to the Company from the sale thereof. In the event of the
issuance of Debt Securities at original issue discount, the aggregate principal
amount of Debt Securities offered hereby will be a higher amount, provided that
the total price at which Debt Securities are sold to the public pursuant to
this Prospectus will not exceed $400,000,000, or the equivalent thereof in
other currencies or composite currencies. If any agents of the Company or any
underwriters are involved in the sale of any series of Debt Securities in
respect of which this Prospectus is being delivered, the names of such agents
or underwriters and any applicable commissions and discounts are set forth in
the Prospectus Supplement.
Unless otherwise specified in a Prospectus Supplement, the Debt
Securities, when issued, will be unsecured and unsubordinated obligations of
the Company and will rank pari passu in right of payment with all other
unsecured and unsubordinated indebtedness of the Company. The Company may (but
is not required to) make application to list one or more series of Debt
Securities on one or more national securities exchanges. Any such application
to list the Debt Securities is described in the Prospectus Supplement related
thereto.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE A SALE OF DEBT SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT APPLICABLE TO SUCH DEBT SECURITIES.
---------------
The Debt Securities will be sold directly, through agents designated from
time to time, or through underwriters or dealers. The names of any underwriters
or agents of the Company involved in the sale of the Debt Securities in respect
of which this Prospectus is being delivered and any applicable commissions or
discounts will be set forth in the applicable Prospectus Supplement.
---------------
The date of this Prospectus is February 25, 1999.
<PAGE>
CERTAIN PERSONS, INCLUDING ANY UNDERWRITERS, PARTICIPATING IN THE OFFERING
MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE
PRICE OF THE DEBT SECURITIES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE
PURCHASE OF THE DEBT SECURITIES TO COVER SHORT POSITIONS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
---------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the regional offices of the Commission at 7
World Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The public
may obtain information on the Public Reference Room by calling the Commission
at 1-800-SEC-0330. The Commission maintains a Web site that contains reports,
proxy and information statements and other information concerning registrants
that file electronically with the Commission, which can be accessed at
http://www.sec.gov. Such reports, statements and other information concerning
the Company can also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. The Company's common stock
is listed on the New York Stock Exchange.
This Prospectus constitutes a part of a registration statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
omits certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
Debt Securities offered hereby. Any statements contained herein concerning the
provisions of any document are not necessarily complete and, in each instance,
reference is hereby made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended September 30,
1998, the Company's Current Report on Form 8-K dated October 13, 1998 and the
Company's Quarterly Report on Form 10-Q for the Quarterly Period ended December
31, 1998, which were previously filed by the Company with the Commission under
the Exchange Act, are incorporated herein by reference. All documents filed by
the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Prospectus and prior to the termination of the offering
of the Debt Securities offered hereby (except to the extent specified therein
or in rules or regulations of the Commission) shall be deemed to be
incorporated herein by reference and to be part hereof from the date of filing
of such documents.
Any statement contained herein or in a document all or a portion of which
is incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, on the written or oral request of such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated in this Prospectus by reference other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into the incorporated document. Requests for such copies should be directed to:
Oakwood Homes Corporation, 7800 McCloud Road, Greensboro, North Carolina 27425,
Attention: Secretary; Telephone: (336) 664-2400.
2
<PAGE>
THE COMPANY
Oakwood Homes Corporation, a North Carolina corporation (the "Company")
designs, manufactures and markets manufactured and modular homes. The Company
operates 32 manufacturing plants across the United States. The Company sells
manufactured homes primarily through 362 Company-owned sales centers and over
100 exclusive retailers and key dealers. The Company operates its sales centers
under the names Oakwood(R) Mobile Homes, Freedom Homes(R), Victory Homes,
Schult(R) Homes and Golden West Homes(R). During fiscal 1998, approximately 96%
of the Company's retail sales of new homes were of homes manufactured by the
Company. The Company believes that it is the largest retailer, and the third
largest manufacturer, of manufactured homes in the United States. Through our
captive reinsurance subsidiary, the Company also reinsures risks with respect
to homeowners insurance, credit life insurance and other insurance policies
written for customers in connection with the Company's retail sales activities.
The Company combines manufacturing, retail sales and financing of
manufactured homes. The Company believes that the extent of its integration
provides it with a competitive advantage over many others in the industry. The
Company's ability to control the design, manufacture and distribution of its
homes enables it to plan its inventory requirements, to control the quality and
servicing of its products and to respond promptly to changes in the retail
market. In addition, the Company's ability to finance its sales allows the
Company to make credit decisions promptly and to minimize the inconvenience to
the customer of obtaining credit.
The Company provides financing for the majority of homes it sells through
loans originated by the Company. During fiscal 1998, approximately 87% of the
Company's retail unit sales were financed by installment sales contracts or
loans that the Company originated. The Company has historically obtained funds
to finance loans primarily through sales of REMIC trust certificates to
institutional investors. The Company also uses short-term credit facilities and
internally generated funds to support loans until a pool of loans is
accumulated to provide for permanent financing generally at fixed rates.
Internal financing of loans has allowed the Company to broaden its sources of
financing by obtaining funds secured by loans directly from institutional
investors and from public markets. The Company's ability to continue to finance
loans is dependent upon the continued availability of adequate sources of
capital.
The Company was founded in 1946 and its principal executive offices are
located at 7800 McCloud Road, Greensboro, North Carolina 27409-9634. Its
telephone number at that location is (336) 664-2400. Except as otherwise
indicated by the context, references herein to the "Company" include the
Company, its subsidiaries and its predecessors.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for each of the last five fiscal years.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
FISCAL YEAR ENDED SEPTEMBER 30, DECEMBER 31,
- --------------------------------------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1997 1998
- ------ ---- ---- ---- ---- ---- ----
3.16 3.62 5.12 5.91 3.44 4.82 2.82
</TABLE>
In calculating the ratio of earnings to fixed charges, earnings consist of
earnings before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense (which includes
amortization of deferred financing costs), whether expensed or capitalized, and
that portion of rental expense estimated to be attributed to interest.
USE OF PROCEEDS
Except as otherwise set forth in the Prospectus Supplement relating to a
series of Debt Securities, net proceeds to be received by the Company from the
sale of the Debt Securities will be used for general corporate purposes which
may include expenses relating to potential acquisitions, repayment of certain
long-term and short-term debt, and supporting the Company's retail expansion.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture (the "Indenture")
to be entered into between the Company and the trustee named in the applicable
Prospectus Supplement (the "Trustee"). A form of the Indenture has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
The following summaries of certain provisions of the Debt Securities and the
Indenture do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all the provisions of the Indenture,
including the definitions therein of certain terms. Wherever
3
<PAGE>
particular provisions or defined terms of the Indenture (or of any form of Debt
Security which is adopted pursuant to the Indenture) are referenced, such
provisions or defined terms are incorporated herein by reference. As used under
this heading, the term "Debt Securities" includes the debt securities being
offered pursuant to this Prospectus and all other debt securities issued by the
Company from time to time under the Indenture.
GENERAL
The Debt Securities will be unsecured obligations of the Company. Unless
otherwise stated in the applicable Prospectus Supplement, the Debt Securities
will be unsubordinated obligations of the Company and will rank pari passu in
right of payment with all other unsecured and unsubordinated indebtedness of
the Company. The Company may also issue Debt Securities that are subordinated
in right of payment, in the manner and to the extent described in the
applicable Prospectus Supplement, to all existing and future Senior
Indebtedness (as defined in the applicable Prospectus Supplement) of the
Company.
The Indenture does not limit the amount of Debt Securities which can be
issued thereunder and provides that Debt Securities may be issued thereunder in
one or more series up to the aggregate principal amount which may be authorized
from time to time by the Company. All Debt Securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of any holder, for issuances of additional Debt
Securities of such series. The Indenture provides that there may be more than
one Trustee thereunder, each Trustee serving with respect to one or more series
of Debt Securities. Reference is made to the Prospectus Supplement for the
terms of the series of Debt Securities being offered thereby, including, where
applicable: (i) the title of such Debt Securities; (ii) the limit, if any, upon
the aggregate principal amount of such Debt Securities; (iii) the person to
whom any interest on a Debt Security of that series shall be payable, if other
than the person in whose name that Debt Security is registered at the close of
business on the regular record date for such series; (iv) the date or dates, or
the method of determination thereof, on which the principal and premium, if
any, of such Debt Securities are payable; (v) the rate or rates (which may be
fixed, floating or adjustable), or the method of determination thereof, at
which such Debt Securities will bear interest, if any; the date or dates from
which such interest will accrue or method by which such date or dates will be
determined; the interest payment dates on which such interest will be payable
and the record dates for the interest payable on such interest payment dates or
method by which such date or dates will be determined; and the basis upon which
interest shall be calculated if other than that of a 360-day year of twelve
30-day months; (vi) the place or places where the principal of, and premium, if
any, and any interest on such Debt Securities will be payable; (vii) the price
or prices at which, the period or periods within which, the currencies,
currency units or composite currencies in which and the terms and conditions
upon which such Debt Securities may be redeemed in whole or in part, at the
option of the Company; (viii) the obligation, if any, of the Company to redeem
or purchase such Debt Securities pursuant to any sinking fund or analogous
provisions or at the option of a holder and the price or prices at which and
the period or periods within which and the terms and conditions upon which such
Debt Securities will be redeemed, purchased or repaid, in whole or in part,
pursuant to such obligation; (ix) if other than denominations of $1,000 and any
integral multiple thereof, the denominations in which such Debt Securities will
be issuable; (x) whether the Debt Securities of that series or any covenants of
the Company with respect to that series may be subject to defeasance or
covenant defeasance and, if so, the requirements for such defeasance or
covenant defeasance; (xi) if the amount of payments of principal of or any
premium or interest on any Debt Securities of the series may be determined with
reference to an index, formula or other method, the manner in which such
amounts shall be determined; (xii) whether any of the Debt Securities of the
series will be issued in book-entry form and, in such case, the depositary for
such book-entry securities and the circumstances under which any such
book-entry security may be registered for transfer or exchange in the name of a
person other than such depositary or its nominee; (xiii) if other than the
principal amount, the portion of the principal amount of such Debt Securities
which will be payable upon declaration of acceleration of the maturity thereon
pursuant to the Indenture; (xiv) provisions, if any, granting special rights to
holders of the Debt Securities upon the occurrence of any specified events;
(xv) any additions, deletions or changes in the Events of Default or covenants
of the Company with respect to such Debt Securities; (xvi) the terms pursuant
to which the Debt Securities of the series will be subordinate and subject in
right of payment to the prior payment in full of all senior indebtedness of the
Company; (xvii) whether the payment of principal and any premium or interest on
the Debt Securities will be guaranteed by one or more guarantors, including
subsidiaries of the Company; (xviii) whether Debt Securities of any series are
to be issuable as registered securities, bearer securities or alternatively as
bearer and registered securities and whether the bearer securities are to be
issuable with coupons, without coupons or both, and any restrictions applicable
to the offer, sale or delivery of the bearer securities and the terms, if any,
upon which bearer securities of the series may be exchanged for registered
securities of the series and vice versa; and (xix) any other terms of such Debt
Securities whether or not consistent with the provisions of the Indenture.
(Section 301)
4
<PAGE>
If the principal of (and premium, if any) or any interest on Debt
Securities of any series are payable in a foreign or composite currency, the
restrictions, elections, federal income tax consequences, specific terms and
other information with respect to such Debt Securities and such currency will
be described in the Prospectus Supplement relating thereto.
One or more series of Debt Securities may be sold at a discount below
their stated principal amount bearing no interest or interest at a rate that at
the time of issuance is below market rates ("Original Issue Discount
Securities"). (Section 502) One or more series of Debt Securities may be debt
securities the terms of which provide that the principal amount payable at the
stated maturity may be more or less than the principal face amount of such
security at the time of issuance ("Indexed Securities"). One or more series of
Debt Securities may be variable-rate debt securities that may be exchangeable
for fixed-rate debt securities. Federal income tax consequences and other
special considerations applicable to any such series will be described in the
Prospectus Supplement relating thereto.
Unless otherwise provided in the applicable Prospectus Supplement, the
principal of (and premium, if any) and any interest on Debt Securities will be
payable at the principal corporate trust office of the Trustee at the location
identified in the applicable Prospectus Supplement; provided, however, that
payment of interest on Debt Securities may be made at the option of the Company
by check mailed to the holders thereof or by wire transfer to an account
maintained by the person entitled thereto. (Section 307)
All moneys paid by the Company to the Trustee for the payment of principal
of (and premium, if any) or any interest on any Debt Security that remains
unclaimed by the holder of such Debt Security at the end of two years after
such principal, premium or interest shall have become due and payable will be
repaid by the Trustee to the Company on demand, and such holder will thereafter
look only to the Company for payment thereof. (Section 1003)
The Indenture contains no covenants or other provisions to afford
protection to holders of the Debt Securities in the event of a highly leveraged
transaction or a change in control of the Company, except to the limited extent
described under " -- Covenants" and " -- Restrictions on Consolidation, Merger
and Certain Sales of Assets" below. In the event such protective covenants or
provisions are added at a later time, they will be described in the applicable
Prospectus Supplement.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities will be issued only in fully-registered form without coupons,
which form may be a Global Debt Security as described below, in denominations
of $1,000 or any integral multiple thereof. See " -- Book-Entry, Delivery and
Form." The Company will not charge a service charge for any registration of
transfer or exchange of Debt Securities but may require payment of a sum
sufficient to cover any tax or other governmental charge in connection
therewith. (Section 305)
The Debt Securities will be direct obligations of the Company and will be
unsecured. The Indenture does not restrict the amount of additional unsecured
debt which the Company may incur.
BOOK-ENTRY, DELIVERY AND FORM
If the related Prospectus Supplement so indicates, a series of Debt
Securities will be issued in the form of one or more fully-registered global
debt securities (each, a "Global Debt Security"). Each Global Debt Security
will be deposited with, or on behalf of, The Depository Trust Company, New
York, New York ("DTC") and registered in the name of DTC's nominee.
One or more Global Debt Securities will represent all Debt Securities of a
series that have the same terms, including, but not limited to, the same
interest payment dates, rates of interest (if any), maturity and repayment and
redemption provisions (if any). Ownership of beneficial interests in Global
Debt Securities will be shown on, and transfers thereof will be effected only
through, records maintained by DTC (with respect to interests of Participants
(defined below)) and its Participants (with respect to interests of persons
other than Participants). Payments of principal and interest on beneficial
interests in Global Debt Securities will be made through the Trustee to DTC.
Global Debt Securities will not be exchangeable for a certificate in definitive
registered form (each, a "Certificated Note") and, except as set forth herein,
will not otherwise be issuable in definitive form.
Except as set forth below, the Global Debt Security may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee.
The Company understands that DTC is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency"
5
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registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in each Participant's account, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants ("Direct Participants") include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations.
DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to DTC's system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Purchases of beneficial interests in Global Debt Securities under DTC's
system must be made by or through Direct Participants, which will receive a
credit for the beneficial interests in Global Debt Securities on DTC's records.
The ownership interest of each actual purchaser of each beneficial interest in
a Global Debt Security (the "Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which the Beneficial Owner entered into the
transaction. Transfers of beneficial interests in Global Debt Securities are to
be accomplished by entries made on the books of Participants acting on behalf
of the Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Global Debt Securities, except in the
event that use of the book-entry system for one or more Debt Securities is
discontinued.
To facilitate subsequent transfers, all Global Debt Securities deposited
by Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of Global Debt Securities with DTC and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Global
Debt Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Global Debt Securities are credited, which
may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Global Debt Securities within an issue are being redeemed, DTC's current
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to Global
Debt Securities. Under its usual procedures, DTC will mail an "Omnibus Proxy"
to the Company as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts the Global Debt Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Global Debt Securities will be made
to DTC. DTC's practice is to credit Direct Participants' accounts on the
payable date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
the payable date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as in the case of
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such Participant and not of
DTC, or the Company, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of principal and interest to DTC is the
responsibility of the Company, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.
A Beneficial Owner shall give notice to elect to have its interest in a
Global Debt Security purchased or tendered, through its Participant, to the
Paying Agent, and shall effect delivery of such interest in a Global Debt
Security by causing the Direct Participant to transfer the Participant's
interest, on DTC's records, to the Paying Agent. The requirement for physical
delivery of Global Debt Securities in connection with a demand for purchase or
a mandatory purchase will be deemed satisfied when the ownership rights in the
Global Debt Securities are transferred by a Direct Participant on DTC's
records.
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DTC may discontinue providing its services as securities depositary with
respect to the Global Debt Securities at any time by giving reasonable notice
to the Company or the agents or underwriters involved in the sale of the Global
Debt Securities. Under such circumstances, in the event that a successor
securities depositary is not obtained, Certificated Notes will be printed and
delivered in exchange for the Global Debt Securities held by DTC.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
Certificated Notes will be printed and delivered in exchange for the Global
Debt Securities held by DTC.
If an Event of Default with respect to the Debt Securities has occurred
and is continuing, Certificated Notes may be printed and delivered in exchange
for the Global Debt Securities held by DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a global
security.
So long as DTC, or its nominee, is the registered owner of the global
security, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the book-entry securities for all purposes under the
Indenture. Except as described in this section, beneficial owners will not be
entitled to have book-entry securities registered in their names, will not
receive or be entitled to receive physical delivery of securities in definitive
form and will not be considered the owners or holders of the securities under
the Indenture.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
None of the Company, any underwriter or agent, the Trustee, any paying
agent or the registrar for the Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Global Debt Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
SUBORDINATION
The board resolutions adopted, officers' certificates executed or
indentures supplemental to the Indenture established in connection with any
particular series of Debt Securities may provide that such Debt Securities are
subordinated to other Debt Securities or to other indebtedness of the Company.
Such board resolutions, officers' certificates or indentures supplemental will
state the terms pursuant to which such series of subordinated Debt Securities
will be made subordinate and subject in right of payment to the prior payment
in full of all senior indebtedness of the Company, and the definition of any
such senior indebtedness, all of which will be described in the Prospectus
Supplement relating thereto. (Section 301 and Article Fourteen)
COVENANTS
The particular covenants, if any, relating to any series of Debt
Securities will be described in the Prospectus Supplement relating to such
series. If any such covenants are described, the Prospectus Supplement will
also state whether the "covenant defeasance" provisions described below under "
- -- Defeasance -- Defeasance of Certain Covenants" also apply.
RESTRICTIONS ON CONSOLIDATION, MERGER AND CERTAIN SALES OF ASSETS
The Indenture provides that the Company may consolidate with or merge with
or into, or convey, transfer or lease its properties and assets substantially
as an entirety to any entity, and may permit any entity to consolidate with or
merge with or into, or convey, transfer or lease its properties and assets
substantially as an entirety to, the Company, provided that (i) immediately
after giving effect to such transaction, no Event of Default, and no event
which, after notice or the lapse of time, or both, would become an Event of
Default, shall have occurred and be continuing and (ii) either the Company
shall be the continuing corporation, or the successor entity (if other than the
Company) shall be a corporation, trust or partnership organized under the laws
of the United States, any state thereof or the District of Columbia, and such
successor entity shall expressly assume by an indenture supplemental to the
Indenture the due and punctual payment of the principal of, and any premium and
interest on, all of the Debt Securities, according to their tenor, and the due
and punctual performance and observance of all of the covenants and conditions
of the Indenture to be performed by the Company. Upon the assumption of the
Company's obligations by such an entity in such circumstances, subject to
certain exceptions, the Company shall be discharged from all obligations under
the Debt Securities and the Indenture. (Article Eight)
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EVENTS OF DEFAULT
Except as may otherwise be provided in a Prospectus Supplement with
respect to a particular series of Debt Securities, the following events with
respect to a particular series of Debt Securities are defined as an "Event of
Default": (i) default for 30 days in payment of any interest on the Debt
Securities; (ii) default in payment of principal of (and premium, if any, on)
any of the Debt Securities at maturity; (iii) default in the deposit of any
sinking fund payment, when due by the terms of the Debt Securities of such
series; (iv) default for 45 days after notice in performance of any other
covenant in the Indenture or Debt Securities; or (v) certain events of
bankruptcy, insolvency, receivership or reorganization. (Section 501) No Event
of Default with respect to a particular series of Debt Securities issued under
the Indenture necessarily constitutes an Event of Default with respect to any
other series of Debt Securities issued thereunder.
If an Event of Default shall have occurred and be continuing in respect of
any series of Debt Securities, either the Trustee or the holders of not less
than 25% in principal amount of the Debt Securities of such series then
outstanding may declare the principal amount (or, if the Debt Securities of
such series are Original Issue Discount Securities or Indexed Securities, such
portion of the principal amount as may be specified by the terms of such
series) of all the Debt Securities of such series to be due and payable
immediately by a notice in writing to the Company (and to the Trustee, if given
by the holders). Upon certain conditions, such declaration may be annulled and
past defaults (except, unless theretofore cured, a default in payment of
principal of or premium, if any, or interest on the Debt Securities or in
respect of a covenant which cannot be modified or amended without the consent
of every holder) may be waived by the holders of a majority in aggregate
principal amount of the Debt Securities of such series then outstanding.
(Section 502)
The Indenture requires the Company to file annually with the Trustee an
officers' certificate either stating the absence of any default or specifying
any default that may exist. (Section 1009) The Indenture provides that the
Trustee shall, within 45 days after the occurrence of a default, give to the
holders of the Debt Securities notice of such default, unless such default has
been cured or waived; provided that, except in the case of default in the
payment of principal of or premium, if any, or interest on any of the Debt
Securities of such series, or in the payment of any sinking fund installment
with respect to the Debt Securities of such series, the Trustee shall be
protected in withholding such notice if the Trustee in good faith determines
that the withholding of such notice is in the interest of the holders of the
Debt Securities. The term "default" for the purpose of this provision only
shall mean the occurrence of any event which is, or after notice or lapse of
time or both would become, an Event of Default with respect to the Debt
Securities of such series. (Section 602)
The Indenture provides that the Trustee will be under no obligation,
subject to the duty of the Trustee during a default to act with the required
standard of care, to exercise any of its rights or powers under the Indenture
at the request or direction of any of the holders of the Debt Securities of any
series, unless such holders shall have offered to the Trustee reasonable
security or indemnity against costs, expenses and liabilities which might be
incurred by it in compliance with such request. (Section 507) Subject to such
provisions for indemnification of the Trustee, the holders of a majority in
principal amount of the Debt Securities of any series will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Debt Securities of that series. (Section 512)
No holder of a Debt Security will have any right to institute any
proceeding with respect to the Indenture, or for the appointment of a receiver,
assignee, trustee, liquidator or sequestrator (or other similar official), or
for any other remedy thereunder, unless (i) the holder has previously given to
the Trustee written notice of a continuing event of default with respect to the
Debt Securities of that series, (ii) holders of at least 25% in aggregate
principal amount of the outstanding Debt Securities of that series have made a
written request to the Trustee to institute the proceeding and the holder or
holders have offered indemnity satisfactory to the Trustee in its reasonable
judgment; and (iii) the Trustee has failed to institute the proceeding, and has
not received from the holders of a majority in aggregate principal amount of
the outstanding Debt Securities of that series a direction inconsistent with
that request, within 60 days after the notice, request and offer. (Section 507)
These limitations do not apply to a suit instituted by a holder of a Debt
Security to enforce payment of the principal of, premium, if any, or interest
on the Debt Security on or after the applicable due date specified in the Debt
Security. (Section 508)
Reference is made to the Prospectus Supplement relating to each series of
Debt Securities which are Original Issue Discount Securities or Indexed
Securities for the particular provisions relating to acceleration of the
maturity of a portion of the principal amount of such Original Issue Discount
Securities or Indexed Securities upon the occurrence of an Event of Default and
the continuation thereof.
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DEFEASANCE
The Indenture shall cease to be of further effect with respect to the Debt
Securities of any series (except as to any surviving rights of registration of
transfer or exchange of Debt Securities expressly provided for in the Indenture
and rights to receive the principal, premium, if any, and interest, if any, on
the Debt Securities) when all such Debt Securities have been delivered to the
Trustee for cancellation or have become due and payable or will upon Stated
Maturity or redemption within one year become due and payable and the Company
has irrevocably deposited with the Trustee (as trust funds for the purpose) an
amount in the currency or currencies, currency unit or composite currency
sufficient to pay and discharge the entire indebtedness on such Debt Securities
as described below.
The Prospectus Supplement relating to the Debt Securities of any series
will state if any additional defeasance provisions will apply to the Debt
Securities of such series.
DEFEASANCE AND DISCHARGE
The Indenture provides, with respect to the Debt Securities of any series
to the extent established in the terms thereof, that the Company will be deemed
discharged from any and all obligations in respect of the Debt Securities of
such series (except for certain obligations to register the transfer or
exchange of Debt Securities of such series, to replace stolen, lost or
mutilated Debt Securities of such series, to maintain paying agencies and hold
moneys for payment in trust) upon the deposit with the Trustee, in trust, cash
or U.S. Government Obligations (as defined in the Indenture), which through the
payment of interest and principal thereof in accordance with their terms will
provide money in an amount sufficient to pay any installment of principal of
(and premium, if any) and each installment of interest and any mandatory
sinking fund payments in respect of the Debt Securities of such series on the
stated maturity of such payments in accordance with the terms of the Indenture
and such Debt Securities of such series. Such option may be exercised only if,
among other things, the Company has delivered to the Trustee an opinion of
independent counsel to the effect that, among other things, there has been a
change in federal income tax law or the judicial interpretation thereof, or
there has been published by, or the Company has received from, the Internal
Revenue Service a ruling to the effect that, in each case, such a discharge
will not be deemed, or result in, a taxable event with respect to the holders
of the Debt Securities of such series. (Section 403)
DEFEASANCE OF CERTAIN COVENANTS
The Indenture provides, with respect to the Debt Securities of any series
to the extent established in the terms thereof, that the Company may omit to
comply with certain restrictive covenants applicable to such Debt Securities
and that such omissions shall not be deemed to be Events of Default under the
Indenture and the Debt Securities of such series if the Company deposits with
the Trustee, in trust, cash or U.S. Government Obligations which through the
payment of interest and principal thereof in accordance with their terms will
provide money in an amount sufficient to pay principal (and premium, if any)
and interest and any mandatory sinking fund payments in respect of the Debt
Securities on the stated maturity of such payments in accordance with the terms
of the Indenture and such Debt Securities of such series. The Company will also
be required to deliver to the Trustee, among other things, an opinion of
counsel to the effect that the holders will not recognize income, gain or loss
for federal income tax purposes as a result of such covenant defeasance and
will be subject to federal income tax on the same amount and in the same manner
and at the same times, as would have been the case if such deposit and
defeasance had not occurred. (Section 1008)
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the holders of a majority in aggregate
principal amount of the outstanding Debt Securities of each series affected by
such modification or amendment; provided that no such modification or
amendment, without the consent of the holders of each of the Debt Securities
affected thereby, may (i) change the stated maturity of the principal of, or
waive a default in the payment of the principal of or interest on, any Debt
Security, or reduce the principal amount thereof or any premium or interest
thereon or the rate of interest thereon or any premium payable upon the
redemption thereof, or reduce the amount of the principal of an Original Issue
Discount Security that would be due and payable upon a declaration of
acceleration of the maturity thereof pursuant to the terms of the Indenture, or
change any place of payment where any Debt Security or any premium or interest
thereon is payable, change the currency in which a Debt Security or any premium
or interest therein is payable or impair the right to institute suit for the
enforcement of any such payment on or after the stated maturity thereof (or, in
the case of redemption, on or after the redemption date, or, in the case of
repayment at the option of the holder, on or after the date fixed for
repayment); (ii) reduce the percentage in principal amount of the outstanding
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Debt Securities of any series, the consent of whose holders is required for any
such supplemental indenture, or the consent of whose holders is required for
any amendment or waiver (of compliance with certain provisions of the Indenture
or certain defaults thereunder and their consequences) provided for in the
Indenture; (iii) modify any of the provisions relating to supplemental
indentures, waiver of past defaults or waiver of certain covenants, except to
increase any such percentage or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the holder of
each outstanding Debt Security affected thereby; (iv) in the case of any
subordinated Debt Securities, modify any of the provisions in the Indenture
relating to subordination or to the definition of "Senior Indebtedness" in a
manner adverse to the holders of such subordinated Debt Securities; or (v)
effect certain other changes. (Section 902)
Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of any holder of Debt Securities for any of
the following purposes: (i) to evidence the succession of another entity to the
Company and the assumption by any such successor of the covenants of the
Company in the Indenture and in the Debt Securities as obligor under the
Indenture; (ii) to add to the covenants of the Company for the benefit of the
holders of all or any series of Debt Securities or to surrender any right or
power conferred upon the Company in the Indenture; (iii) to add additional
Events of Default; (iv) to add or change any provisions of the Indenture to
such extent as shall be necessary to permit or facilitate the issuance of Debt
Securities in bearer form, registrable or not registrable as to principal, and
with or without interest coupons, or to permit or facilitate the issuance of
Debt Securities in uncertificated form; (v) to add to, change or eliminate any
of the provisions of the Indenture in respect of one or more series of Debt
Securities, provided that any such addition, change or elimination (1) shall
neither (A) apply to any Debt Security of any series created prior to the
execution of such supplemental indenture and entitled to the benefit of such
provision nor (B) modify the rights of the holder of any such Debt Security
with respect to such provision or (2) shall become effective only when there is
no such Debt Security outstanding; (vi) to establish the form or terms of Debt
Securities of any series as permitted by the Indenture; (vii) to evidence and
provide for the acceptance of appointment under the Indenture by a successor
Trustee with respect to the Debt Securities of one or more series and to add to
or change any of the provisions of the Indenture as shall be necessary to
provide for or facilitate the administration of the trusts under the Indenture
by more than one Trustee; (viii) to secure the Debt Securities; (ix) to
supplement any of the provisions of the Indenture to such extent as shall be
necessary to permit or facilitate the defeasance, covenant defeasance or
satisfaction and discharge of any series of Debt Securities pursuant to the
Indenture; provided that any such action shall not adversely affect the
interests of the holders of Debt Securities of such series or any other series
of Debt Securities; (x) to cure any ambiguity, to correct or supplement any
provision in the Indenture which may be inconsistent with any other provision
in the Indenture, or to make any other provisions with respect to matters or
questions arising under the Indenture, provided that such action shall not
adversely affect the interests of the holders of Debt Securities of any series;
(xi) to add a guarantor or guarantors for any or all series of Debt Securities;
and (xii) to comply with the requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture Act of
1939, as amended. (Section 901)
CONCERNING THE TRUSTEE
The Company may maintain banking and other commercial relationships with
the Trustee and its affiliates in the ordinary course of business.
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed
in accordance with, the laws of the State of New York, without regard to
principles of conflicts of laws.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities through one or more underwriters
or dealers, directly to a limited number of purchasers or to a single
purchaser, through agents or through a combination of any such or other
methods. The Prospectus Supplement with respect to a series of Debt Securities
will set forth the terms of the offering of the Debt Securities, including the
name or names of any underwriters, the purchase price of the Debt Securities
and the proceeds to the Company from such sale, any delayed delivery
arrangements, any underwriting discounts and other items constituting
underwriters' compensation, any initial public offering price, any discounts or
concessions allowed or reallowed or paid to dealers and any securities
exchanges on which such securities may be listed. Any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time. Only underwriters named in the Prospectus
Supplement are deemed to be underwriters in connection with the securities
offered thereby.
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If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. The
Debt Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Debt Securities will be named
in the Prospectus Supplement relating to such offering and, if in an
underwriting syndicate is used, the managing underwriter or underwriters will
be set forth on the cover of such Prospectus Supplement. Unless otherwise set
forth in the Prospectus Supplement, the obligations of the underwriters to
purchase the Debt Securities will be subject to certain conditions precedent
and the underwriters will be obligated to purchase all the Debt Securities if
any are purchased.
In connection with the sale of Debt Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Debt Securities for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Debt Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of Debt Securities may be deemed to be underwriters, and
any discounts or commissions received by them from the Company and any profit
on the resale of Debt Securities by them may be deemed to be underwriting
discounts and commissions under the Securities Act. Any such underwriter or
agent will be identified, and any such compensation received from the Company
will be described, in the related Prospectus Supplement.
The Debt Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Debt Securities in respect of which this Prospectus is delivered is
named, and any commissions payable by the Company to such agent will be set
forth, in the Prospectus Supplement relating thereto. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers from certain types of
institutions to purchase Debt Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in
the future. The obligations of any purchaser under any such contract will be
subject to the condition that the purchase of the Debt Securities shall not be
prohibited at the time of delivery under the laws of the jurisdiction to which
such purchaser is subject. The underwriters and such other agents will not have
any responsibility in respect of the validity or performance of such contracts.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
by the Company with respect to payments they may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with, or perform services for the Company in the ordinary course of business.
The Debt Securities may or may not be listed on a national securities
exchange or quoted on the Nasdaq National Market System. No assurances can be
given that there will be an active trading market for the Debt Securities.
If underwriters or dealers are used in the sale, until the distribution of
the Debt Securities is completed, rules of the Commission may limit the ability
of any such underwriters and selling group members to bid for and purchase the
Debt Securities. As an exception to these rules, representatives of any
underwriters are permitted to engage in certain transactions that stabilize the
price of the Debt Securities. Such transactions may consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Debt Securities. If the underwriters create a short position in the Debt
Securities in connection with the offerings, I.E., if they sell more Debt
Securities than are set forth on the cover page of the Prospectus Supplement,
the representatives of the underwriters may reduce that short position by
purchasing Debt Securities in the open market. The representatives of the
underwriters may also elect to reduce any short portion by exercising all or
part of any over-allotment option described in the Prospectus Supplement. In
general, purchases of a security for the purpose of stabilization or to reduce
a short position could cause the price of the security to be higher than it
might be in the absence of such purchases. The Company makes no representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Debt Securities. In
addition, the Company makes no representation that the representatives of any
underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
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LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon
for the Company by Kennedy Covington Lobdell & Hickman, L.L.P., 100 North Tryon
Street, Charlotte, North Carolina 28202. Clarence W. Walker, a partner in the
firm of Kennedy Covington Lobdell & Hickman, L.L.P., is a member of the Board
of Directors of the Company. As of February 15, 1999, partners, counsel and
associates of Kennedy Covington Lobdell & Hickman, L.L.P. and their spouses and
minor children beneficially owned an aggregate of 115,545 shares of common
stock of the Company (which includes 56,488 shares subject to options that are
presently exercisable or exercisable within 60 days).
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Company's Annual Report on Form 10-K for its fiscal year ended September 30,
1998 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
such firm as experts in auditing and accounting.
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FEBRUARY 25, 1999
[GRAPHIC]
$300,000,000
OAKWOOD HOMES CORPORATION
$125,000,000 7 7/8% SENIOR NOTES DUE 2004
$175,000,000 8 1/8% SENIOR NOTES DUE 2009
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PROSPECTUS SUPPLEMENT
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NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST UNION CAPITAL MARKETS
MERRILL LYNCH & CO.
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