SUPPLEMENT TO EXCHANGE OFFER PROSPECTUS DATED FEBRUARY 13, 1998
SCOVILL FASTENERS INC.
OFFER TO EXCHANGE 11 1/4% SENIOR NOTES DUE 2007, SERIES A
FOR
11 1/4% SENIOR NOTES DUE 2007, SERIES B
Scovill Fasteners Inc., a Delaware corporation (the "Company"), is
supplementing its Exchange Offer Prospectus dated February 13, 1998 (the
"Prospectus") as set forth below. Capitalized terms not otherwise defined herein
have the same meanings set forth in the Prospectus. Except as set forth in this
Supplement, the terms of the Prospectus and the Offer to Exchange remain as set
forth in the Prospectus.
On February 20, 1998, Co-Investment Partners, L.P. ("Co-Investment")
purchased (the "New Investment") one million units (the "Common Stock Units"),
each consisting of one share of Common Stock and one share of Series B Preferred
Stock, from Parent for a price of $10,320,833. Parent used the proceeds from the
New Investment to repurchase from the Initial Purchasers the 100,000 units (the
"Old Units") that were sold to the Initial Purchasers in the Units Offering.
Each Old Unit consisted of one share of 13 3/4% Series A Cumulative Redeemable
Exchangeable Preferred Stock (the "Senior Preferred Stock") and one warrant to
purchase four Common Stock Units. The purchase price paid by Parent for the Old
Units was equal to the liquidation preference of the Senior Preferred Stock plus
a prorated dividend from the issue date to the date of repurchase.
In connection with the New Investment, (i) Co-Investment entered into a
Voting Agreement with Parent and Saratoga, pursuant to which Co-Investment
granted Saratoga sole voting power with respect to 672,000 shares of the Common
Stock purchased by Co-Investment, (ii) Co-Investment was given "observor" status
to attend meetings of the Company's Board of Directors and (iii) Co-Investment
became entitled to one demand registration.
The following pages contain changes to the Prospectus.
The date of this Supplement is February 26, 1998.
<PAGE>
Pages 15 and 16 of the Prospectus are replaced in their entirety with the
following:
<TABLE>
<CAPTION>
Predecessor-Alper(1) Predecessor-KSCO(2) Parent
Pro Forma
Nine Months
Period Period Ended Year Nine
Year from from Year Ended September 30, Ended Months
Ended 1/1/95 to 10/17/95 to December December Ended
December 10/17/95 12/31/95 31, 1996 1996 1997 31, 1996 9/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............... $65,428 $53,589 $12,799 $91,632 $69,796 $73,466 $ 91,632 $ 73,466
Gross profit............ 18,383 13,329 3,446 27,032 19,533 20,362 27,282 21,484
Selling, general and
administrative 10,534 7,822 1,827 17,051 12,733 11,697 17,226 11,772
expenses(3)..........
Amortization expense.... 411 320 239 2,557 2,046 2,025 3,729 2,874
------- ------ ------- ------- ------- ------- -------- --------
Operating income........ 7,438 5,187 1,380 7,424 4,754 6,640 6,327 6,838
Interest expense........ 5,092 3,472 892 5,953 4,848 2,698 14,570 10,929
Other expense (income).. (629) 551 214 450 102 430 471 416
------- ------ ------- ------- ------- ------- -------- --------
Income (loss) before
taxes and 2,975 1,164 274 1,021 (196) 3,512 (8,714) (4,507)
extraordinary loss...
Tax provision (benefit). 634 -- 158 923 258 1,586 (2,156) (1,023)
------- ------ ------- ------- ------- ------- -------- --------
Income (loss) before
extraordinary loss... 2,341 1,164 116 98 (454) 1,926 (6,558) (3,484)
------- ------ ------- ------- ------- ------- -------- --------
Net income (loss)(4) .. $ 2,341 $1,164 $ 116 $ (852) $(1,404) $ 1,926 $ (6,558) $ (3,484)
======= ====== ======= ======= ======= ======= ======== ========
Other Data:
EBITIDA(5).............. $14,514 $10,814 $ 2,886 $17,218 $12,210 $16,310 $ 17,022 $16,248
Adjusted EBITDA(6)...... 14,346 11,242 3,163 18,365 12,772 17,115 18,240 17,022
Depreciation............ 6,559 5,735 1,481 6,829 5,512 4,213 7,437 6,952
Capital expenditures.... 7,363 4,962 1,168 5,695 4,437 4,114 5,695 4,114
Adjusted Interest 4,995 3,255 757 5,633 4,608 2,493 13,749 10,313
Expense(7)
Earnings/Fixed Charges(8) 1.56x 1.32x 1.29X 1. 16x -- 1.81x --- ---
EBITDA/Adjusted Interest
Expense.............. 1.58x
Adjusted EBITDA/Adjusted
Interest Expense..... 1.65x
Cash flows from operating
activities........... 8,027 7,027 (1,013) (1,416) (1,779) 2,476 (1,593) (1,249)
Cash flows from investing
activities........... (7,187) (4,936) (45,298) 2,586 (27,423) (4,114) (136,712) (139,864)
Cash flows from financing
activities........... (484) (1,998) 46,721 (977) 29,892 2,229 138,562 141,768
</TABLE>
<TABLE>
<CAPTION>
September 30, 1997
Actual Pro Forma
<S> <C> <C>
Balance Sheet Data:
Working capital(9)...... $ 21,437 $ 23,443
Total assets............ 108,742 221,115
Total debt(10).......... 40,130 130,269
Stockholders' equity(11) 22,762 42,169
</TABLE>
- ----------
(1) On October 17, 1995, Fasteners was acquired (the "Kohlberg Acquisition") by
KSCO, which was organized by Kohlberg & Co. ("Kohlberg") for the purpose of
acquiring the capital stock of Fasteners. The Kohlberg Acquisition was
accounted for using the purchase method of accounting. Financial
information for periods prior to October 17, 1995 are for Fasteners when it
was a wholly owned subsidiary of Alper Holdings USA, Inc. ("Alper") (in
such capacity, Fasteners is referred to herein as "Predecessor-Alper"). The
Kohlberg Acquisition and the related application of purchase accounting
resulted in changes to the capital structure of Predecessor-Alper and the
historical basis of various assets and liabilities. The effect of such
changes significantly impairs the comparability of the financial position
and results of operations of Predecessor-Alper to those of KSCO.
(2) The Acquisition and the related application of purchase accounting resulted
in changes to the capital structure of KSCO (sometimes referred to herein
as "Predecessor-KSCO") and the historical basis of various assets and
liabilities. The effect of such changes significantly impairs the
comparability of the financial position and results of operations of
Predecessor-KSCO to those of Parent.
2
<PAGE>
(3) Selling, general and administrative expenses ("SG&A") includes nonrecurring
income of $600 in 1994 primarily related to the favorable resolution of
matters previously accrued. SG&A also includes a nonrecurring charge for
severance payments made to employees at the Clarkesville facility who were
terminated when certain Rau and PCI employees were transferred to the
Clarkesville facility. Such charge amounted to $118 and $272 for the nine
months ended September 30, 1996 and the year ended December 31, 1996,
respectively. On a pro forma basis, SG&A also includes management fees to
be paid to Saratoga by Parent, which will be dividended by Fasteners to
Parent in an amount of $600 annually.
(4) In January 1996, the Company refinanced its previously existing credit
agreements with the Existing Credit Facility, which resulted in an
extraordinary after-tax charge of $950 in the first quarter of 1996 from
the write-off of related deferred financing costs.
(5) EBITDA is defined as net income (loss) before interest expense (including
amortization of deferred financing costs), provision for income taxes,
depreciation, amortization, rental payments on the Synthetic Lease, the
non-cash portion of other expense (income), preferred stock dividends and
extraordinary items. Payments on the Synthetic Lease were $858 and $3,861
for the year ended December 31, 1996 and the nine months ended September
30, 1997, respectively. The non-cash portion of other expense (income) was
$(523) and $123 for the year ended December 31, 1994 and for the period
from January 1, 1995 to October 17, 1995, respectively, and was
insignificant for all other periods presented.
(6) Adjusted EBITDA is defined as EBITDA (as defined in footnote (5) above)
plus (i) non-recurring expense (income) included in SG&A (see footnote (3)
above), (ii) the portion of other expense (income) not included in EBITDA,
which consists of miscellaneous non-operating cash items, and (iii)
management fees to Alper, Kohlberg and, on a pro forma basis, Saratoga. On
an historical basis, management fees paid to Alper and Kohlberg, included
in the general and administrative expenses, were $538, $0, $63, $425, $342
and $375 for the year ended December 31, 1994, the period from January 1,
1995 to October 17, 1995, the period from October 17, 1995 to December 31,
1995, the year ended December 31, 1996 and the nine months ended September
30, 1996 and 1997, respectively. On a pro forma basis, management fees paid
to Saratoga would have been $600 and $450 for the year ended December 31,
1996 and for the nine months ended September 30, 1997, respectively. The
Company has included information concerning EBITDA and Adjusted EBITDA
because it is used by certain investors as a measure of a company's ability
to service its debt. EBITDA and Adjusted EBITDA are not required by
generally accepted accounting principles ("GAAP") and should not be
considered alternatives to net income determined in accordance with GAAP as
an indicator of operating performance or as an alternative to cash flow
from operating activities determined in accordance with GAAP as a measure
of liquidity. The Company's use of EBITDA may not be comparable to
similarly titled measures due to the use by other companies of different
financial statement components in calculating EBITDA.
(7) Adjusted Interest Expense is defined as interest expense less the
amortization of deferred financing costs.
(8) For the purpose of determining the ratio of earnings to fixed charges,
"earnings" consist of income before provision for income taxes and fixed
charges. "Fixed charges" consist of interest expense (including
amortization of deferred financing costs) and one third of rental expense,
representing that portion of rental expense deemed to be representative of
the interest factor. On an historical basis, earnings were insufficient to
cover fixed charges by $196 for the nine months ended September 30, 1996.
On a pro forma basis, earnings were insufficient to cover fixed charges by
$8,714 and $4,507 for the year ended December 31, 1996 and nine months
ended September 30, 1997, respectively.
(9) Working capital is defined as current assets less current liabilities.
(10) Excludes off-balance sheet financing pursuant to the Synthetic Lease,
proceeds of which were applied toward repayment of debt of $31,268 in
November 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."
(11) Pro forma stockholder's equity reflects the Equity Contribution. See "The
Transactions," "Capitalization" and "Description of Capital Stock." Pro
forma stockholder's equity is presented net of $7,831 which represents the
non-cash accounting treatment required for management's continuing
ownership interest, in accordance with the provisions of Emerging Issues
Task Force Issue No. 88-16 of the Financial Accounting Standards Board (the
"FASB").
3
<PAGE>
Page 35 of the Prospectus is replaced in its entirety with the following:
CAPITALIZATION
The following table sets forth the consolidated capitalization of Parent
and its subsidiaries (including the Company) as of September 30, 1997 assuming
that Parent had been formed at such date and after giving pro forma effect to
the Transactions and the New Investment. This table should be read in
conjunction with "The Transactions," "Pro Forma Consolidated Financial
Statements" and the consolidated financial statements and the notes thereto
included elsewhere in this Offering Memorandum.
September 30, 1997
------------------------
Parent
Pro Forma
------------------------
Long-term debt (including current maturities) (1):
New Credit Facility(2).................................... $ 28,000
11 1/4% Senior Notes due 2007............................. 100,000
Other(3).................................................. 2,269
-------
Total long-term debt (including current maturities).... 130,269
-------
Stockholders' equity:
Series B Preferred Stock.................................. 49,500
Common Stock.............................................. ----
Additional paid-in capital................................ 500
Retained earnings......................................... ----
Predecessor basis adjustment(4)........................... (7,831)
--------
Total stockholders' equity............................. 42,169
--------
Total capitalization................................... $171,838
========
- --------------
(1) Excludes off-balance sheet financing pursuant to the Synthetic Lease,
proceeds of which were applied toward repayment of debt of $31,268 in
November 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."
(2) Excludes the $25,000 Revolving Credit Facility, which was undrawn at
closing. See "Description of Other Indebtedness--New Credit Facility."
(3) Includes long-term debt at Scovill Europe and various capital lease
obligations.
(4) Represents the non-cash accounting treatment required for management's
continuing ownership interest in accordance with the provisions of Emerging
Issues Task Force Issue No. 88-16 of the FASB.
4
<PAGE>
Pages 39 through 42 of the Prospectus are replaced in their entirety with the
following:
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED BALANCE SHEET
SCOVILL HOLDINGS INC.
(Dollars in thousands)
(Unaudited)
September 30, 1997
-----------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents....................................... $ 1,194 $ 64 (A) $ 1,258
Accounts receivable, net of allowance........................... 15,048 -- 15,048
Inventories..................................................... 24,025 -- 24,025
Other........................................................... 741 -- 741
-------- -------- --------
Total Current Assets................................... 41,008 64 41,072
-------- -------- --------
Property, Plant and Equipment, net....................................... 41,473 29,200 (B) 70,673
-------- -------- --------
Other Assets
Goodwill........................................................ 15,559 66,665 (C) 82,224
Trademarks...................................................... 2,066 14,000 (C) 16,066
Non-compete agreements.......................................... 2,764 -- 2,764
Deferred acquisition and financing fees......................... 3,725 (3,725) (C) --
-- 7,467 (A) 7,467
Deferred taxes.................................................. 1,298 (1,298) (D) --
Other assets.................................................... 849 -- 849
-------- -------- --------
Total Other Assets..................................... 26,261 83,109 109,370
-------- -------- --------
Total Assets.................................. $108,742 $112,373 $221,115
======== ======== ========
Liabilities and Stockholders' Equity
Current Liabilities......................................................
Current maturities of long-term debt............................ $ 1,013 $ (467) (A) $ 546
Accounts payable................................................ 9,612 -- 9,612
Accrued liabilities............................................. 8,946 (1,475) (A) 7,471
-------- -------- --------
Total Current Liabilities.............................. 19,571 (1,942) 17,629
Long-Term Liabilities....................................................
Revolving line of credit........................................ 11,930 (11,930) (A) --
Term Loan....................................................... 25,464 (25,464) (A) --
-- 28,000 (A) 28,000
11 1/4% Senior Notes due 2007...................................... -- 100,000 (A) 100,000
Other debt...................................................... 1,723 -- 1,723
Employee benefits............................................... 24,351 -- 24,351
Deferred taxes.................................................. -- 5,600 (C)
(1,298) (D) 4,302
Other........................................................... 2,941 -- 2,941
-------- -------- --------
Total Long-Term Liabilities............................ 66,409 94,908 161,317
-------- -------- --------
Stockholders' Equity
Series B Preferred Stock........................................ -- 49,500 (A) 49,500
Common Stock.................................................... 89 (89) (C) --
Additional paid-in capital...................................... 22,086 (22,086) (C) --
500 (A) 500
Retained earnings............................................... 1,191 (1,191) (C) --
Predecessor basis adjustment.................................... -- (7,831) (C) (7,831)
Foreign currency translation adjustment......................... (604) 604 (C) --
-------- -------- --------
Total Stockholders' Equity................................... 22,762 19,407 42,169
-------- -------- --------
Total Liabilities and Stockholders' Equity............... $108,742 $112,373 $221,115
======== ======== ========
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
SCOVILL HOLDINGS INC.
(Dollars in thousands)
(Unaudited)
Year Ended December 31, 1996
Pro Forma
Historical Adjustments Pro Forma
<S> <C> <C> <C>
Net sales................................................... $91,632 $ -- $91,632
Cost of sales............................................... 64,600 (250)(E) 64,350
------- ------ -------
Gross profit............................................. 27,032 250 27,282
Selling expenses............................................ 10,220 -- 10,220
General and administrative expenses......................... 6,831 175 (F) 7,006
Amortization expense........................................ 2,557 1,172 (G) 3,729
------- ------ -------
Operating income......................................... 7,424 (1,097) 6,327
Other expense (income)...................................... 450 21 (H) 471
Interest expense............................................ 5,953 8,617 (I) 14,570
------- ------ -------
Income (loss) before income tax provision................... 1,021 (9,735) (8,714)
Income tax provision (benefit).............................. 923 (3,079)(D) (2,156)
------- ------ -------
Net income (loss) before extraordinary loss (J)............. $ 98 S (6,656) $(6,558)
======= ======== =======
Nine Months Ended September 30,1997
Pro Forma
Historical Adjustments Pro Forma
Net sales............................................ $73,466 $ -- $73,466
Cost of sales........................................ 53,104 (1,122)(E) 51,982
Gross profit...................................... 20,362 1,122 21,484
Selling expenses..................................... 7,192 -- 7,192
General and administrative expenses.................. 4,505 75 (F) 4,580
Amortization expense................................. 2,025 849 (G) 2,874
Operating income.................................. 6,640 198 6,838
Other expense (income)............................... 430 (14)(H) 416
Interest expense..................................... 2,698 8,231 (I) 10,929
------- ------- -------
Income (loss) before income tax provision............ 3,512 (8,019) (4,507)
Income tax provision (benefit)....................... 1,586 (2,609)(D) (1,023)
------- ------- -------
Net income (loss).................................... $ 1,926 $(5,410) $(3,484)
======= ======= =======
</TABLE>
6
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(A) These adjustments record (i) the issuance of the Notes, (ii) the borrowing
of the Term Loan, (iii) the Equity Contribution (see "The Transactions,"
"Capitalization" and "Description of Capital Stock"), (iv) the use of a
portion of the net proceeds to repurchase equipment subject to the
Synthetic Lease and to repay the Existing Credit Facility and (v) the
capitalization of deferred financing costs of $7,467. The table below
reflects the financing transactions:
Notes.................................................. $100,000
Term Loan.............................................. 28,000
Equity Contribution.................................... 49,400
--------
$177,400
========
Repayment of existing indebtedness:
Current maturities and accrued interest........... $ 1,084
Accrued Synthetic Lease payments.................. 858
Long-term loan.................................... 25,464
Revolving line of credit.......................... 11,930
Transaction fees and expenses.......................... 7,467
--------
$ 46,803
========
(B) Represents the capitalization of attaching machinery and equipment
resulting from the repurchase of equipment subject to the Synthetic Lease.
(C) The pro forma cost and the preliminary pro forma calculation of the excess
of the cost over the book value of net assets acquired is as follows:
Cash purchase price of equity.................................. $98,100
Transaction fees included in excess of purchase cost
over book value ............................................... 3,833
-------
Book value of KSCO's equity.................................... 22,762
Predecessor basis adjustment(i)................................ 7,831
Elimination of existing deferred financing, acquisition
and organization costs......................................... (3,725)
Adjusted book value of net assets acquired..................... 26,868
Purchase price allocated to trademarks......................... 14,000
Deferred income taxes related to valuation of trademarks....... (5,600)
-------
Excess of purchase cost over book value........................ $66,665
=======
Certain transaction fees and expenses totaling $3,833 that will be incurred
in connection with the Acquisition are included in the excess of purchase
cost over book value.
- ----------
(i) As further described in "The Transactions," management maintained a
continuing ownership interest in the Company. Accordingly,
stockholders' equity and the excess of purchase cost over book value
have been reduced pursuant to the provisions of Emerging Issues Task
Force Issue No. 88-16 of the FASB.
(D) Reflects the deferred tax benefit related to the loss from operations.
Based on present estimates of future operations and debt servicing related
to the Acquisition, it is management's opinion that it is more likely than
not that future tax benefits related to the Acquisition will not be
realized beyond the amount of reversing taxable temporary differences,
which continued to exceed the future tax benefits realized in the pro forma
periods presented.
7
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands)
(Unaudited)
(E) Represents depreciation expense adjustment related to repurchase of
equipment subject to the Synthetic Lease assuming an eight-year life.
Adjustment is reflected net of operating lease expense incurred under the
prior lease agreement
(F) Reflects the elimination of management fees historically paid to Kohlberg
and the addition of management fees to be paid to Saratoga. Upon
consummation of the Transactions, Parent entered into a management
agreement with Saratoga, pursuant to which Parent will pay $600 per year to
Saratoga. Although such payments will be funded with a dividend from
Fasteners they have been reflected herein as an operating expense of
Parent.
(G) Represents the incremental amortization of goodwill based on preliminary
estimated fair values of the assets acquired and liabilities assumed using
a 40-year life. See note (C).
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31,1996 September 30. 1997
<S> <C> <C>
Goodwill............................................. $1,651 $1,238
Trademark............................................ 350 263
Less: historical amortization of deferred transaction
costs................................................ (829) (652)
------ ------
$1,172 $ 849
====== ======
</TABLE>
(H) The adjustment represents the charge for commitment fees on the unused
portion of the Existing Credit Facility which was repaid upon closing of
the Transactions, offset by the amount of commitment fees on the unused
portion of the Revolving Credit Facility.
(I) The pro forma adjustments to interest expense reflect the following:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31,1996 September 30,1997
<S> <C> <C>
Interest expense on new financing:
Term Loan(l)..................................... $ 2,352 $ 1,764
Notes............................................ 11,250 8,438
Interest expense on historical debt repaid............ (5,806) (2,587)
7,796 7,615
Net deferred financing cost adjustment(2)............. 821 616
Total adjustment...................................... $ 8,617 $8,231
</TABLE>
- ----------
(1) The assumed interest rate on the Term Loan is 8.4%. A change in the
interest rate on the Term Loan of 1% would change interest expense by
$280 and $210 for the year ended December 31, 1996 and the nine months
ended September 30, 1997, respectively.
(2) Deferred financing costs are amortized over the life of the related
debt, using a weighted average life of ten years for the Notes and six
years for the Term Loan.
(J) In January 1996, the Company refinanced its previously existing credit
agreements with the Existing Credit Facility, which resulted in an
extraordinary after-tax charge of $950 in the first quarter of 1996 from
the write-off of related deferred financing costs.
8
<PAGE>
Page 67 of the Prospectus is replaced in its entirety with the following:
CERTAIN TRANSACTIONS
Stockholders Agreement
Effective with the consummation of the Transactions, Parent and its
stockholders and optionholders entered into a Stockholders Agreement. The
following summary of certain provisions of the Stockholders Agreement, as
amended and restated, does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Stockholders Agreement, a copy
of which has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Capitalized terms not defined below have the
meanings given to them in the Stockholders Agreement.
Put and Call of Management Equity
Any Management Party who elects to resign his employment with the Company
who does so within thirty (30) days following the second anniversary of the
consummation of the Transactions will be entitled to require Parent to
repurchase, at their Fair Market Value, the stock options (or shares issued upon
exercise of such options) in Parent rolled over from stock options in KSCO (the
"Rollover Equity"). In addition, upon the death or permanent disability of any
Management Party, such Management Party (or his estate) will be entitled to
require Parent to repurchase, at their Fair Market Value, the Rollover Equity
and any vested options. Finally, in the event of any termination of employment
of any Management Party other than for Cause, such Management Party will be
entitled to require Parent to repurchase, at their Fair Market Value, that
portion of the Rollover Equity that would allow him to recover the value of his
Rollover Equity (at the Closing Date) plus interest at the applicable federal
rate. These repurchase arrangements are subject to restrictions in the New
Credit Facility, the Indenture and the Senior Preferred Stock.
Parent can require any Management Party to sell, at their Fair Market
Value, the stock options and Shares held by him upon any termination of
employment of such Management Party.
Registration Rights
Each Investor is entitled to piggyback registration rights following a
180-day holdback period beginning with the initial public offering of Common
Stock. Each of (i) Saratoga, (ii) Co-Investment and (iii) Moore Global
Investment Strategies, L.P. and Remington Investment Strategies L.P. is entitled
to demand registration rights following such hold back period. Management
Parties are also entitled to registration on Form S-8.
Board Designation
Until at least 25% of the Common Stock is publicly traded, (i) David J.
Barrett will be elected to serve as a director for so long as he shall be an
officer and an employee of parent or of a Subsidiary thereof, (ii) Moore Capital
Investments, Ltd. and Remington Investments Strategies, L.P. together have the
right to designate one member of the Board of Directors of Parent so long as
such investors together hold at least 50% of their original investment in
Parent, (iii) Saratoga has the right to designate up to five directors and (iv)
Co-Investment has the right to have a representative attend each meeting of the
Board of Directors of Parent.
Voting Agreement
In connection with the New Investment, Co-Investment entered into a Voting
Agreement with Parent and Saratoga dated as of February 20, 1998 (the "Voting
Agreement"). Pursuant to the Voting Agreement, Co-Investment granted Saratoga
sole voting power with respect to 672,000 of Co-Investment's shares of Common
Stock. The Voting Agreement will terminate upon at least 20% of the outstanding
Common Stock being offered and sold in a public offering registered under the
Act.
9
<PAGE>
Page 69 of the Prospectus is replaced in its entirety with the following:
SECURITY OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock at February 20, 1998 of (i) each person known by
Parent to own beneficially 5% or more of the Common Stock, (ii) each current
director of parent, (iii) each Named Executive Officer and (iv) all current
directors and executive officers as a group.
Share Beneficially
Owned
-------------------------
Number of
Name Shares %
- ---- --------- ---------
Saratoga Partners III, L.P.(1)....................... 3,127,500 67.2
Moore Global Investments, Ltd./
Remington Investment Strategies, L.P.(2)......... 700,000 15.0
WLD Partners, Ltd.(3)................................ 400,000 8.6
Co-Investment Partners, L.P.(4)...................... 1,000,000 21.5
William F. Andrews(5)................................ 20,151 *
Charles P. Durkin(1)................................. 3,127,500 67.2
Christian L. Oberbeck(1)............................. 3,127,500 67.2
David J. Barrett(5).................................. 107,472 2.3
Martin A. Moore(5)................................... 87,322 1.8
Mike Baxley(5)....................................... 134,341 2.8
John Champagne(5).................................... 40,302 *
Robert Feltz(5)...................................... 73,216 1.5
All directors and executive officers as a group
(8 persons) (1).................................. 3,590,304 70.1
- ----------
* Less than one percent.
(1) Includes (i) 320,914 shares held by Saratoga Partners III, C.V. and (ii)
672,000 shares held by Co-Investment Partners L.P. with respect to which
Saratoga has sole voting power pursuant to the Voting Agreement (see
"Certain Transactions --Voting Agreement"). Saratoga's address is 535
Madison Avenue, New York, New York 10022. Saratoga's general partner is DR
Associates IV, L.P., of which the general partner is Dillon, Read Inc.
Dillon, Read Inc. is a wholly owned subsidiary of SBC Warburg Dillon Read
Inc., which is a wholly owned subsidiary of Swiss Bank Corporation.
Saratoga has authorized Messrs. Durkin and Oberbeck, directors of the
Company, to vote the shares of Common Stock held by Saratoga. Messrs.
Durkin and Oberbeck disclaim beneficial ownership of the shares of Common
Stock held by Saratoga.
(2) The address of Moore Global Investments, Ltd. ("MGI") is c/o Citco Funds
Services (Bahamas) Ltd., Bahamas Financial Centre, P.O. Box CB-13136,
Nassau, Bahamas. The address of Remington Investment Strategies, L.P.
("Remington") is 1251 Avenue of the Americas, 53rd Floor, New York, New
York 10020. Moore Capital Management, Inc., a Connecticut corporation, is
vested with investment discretion with respect to portfolio assets held for
the account of MGI. Moore Capital Advisers, L.L.C., a New York limited
liability company, is the sole general partner of Remington. Mr. Louis M.
Bacon is the majority shareholder of Moore Capital Management, Inc. and is
the majority equity holder of Moore Capital Advisors, L.L.C. As a result,
Mr. Bacon may be deemed to be the indirect beneficial owner of the
aggregate 700,000 shares held by MGI and Remington.
(3) The address is Las Olas Centre, 450 East Las Olas Boulevard, Suite 900,
Fort Lauderdale, Florida 33301.
(4) The address is 660 Madison Avenue, New York, New York 10021. Pursuant to
the Voting Agreement, Co-Investment has granted Saratoga sole voting power
with respect to 672,000 of such shares.
(5) Represents Common Stock issuable upon exercise of options to purchase
Common Stock and Series B Preferred Stock. See "Certain Transactions -- The
Acquisition."
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