SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 17, 1998
DISCOVERY ZONE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-21854 36-3877601
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
565 Taxter Road, Fifth Floor
Elmsford, New York 10523
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 954-627-2400
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INFORMATION TO BE INCLUDED IN REPORT
Item 1. Changes in Control of Registrant
Not Applicable.
Item 2. Acquisition or Disposition of Assets
Not Applicable.
Item 3. Bankruptcy or Receivership
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable.
Item 5. Other Events
Discovery Zone, Inc. ("DZ") has raised $29.5 million of new
capital pursuant to private offerings of equity and debt securities which closed
on July 17, 1998. The proceeds of these financings will be used by DZ to
continue to pursue its brand repositioning and store revitalization strategy,
designed to increase attendance and per capita spending at its network of 202
children's entertainment centers in North America.
Pursuant to a private equity offering primarily to certain
existing common and preferred stockholders, $9.5 million was raised through the
issuance of Preferred Stock Units consisting of two series of 14 1/2% Cumulative
Preferred Stock ("New Preferred Stock") having an aggregate liquidation
preference of $9.5 million, together with warrants to purchase an aggregate of
approximately 50.6% of the fully-diluted common stock, par value $0.00017 per
share ("Common Stock"), of DZ for a nominal exercise price. The New Preferred
Stock has a mandatory redemption date of November 1, 2002 and will accumulate
dividends at an annual rate of 14 1/2%, compounded quarterly. DZ intends to
launch a rights offering to existing holders of Common Stock to allow them to
purchase Preferred Units on substantially the same terms as were offered to
purchasers of the Series B Preferred Units.
Pursuant to a private debt offering primarily to existing
noteholders, DZ also raised $20 million through the issuance of Units,
consisting of $20 million aggregate principal amount of 13 1/2% Senior
Collateralized Notes due 2002 ("New Notes"), together with two series of
warrants to purchase an aggregate of approximately 49% of the fully-diluted
Common Stock for a nominal exercise price. If DZ redeems the New Notes prior to
the end of 1999 and certain other conditions are met, a portion of these
warrants, representing an aggregate of 9% of the fully diluted Common Stock,
will be redeemed or canceled
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at no additional cost to DZ. The New Notes, which rank pari passu in right of
payment with DZ's existing 13 1/2% Senior Secured Notes due August 1, 2002 (the
"Existing Notes"), provide for quarterly interest payments at an annual rate of
13 1/2% and have a maturity date of May 1, 2002. DZ obtained the required
consents to issue the New Notes from holders of the Existing Notes and is
seeking a further consent from such holders to modify the "change of control"
covenant pertaining to the Existing Notes in a solicitation that expires on
August 31, 1998.
The securities have not been registered under the Securities
Act of 1993, as amended, and may not be offered or sold in the United States
absent registration or an applicable exemption from the registration
requirements under the Securities Act.
Any statements contained in this Form 8-K that are not
statements of historical fact may be deemed to be forward-looking statements
which may involve known and unknown risks. Reference is made to DZ's Annual
Report on Form 10-K/A for the year ended December 31, 1997, including the
section entitled "Risk Factors Affecting Performance" contained therein, and its
Quarterly Report on Form 10-Q/A for the quarter ended March 31, 1998.
Item 6. Resignation of Registrant's Directors
Not Applicable.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Not Applicable.
(b) Pro forma financial information.
Not Applicable.
(c) Exhibits.
Not Applicable.
Item 8. Change in Fiscal Year
Not Applicable.
Item 9. Sales of Equity Securities Pursuant to Regulation S
Not Applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
DISCOVERY ZONE, INC.
Date: July 23, 1998 By: /s/ ROBERT G. ROONEY
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Name: Robert G. Rooney
Title: Senior Vice President and Chief
Financial and Administrative
Officer
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