SIMCALA INC
424B3, 1998-07-30
PRIMARY PRODUCTION OF ALUMINUM
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<PAGE>   1
                                               Filed Pursuant to  Rule 424(b)(3)
                                                      Registration No. 333-53791
 
PROSPECTUS
                                  $75,000,000
 
                                 (LOGO SIMCALA)
 
                             OFFER TO EXCHANGE ITS
                     9 5/8% SENIOR NOTES DUE 2006, SERIES B
                        WHICH HAVE BEEN REGISTERED UNDER
                           THE SECURITIES ACT OF 1933
                          FOR ANY AND ALL OUTSTANDING
                     9 5/8% SENIOR NOTES DUE 2006, SERIES A
 
   
    THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON FRIDAY, AUGUST
28, 1998, UNLESS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION (THE "EXPIRATION
DATE").
    
 
    SIMCALA, Inc., a Delaware corporation ("SIMCALA" or the "Company") and a
wholly owned subsidiary of SIMCALA Holdings, Inc., a Georgia corporation
("Holdings"), hereby offers (the "Exchange Offer"), upon the terms and subject
to the conditions set forth in this Prospectus (the "Prospectus") and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange up
to $75,000,000 aggregate principal amount of its 9 5/8% Senior Notes due 2006,
Series B (the "Exchange Notes" or the "Series B Notes") for an equal principal
amount of its outstanding 9 5/8% Senior Notes due 2006, Series A (the "Series A
Notes", and collectively with the Exchange Notes, the "Notes"). The Exchange
Notes are substantially identical (including principal amount, interest rate,
maturity and redemption rights) to the Series A Notes for which they may be
exchanged pursuant to this Exchange Offer, except that (i) the Exchange Notes
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and (ii) holders of Exchange Notes will no longer be entitled
to certain rights of registration provided to eligible holders of the Series A
Notes under a Registration Rights Agreement by and between SAC Acquisition Corp.
("SAC") and NationsBanc Montgomery Securities LLC (the "Initial Purchaser") and
a Registration Rights Agreement Supplement by and between the Company (as
successor to SAC) and the Initial Purchaser, each dated as of March 31, 1998
(collectively, the "Registration Rights Agreement"). The Series A Notes have
been, and the Exchange Notes will be, issued under an Indenture by and between
SAC and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee") and an
Indenture Supplement by and between the Company (as successor to SAC) and the
Trustee, each dated as of March 31, 1998 (collectively, the "Indenture"). The
Company will not receive any proceeds from this Exchange Offer, however,
pursuant to the Registration Rights Agreement, the Company will bear certain
offering expenses. See "Description of the Notes."
 
    The Exchange Notes will bear interest at the same rate and on the same terms
as the Series A Notes. Consequently, interest on the Exchange Notes will be
payable semiannually on April 15 and October 15, commencing October 15, 1998,
including interest accrued but unpaid since the Series A Notes were originally
issued. The Exchange Notes will mature on April 15, 2006, unless previously
redeemed. The Exchange Notes will be redeemable at the option of the Company, in
whole or in part, on or after April 15, 2002, at the redemption prices set forth
herein, plus accrued and unpaid interest thereon and Liquidated Damages (as
defined herein), if any, to the redemption date. Notwithstanding the foregoing,
at any time on or before April 15, 2001, the Company may redeem up to 30% of the
original aggregate principal amount of the Notes with the net proceeds of a
public offering of common stock of the Company or Holdings (to the extent the
net proceeds are contributed to the Company as common equity) at the redemption
prices set forth herein, plus accrued and unpaid interest thereon, if any, to
the redemption date; provided, that at least 70% of the original aggregate
principal amount of Notes remains outstanding immediately after the occurrence
of such redemption. See "Description of the Notes."
 
    The Notes are general unsecured obligations of the Company and rank senior
to all existing and future subordinated indebtedness of the Company and pari
passu in right of payment with all existing and future senior indebtedness of
the Company, including indebtedness under the New Credit Facility (as defined
herein). The obligations of the Company under the New Credit Facility, however,
are secured by substantially all of the Company's assets. Such indebtedness
effectively ranks senior in right of payment to the Notes to the extent of such
assets. As of June 30, 1998, the Company had approximately $83.1 million of
indebtedness outstanding ($6.3 million of which was pari passu in right of
payment with the Notes and none of which was secured). The terms of the
Indenture permit the Company and its subsidiaries to incur additional
indebtedness (including secured indebtedness), subject to certain limitations.
See "Use of Proceeds," "Description of the Notes" and "Description of Other
Indebtedness."
 
    The Series A Notes have not been listed on any securities exchange or
automated quotation system. The Series A Notes have been designated eligible for
trading in the Private Offerings, Resales and Trading through Automated Linkages
("PORTAL") market. The Company does not intend to apply for listing of the
Exchange Notes on any securities exchange or for quotation through Nasdaq.
Although the Initial Purchaser has informed the Company that it currently
intends to make a market in the Notes, it is not obligated to do so, and any
such market making may be discontinued at any time without notice. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Notes.
 
     SEE "RISK FACTORS" BEGINNING ON PAGE 18 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER SERIES A NOTES IN THE EXCHANGE
OFFER.
   
    The Company will accept for exchange any and all Series A Notes validly
tendered by eligible holders and not withdrawn prior to 5:00 p.m. Eastern Time
on Friday, August 28, 1998, unless extended by the Company in its sole
discretion (the "Expiration Date"). Tenders of Series A Notes may be withdrawn
at any time prior to the Expiration Date. The Exchange Offer is subject to
certain customary conditions. The Series A Notes may be tendered only in
integral multiples of $1,000. See "The Exchange Offer."
    
  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.
 
   
                 THE DATE OF THIS PROSPECTUS IS JULY 29, 1998.
    
<PAGE>   2
 
                                EXPLANATORY NOTE
 
     This Registration Statement covers $75,000,000 aggregate principal amount
of the Exchange Notes to be offered in exchange for equal principal amounts of
the Series A Notes in the Exchange Offer. This Registration Statement is being
filed to satisfy certain requirements of the Registration Rights Agreement.
 
     Based on interpretations by the staff of the Securities and Exchange
Commission (the "SEC" or the "Commission") set forth in no-action letters issued
to unrelated third parties, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for Series A Notes may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder which is a broker-dealer that holds Notes acquired for its own
account as a result of market-making or other trading activities or any holder
which is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business and such holder is not engaged
in, and does not intend to participate, and has no arrangement or understanding
with any person to participate in, a distribution of such Exchange Notes. The
Company hereby notifies each holder of Series A Notes that any broker-dealer
that holds Series A Notes acquired for its own account as a result of market-
making activities or other trading activities and who receives Exchange Notes
pursuant to the Exchange Offer may be a statutory underwriter, and must deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resale of the Exchange Notes. Any broker-dealer that holds Series A Notes
acquired for its own account as a result of market-making or other trading
activities, acknowledges and agrees as a term of the Exchange Offer, that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes received pursuant to the Exchange
Offer. However, by so doing, the broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. Such
broker-dealer will also be deemed to represent and warrant to the Company that
it is not participating in, and has no intent to participate in, any
distribution of Exchange Notes, and has not entered into any arrangement or
understanding with any person to distribute the Exchange Notes. The Company has
agreed, for a period of 180 days after the date on which the Exchange Offer
Registration Statement is declared effective, to make available a prospectus
meeting the requirements of the Securities Act to any such broker-dealer for use
in connection with any resale of any Exchange Notes acquired in the Exchange
Offer.
 
     In the event that any holder of Series A Notes is prohibited by law or any
policy of the Commission from participating in the Exchange Offer, or any holder
of Exchange Notes may not resell such Exchange Notes without delivering a
prospectus and this Prospectus is inappropriate or unavailable for such resales,
or if a holder is a broker-dealer and holds Notes acquired directly from the
Company or one of its affiliates, and in each case such holder satisfies certain
other requirements, including timely notice to the Company, the Company has
agreed, pursuant to the Registration Rights Agreement, to file a shelf
registration statement (the "Shelf Registration Statement") in respect of any
such Notes pursuant to Rule 415 under the Securities Act. See "Prospectus
Summary -- The Exchange Offer," "The Exchange Offer" and "Plan of Distribution."
 
     Any Series A Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent Series A Notes are tendered and accepted in
the Exchange Offer, a holder's ability to sell untendered and unregistered
Series A Notes could be adversely affected. Following consummation of the
Exchange Offer, the holders of Series A Notes will continue to be subject to the
existing restrictions upon transfer thereof and the Company will have fulfilled
one of its obligations under the Registration Rights Agreement. Holders of Notes
who do not tender their Notes generally will not have any further registration
rights under the Registration Rights Agreement or otherwise. See "The Exchange
Offer -- Termination of Certain Rights" and "-- Consequences of Failure To
Exchange."
 
     The Company expects that the Exchange Notes will be issued only in the form
of a Global Note (as defined herein), which will be deposited with, or on behalf
of, The Depository Trust Company ("DTC") and registered in its name or in the
name of DTC's nominee, Cede & Co. ("Cede"). Beneficial interests in the Global
Note representing the Exchange Notes will be shown on, and transfers thereof
will be effected through, records maintained by DTC and its participants. After
the initial issuance of the Global Note, Exchange
 
                                        2
<PAGE>   3
 
Notes in certificated form may be issued in exchange for the Global Note on the
terms and conditions set forth in the Indenture. See "Description of the
Notes -- Book-Entry; Delivery and Form."
 
     The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the offering of the Exchange Notes, the Company will become subject to
the informational requirements of the Exchange Act. So long as any Notes are
outstanding, or the Company is subject to the periodic reporting requirements of
the Exchange Act, it is required to furnish the information required to be filed
with the Commission to the Trustee and the holders of the Notes. The Company has
agreed that, even if it is not required under the Exchange Act to furnish such
information to the Commission, it will nonetheless continue to furnish
information that would be required to be furnished by the Company pursuant to
Sections 13 and 15(d) of the Exchange Act, to the Trustee and the holders of the
Notes as if it were subject to such periodic reporting requirements. See
"Available Information."
 
     In addition, the Company has agreed that in the event the Company is no
longer subject to Sections 13 or 15(d) under the Exchange Act, and for so long
as any of the Notes remain outstanding, it will make available to any
prospective purchaser of the Notes or beneficial owner of the Notes in
connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act, until such time as either (i) the Company has
exchanged the Series A Notes for the Exchange Notes or (ii) the holders thereof
have disposed of such Notes pursuant to an effective registration statement
filed by the Company.
 
                             AVAILABLE INFORMATION
 
     The Company has filed with the Commission a registration statement on Form
S-1 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, as permitted by
the rules and regulations of the Commission. For further information with
respect to the Company and the Exchange Notes, reference is hereby made to the
Registration Statement, including the exhibits and schedules filed or
incorporated as a part thereof. Statements contained herein concerning the
provisions of any document are not necessarily complete and in each instance
reference is made to the copy of the document filed as an exhibit or schedule to
the Registration Statement. Each such statement is qualified in its entirety by
reference to the copy of the applicable document filed with the Commission. In
addition, after effectiveness of the Registration Statement, the Company will
file periodic reports and other information with the Commission under the
Exchange Act, relating to the Company's business, financial statements and other
matters. The Registration Statement, including the exhibits and schedules
thereto, and the periodic reports and other information filed in connection
therewith, may be inspected at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies may be obtained
at the prescribed rates from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 or on
the Internet at http://www.sec.gov.
 
             CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
 
     CERTAIN OF THE MATTERS DISCUSSED IN THIS PROSPECTUS MAY CONSTITUTE
FORWARD-LOOKING STATEMENTS FOR PURPOSES OF THE SECURITIES ACT AND THE EXCHANGE
ACT. ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDED IN THIS
PROSPECTUS THAT ADDRESS ACTIVITIES, EVENTS OR DEVELOPMENTS THAT THE COMPANY
EXPECTS OR ANTICIPATES WILL OR MAY OCCUR IN THE FUTURE, INCLUDING SUCH THINGS AS
FUTURE CAPITAL EXPENDITURES (INCLUDING THE AMOUNT AND NATURE THEREOF), BUSINESS
STRATEGY AND MEASURES TO IMPLEMENT STRATEGY, COMPETITIVE STRENGTHS, GOALS,
EXPANSION AND GROWTH OF THE COMPANY'S BUSINESS AND OPERATIONS, REFERENCES TO
FUTURE SUCCESS, FUTURE SUPPLY OF AND DEMAND FOR SILICON METAL, THE EFFECTS OF
FOREIGN COMPETITION AND OTHER SUCH MATTERS ARE FORWARD-LOOKING STATEMENTS. SUCH
FORWARD-LOOKING STATEMENTS MAY INVOLVE UNCERTAINTIES AND OTHER FACTORS THAT MAY
CAUSE THE ACTUAL RESULTS AND PERFORMANCE OF THE COMPANY TO BE MATERIALLY
DIFFERENT
 
                                        3
<PAGE>   4
 
FROM FUTURE RESULTS OR PERFORMANCE EXPRESSED OR IMPLIED BY SUCH STATEMENTS.
CAUTIONARY STATEMENTS REGARDING THE RISKS ASSOCIATED WITH SUCH FORWARD-LOOKING
STATEMENTS INCLUDE, WITHOUT LIMITATION, THOSE STATEMENTS INCLUDED UNDER "RISK
FACTORS" AND ELSEWHERE HEREIN. AMONG OTHERS, FACTORS THAT COULD ADVERSELY AFFECT
ACTUAL RESULTS AND PERFORMANCE INCLUDE THE LOSS OF A SIGNIFICANT CUSTOMER, A
CHANGE IN CONTROL REQUIRING A REDEMPTION OF THE NOTES, AN INTERRUPTION IN
ELECTRICAL POWER TO THE FACILITY (AS DEFINED HEREIN), AN INABILITY TO OBTAIN KEY
RAW MATERIALS AT FAVORABLE PRICES, THE NEED FOR SIGNIFICANT CAPITAL EXPENDITURES
TO COMPLY WITH ENVIRONMENTAL REGULATIONS, THE LOSS OF KEY EMPLOYEES, A DECLINE
IN THE DEMAND FOR SILICON METAL, A FAILURE OF THE DEMAND FOR SILICON METAL TO
INCREASE AS CURRENTLY PROJECTED, THE REVOCATION OR INEFFECTIVENESS OF ANTI-
DUMPING DUTIES ON FOREIGN COMPETITORS AND THE FAILURE OF THE COMPANY TO
SUCCESSFULLY COMMISSION A FOURTH SMELTING FURNACE.
 
     ALL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY
ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE FOREGOING CAUTIONARY STATEMENT.
 
                        CERTAIN MARKET AND INDUSTRY DATA
 
     UNLESS OTHERWISE INDICATED HEREIN, INFORMATION REGARDING THE SILICON METAL
INDUSTRY IS BASED ON REPORTS PREPARED IN SEPTEMBER AND NOVEMBER 1997 BY CRU
INTERNATIONAL INC. ("CRU"), AN INTERNATIONALLY RECOGNIZED RESEARCH FIRM
SPECIALIZING IN COLLECTING DATA ABOUT THE SILICON METAL INDUSTRY. THE
INFORMATION INCLUDED IN CRU'S STUDIES REFLECTS A NUMBER OF FACTORS AND
ASSUMPTIONS, SUCH AS THE EFFECTS OF GOVERNMENTAL REGULATION ON THE SILICON METAL
INDUSTRY, THE GROWTH IN THE SUPPLY OF AND DEMAND FOR SILICON METAL, HISTORICAL
AND FUTURE SILICON METAL PRICES AND OPERATING AND DEVELOPMENT COSTS OF COMPANIES
IN THE SILICON METAL INDUSTRY.
 
                                        4
<PAGE>   5
 
                               PROSPECTUS SUMMARY
 
     The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial information,
including the financial statements and the notes thereto, included elsewhere in
this Prospectus. Unless the context otherwise requires, the terms "SIMCALA" and
the "Company" refer to SIMCALA, Inc., the term "the Predecessor" refers to the
Company prior to the Acquisition on March 31, 1998 and the term "SiMETCO" refers
to a predecessor of the Company prior to the period beginning on February 10,
1995. The Company's fiscal year ends on December 31 of each calendar year.
Unless otherwise specified, the pro forma financial information included herein
gives effect to the Transactions, including the offering of the Series A Notes
(the "Offering"), the Equity Contribution and the application of the net
proceeds therefrom, as if the Transactions had occurred on January 1, 1997 with
respect to the income statement information for the fiscal year ended December
31, 1997 and the three months ended March 31, 1998.
 
                               THE EXCHANGE OFFER
 
The Exchange Offer.........  The Exchange Offer consists of this Prospectus and
                               the related Letter of Transmittal, and is being
                               made solely to eligible holders of Series A
                               Notes. Upon the terms and subject to the
                               conditions of the Exchange Offer, the Company is
                               offering eligible holders of Series A Notes the
                               opportunity to exchange its Series A Notes that
                               have not been registered under the Securities Act
                               for the Exchange Notes that have been registered
                               under the Securities Act.
 
   
Exchange Offer Expiration
Date.......................  The Exchange Offer expires at 5:00 p.m., Eastern
                               Time on Friday, August 28, 1998 (the "Expiration
                               Date") unless extended by the Company in its sole
                               discretion.
    
 
Exchange Notes Offered.....  The Exchange Notes consist of $75,000,000 aggregate
                               principal amount of 9 5/8% Senior Notes due 2006,
                               Series B.
 
Procedures for Tendering
  Series A Notes...........  Brokers, dealers, commercial banks, trust companies
                               and other nominees who hold Series A Notes
                               through DTC (as defined herein) may effect
                               tenders by book-entry transfer in accordance with
                               DTC's Automated Tender Offer Program ("ATOP"). In
                               order for Series A Notes to be tendered by a
                               means other than by book-entry transfer, a Letter
                               of Transmittal must be completed and signed in
                               accordance with the instructions contained
                               herein. The Letter of Transmittal and any other
                               documents required by the Letter of Transmittal
                               must be delivered to the Exchange Agent by mail,
                               facsimile, hand delivery or overnight carrier,
                               and either such Series A Notes must be delivered
                               to the Exchange Agent or specified procedures for
                               guaranteed delivery must be complied with. See
                               "The Exchange Offer -- Procedures for Tendering."
                               Letters of Transmittal and certificates
                               representing Series A Notes should not be sent to
                               the Company. Such documents should only be sent
                               to the Exchange Agent. See "The Exchange
                               Offer -- Exchange Agent."
 
Conditions to the Exchange
Offer......................  The Exchange Offer is subject to certain customary
                               conditions, which may be waived, to the extent
                               permitted by law, by the Company. See "The
                               Exchange Offer-Conditions" and "-- Procedures for
                               Tendering."
 
                                        5
<PAGE>   6
 
Special Procedures for
  Beneficial Owners........  Any beneficial owner whose Series A Notes are held
                               in book-entry form or are registered in the name
                               of a broker, dealer, commercial bank, trust
                               company or other nominee and who wishes to
                               exchange such Series A Notes for the Exchange
                               Notes should contact such registered holder
                               promptly and instruct such registered holder to
                               tender the Series A Notes for exchange on such
                               beneficial owner's behalf. See "The Exchange
                               Offer -- Procedures for Tendering."
 
Guaranteed Delivery
  Procedures...............  Holders of Series A Notes who wish to tender their
                               Series A Notes and whose Series A Notes are not
                               immediately available or who cannot deliver their
                               Series A Notes, the Letter of Transmittal or any
                               other documents required by the Letter of
                               Transmittal to the Exchange Agent (or comply with
                               the procedures for book-entry transfer) prior to
                               the Expiration Date must tender their Series A
                               Notes according to the guaranteed delivery
                               procedures set forth in "The Exchange Offer --
                               Guaranteed Delivery Procedures."
 
Withdrawal Rights..........  Tenders may be withdrawn at any time prior to 5:00
                               P.M., Eastern Time, on the Expiration Date
                               pursuant to the procedures described under "The
                               Exchange Offer -- Withdrawals of Tenders."
 
Acceptance of Notes and
  Delivery of Exchange
  Notes....................  The Company will accept for exchange any and all
                               Series A Notes that are properly tendered in the
                               Exchange Offer, and not withdrawn, prior to 5:00
                               P.M., Eastern Time, on the Expiration Date. The
                               Exchange Notes issued pursuant to the Exchange
                               Offer will be delivered on the earliest
                               practicable date following the Expiration Date.
                               See "The Exchange Offer -- Terms of the Exchange
                               Offer."
 
Federal Income Tax
  Consequences.............  The issuance of the Exchange Notes to holders of
                               the Series A Notes pursuant to the terms set
                               forth in this Prospectus will not constitute an
                               exchange for federal income tax purposes.
                               Consequently, no gain or loss would be recognized
                               by holders of the Series A Notes upon receipt of
                               the Exchange Notes. See "The Exchange
                               Offer -- Certain Federal Income Tax Consequences
                               of the Exchange Offer."
 
Effect on Holders of the
  Notes....................  As a result of the making of this Exchange Offer,
                               the Company will have fulfilled certain of its
                               obligations under the Registration Rights
                               Agreement, and holders of Series A Notes who do
                               not tender their Series A Notes will generally
                               not have any further registration rights under
                               the Registration Rights Agreement or otherwise.
                               Such holders will continue to hold the untendered
                               Series A Notes and will be entitled to all the
                               rights and subject to all the limitations,
                               including, without limitation, transfer
                               restrictions, applicable thereto under the
                               Indenture, except to the extent such rights or
                               limitations, by their terms, terminate or cease
                               to have further effectiveness as a result of the
                               Exchange Offer. Accordingly, if any Series A
                               Notes are tendered and accepted in the Exchange
                               Offer, the trading market, if any, for the
                               untendered Series A Notes could be adversely
                               affected.
 
Exchange Agent.............  IBJ Schroder Bank & Trust Company is serving as
                               exchange agent (the "Exchange Agent") with
                               respect to the Series A Notes.
 
                                        6
<PAGE>   7
 
                                   THE NOTES
 
Maturity Date..............  April 15, 2006.
 
Interest Payment Dates.....  April 15 and October 15, commencing October 15,
                               1998.
 
Optional Redemption........  On or after April 15, 2002, the Company may redeem
                               the Notes, in whole or in part, at the redemption
                               prices set forth herein, plus accrued and unpaid
                               interest thereon and Liquidated Damages, if any,
                               to the date of redemption. Notwithstanding the
                               foregoing, at any time on or before April 15,
                               2001, the Company may redeem up to 30% of the
                               original aggregate principal amount of the Notes
                               with the net proceeds of a public offering of
                               common stock of the Company or Holdings (to the
                               extent the net proceeds therefrom are contributed
                               to the Company as common equity) at the
                               redemption prices set forth herein, plus accrued
                               and unpaid interest thereon, if any, to the
                               redemption date; provided, that at least 70% of
                               the original aggregate principal amount of Notes
                               remains outstanding immediately after the
                               occurrence of such redemption (excluding Notes
                               held by the Company or its subsidiaries); and,
                               provided, further, that such redemption shall
                               occur within 60 days of the date of the closing
                               of such public offering. See "Description of the
                               Notes -- Optional Redemption."
 
Mandatory Redemption.......  None.
 
Ranking....................  The Notes are general unsecured obligations of the
                               Company and rank senior to all existing and
                               future subordinated indebtedness of the Company
                               and pari passu in right of payment with all
                               existing and future senior indebtedness of the
                               Company, including indebtedness under the New
                               Credit Facility. The obligations of the Company
                               under the New Credit Facility, however, are
                               secured by substantially all of the Company's
                               assets and the real and personal property used in
                               the Company's operations which is, as a result of
                               the IRB Financing (as defined herein), owned by
                               the Industrial Development Board of the City of
                               Montgomery (the "Montgomery IDB") and leased to
                               the Company. Such indebtedness effectively ranks
                               senior in right of payment to the Notes to the
                               extent of such assets. As of June 30, 1998, the
                               Company had approximately $83.1 million of
                               indebtedness outstanding ($6.3 million of which
                               was pari passu in right of payment to the Notes
                               and none of which was secured) and approximately
                               $15.0 million of secured indebtedness available
                               to be incurred under the New Credit Facility (as
                               such availability is reduced by an approximately
                               $6.1 million letter of credit issued thereunder).
                               The terms of the Indenture permit the Company and
                               its subsidiaries to incur additional indebtedness
                               (including secured indebtedness), subject to
                               certain limitations. See "Use of Proceeds,"
                               "Description of the Notes" and "Description of
                               Other Indebtedness."
 
Change of Control..........  Upon a Change of Control (as defined herein), the
                               Company will be required to make an offer to
                               repurchase all outstanding Notes at 101% of the
                               principal amount thereof plus accrued and unpaid
                               interest thereon and Liquidated Damages, if any,
                               to the date of repurchase. See "Description of
                               the Notes -- Repurchase at the Option of
                               Holders -- Change of Control."
 
                                        7
<PAGE>   8
 
Covenants..................  The Indenture restricts, among other things, the
                               ability of the Company and its subsidiaries to
                               incur additional indebtedness and issue preferred
                               stock, incur liens, pay dividends or make certain
                               other restricted payments, apply net proceeds
                               from certain asset sales, enter into certain
                               transactions with affiliates, merge or
                               consolidate with any other person, and assign,
                               transfer, lease, convey or otherwise dispose of
                               substantially all of the assets of the Company.
                               See "Description of the Notes -- Certain
                               Covenants."
 
Use of Proceeds............  The Company will not receive any proceeds from the
                               issuance of the Exchange Notes pursuant to the
                               Exchange Offer. The net proceeds to the Company
                               from the sale of the Series A Notes, together
                               with the Equity Contribution, have been used to
                               fund the Acquisition (as defined herein), to
                               repay certain indebtedness of the Company and to
                               pay transaction fees and expenses and are being
                               used for the Company's general corporate
                               purposes. See "Use of Proceeds."
 
Shelf Registration
  Statement................  If (i) the Exchange Offer is not permitted by
                               applicable law or (ii) any holder of Transfer
                               Restricted Notes (as defined herein) notifies the
                               Company within 20 business days of the
                               commencement of the Exchange Offer that (A) it is
                               prohibited by law or Commission policy from
                               participating in the Exchange Offer, (B) that it
                               may not resell the Exchange Notes acquired by it
                               in the Exchange Offer to the public without
                               delivering a prospectus and this Prospectus is
                               not appropriate or available for such resales or
                               (C) that it is a broker-dealer and holds Series A
                               Notes acquired directly from the Company or an
                               affiliate of the Company, the Company will be
                               required to provide the Shelf Registration
                               Statement to cover resales of the Notes by such
                               holders thereof. If the Company fails to satisfy
                               these registration obligations, it will be
                               required to pay Liquidated Damages to the holders
                               of the Notes under certain circumstances. See
                               "The Exchange Offer."
 
Absence of an Established
  Trading Market for the
  Notes....................  The Series A Notes are new securities that were
                               issued on March 31, 1998 (the "Issue Date" or
                               "Closing Date"). There is currently no
                               established trading market for the Series A Notes
                               or the Exchange Notes. Although the Initial
                               Purchaser has informed the Company that it
                               currently intends to make a market in the Series
                               A Notes and, upon issuance, the Exchange Notes,
                               it is not obligated to do so and any such market
                               making may be discontinued at any time without
                               notice. Accordingly, there can be no assurance as
                               to the development or liquidity of any market for
                               the Notes. To the extent Series A Notes are
                               exchanged in this Exchange Offer, the liquidity
                               of the market for the remaining Series A Notes
                               may be reduced. The Series A Notes have been
                               designated eligible for trading in the PORTAL
                               market. The Company does not intend to apply for
                               listing of the Exchange Notes on any securities
                               exchange or for quotation through Nasdaq. See
                               "Risk Factors -- Absence of an Established
                               Trading Market for the Notes."
 
                                        8
<PAGE>   9
 
                                  THE COMPANY
 
     The Company is a leading domestic manufacturer of silicon metal which is
used in the chemical and aluminum industries. Silicon metal is an essential raw
material used by the chemical industry to produce silicones and polysilicon and
by the aluminum industry primarily as an alloying agent. The Company produces
and sells higher margin chemical grade and specialty aluminum grade silicon
metal, both of which contain the highest concentrations of silicon and the
lowest levels of impurities when compared to lower grades of silicon metal. In
1997, approximately 55% and 45% of the silicon metal consumed in the United
States was consumed by the chemical industry and the aluminum industry,
respectively. Silicones are the basic ingredient used in numerous consumer
products, including lubricants, cosmetics, shampoos, gaskets, building sealants,
automotive hoses, water repellent fluids and high temperature paints and
varnishes. Polysilicon is an essential raw material used in the manufacture of
silicon wafers for semi-conductor chips and solar cells. Aluminum containing
silicon metal as an alloy can be found in a variety of automobile components,
including engine pistons, housing and cast aluminum wheels. Management believes
that there are no commercially feasible substitutes for silicon metal in either
the chemical or aluminum industries. In addition to silicon metal, the Company
produces microsilica, a co-product of the silicon metal smelting process.
Microsilica is a strengthening and filler agent which has applications in the
refractory, concrete, fibercement, oil exploration and minerals industries.
 
     The Company is one of the three largest manufacturers, in terms of volume,
of silicon metal in the United States, and its production facility, located in
Mt. Meigs, Alabama (the "Facility") is the nation's second largest in terms of
capacity. The Facility is the newest "greenfield" silicon metal manufacturing
facility in the United States and is strategically located near abundant
supplies of high quality raw materials necessary for the production of high
grade silicon metal. A "greenfield" silicon metal manufacturing facility is a
facility that is newly constructed to manufacture silicon metal, whereas a
"brownfield" facility is an addition to or expansion of an existing silicon
metal manufacturing facility. SIMCALA intends to use a portion of the net
proceeds of the Offering to expand the Facility by constructing a fourth
smelting furnace and the Company believes that after this expansion, the
Facility will be the second largest silicon metal production facility in the
world. The Company believes that the increased capacity resulting from the
construction of a fourth furnace will enable it to benefit from levels of demand
for silicon metal in the Western Industrialized Nations (as defined herein)
which CRU estimates will exceed currently known sources of supply through 2005.
Upon completion of the fourth furnace, the Company's production capacity will
increase by approximately 12,000 metric tons to approximately 48,000 metric tons
per year.
 
     The Company is one of the most cost efficient silicon metal manufacturers
in the world, as measured by operating cost per metric ton of silicon metal
sold. The Company estimates that it held a market share of approximately 13% of
the total United States chemical market and approximately 13% of the total
United States aluminum market in 1997, based on metric tons of silicon metal
sold. In 1997, the Company had net sales and EBITDA of $62.2 million and $13.8
million, respectively. For the three months ended March 31, 1998, the Company
had net sales and EBITDA of $14.8 million and $0.1 million, respectively. On a
pro forma basis, the Company had net losses of $891,000 and $2.4 million for
1997 and the three months ended March 31, 1998, respectively.
 
                         RECENT HISTORY AND TURNAROUND
 
     SIMCALA was incorporated in 1994 and acquired the Facility from SiMETCO,
Inc. ("SiMETCO") on February 10, 1995. Under SiMETCO's management, the Facility
was underutilized and inefficient and consistently incurred operating losses as
a result of poor management and a focus on the lower margin, less stable
secondary aluminum business. Immediately after the acquisition of the Facility,
the Company hired C. Edward Boardwine, its current Chief Executive Officer. Mr.
Boardwine installed a new senior management team which implemented a major
turnaround program aimed at increasing the operating efficiency of the
 
                                        9
<PAGE>   10
 
Facility and focusing on the production and effective marketing of higher margin
chemical grade and specialty aluminum grade silicon metal. The Company's
turnaround program included the following:
 
     - Increased Production.  The Company increased production by improving the
       efficiency and yield of two furnaces that were operating when the
       acquisition of the Facility occurred and by recommissioning a third
       furnace that was not operational at the time of the Facility's
       acquisition. From 1994 to 1997, the Facility's annual production volume
       increased approximately 55%, from approximately 24,000 metric tons to
       approximately 37,100 metric tons.
 
     - Customer Relationships.  The Company established relationships with the
       major consumers of higher margin chemical grade and specialty aluminum
       grade silicon metal. As part of this effort, the Company sought and
       obtained key customer certifications, requiring it to demonstrate the
       ability to consistently meet customers' proprietary quality and sizing
       requirements. The Company is currently a certified supplier of chemical
       grade silicon metal to G.E. Silicones ("G.E. Silicones"), a division of
       General Electric Company, and Dow Corning Corporation ("Dow Corning"),
       the two largest consumers of chemical grade silicon metal in the United
       States, and a certified supplier of specialty aluminum grade silicon
       metal to Alcan Ingot & Recycling ("Alcan") and Alumax Mill Products Inc.
       ("Alumax"). Production of chemical grade, primary aluminum grade and
       secondary aluminum grade silicon metal at the Facility changed from
       29.6%, 15.1% and 55.3%, respectively, of total net sales in 1994 to 55%,
       28.2% and 16.8%, respectively, of total net sales in 1997. This change in
       product mix has significantly increased the Company's profitability.
 
     - Facility Modernization.  In 1996, the Company completed a $12.0 million
       facility modernization program pursuant to which all the Company's
       production and air abatement equipment was rebuilt. This program
       modernized the Facility and resulted in improved operating efficiency and
       greater consistency in the production of chemical and specialty aluminum
       grade silicon metal. To further enhance operating reliability, the
       Company is in the process of upgrading its raw material handling
       equipment.
 
     - Supplier Relationships.  The Company discontinued relationships with
       suppliers of lower grade raw materials and established relationships with
       suppliers of higher quality raw materials in order to secure a reliable,
       long-term source of the ingredients necessary to produce high quality
       silicon metal. By using high quality raw materials, the Company has been
       able to decrease the levels of impurities in the silicon metal it
       produces, resulting in more efficient production of a consistently high
       quality product.
 
     - Workforce Efficiency.  The Company improved the efficiency of its
       workforce by creating performance based incentives and establishing
       technical training programs. In addition, despite recommissioning a third
       furnace in the third quarter of 1995, the number of employees at the
       Facility from 1994 to 1997 remained constant at approximately 170
       (consisting of approximately 124 hourly employees and 46 salaried
       employees). Consequently, the amount of silicon metal produced per hourly
       employee at the Facility improved from approximately 210 metric tons in
       1994 to approximately 299 metric tons in 1997.
 
     As a result of the foregoing measures, net sales doubled to $62.2 million
in 1997 from $31.1 million in 1994. During that period, EBITDA increased to
$13.8 million from a loss of $3.0 thousand. On a pro forma basis, the Company
had a net loss of $891,000 in 1997. In addition, operating cost per metric ton
of silicon metal produced at the Facility decreased 9.6%, to $1,279.0 in 1997
from $1,415.0 in 1994.
 
                           THE SILICON METAL INDUSTRY
 
     The silicon metal industry consists of two general markets: the chemical
industry market and the aluminum industry market. The chemical industry market
is subdivided into the silicones market and the polysilicon market, both of
which require the highest grade of silicon metal. The aluminum industry market
is subdivided into the primary aluminum market (producing aluminum from ore) and
the secondary aluminum market (producing aluminum from scrap). The Company
defines the primary aluminum market and the higher-end of the secondary aluminum
market as the "specialty aluminum" market because the aluminum produced for
those markets requires higher quality silicon metal.
 
                                       10
<PAGE>   11
 
     From 1987 to 1997, demand for silicon metal in the United States increased
at an average annual rate of approximately 7.7% (on a non-compounded basis).
This increase was driven by an average annual rate of growth of approximately
10.1% (on a non-compounded basis) in the United States chemical market. While
the aluminum market has also grown during this period, demand for chemical grade
silicon metal has increased 73.8% and, in 1997, chemical grade silicon metal
represented approximately 55% of the silicon metal consumed in the United
States. The major factors contributing to the growth of the chemical market are
(i) the introduction of new silicon based product applications (such as
emulsions, release agents and sealants) and (ii) the displacement of
petrochemical based products (such as lubrication and hydraulic fluids). The
growth in the aluminum market is primarily attributable to the increased use of
aluminum in the transportation industry.
 
     According to CRU, demand for silicon metal in the United States is
projected to increase over the next eight years at an average annual rate of
approximately 5.3% (on a non-compounded basis). During that period, CRU projects
that demand for chemical grade silicon metal in the United States will increase
at an average annual rate of approximately 7.6% (on a non-compounded basis).
 
                             COMPETITIVE STRENGTHS
 
     The Company believes that it has a strong competitive position attributable
to a number of factors, including the following:
 
     - Preferred Supplier Status with Key Customers.  SIMCALA has satisfied
       rigorous qualification requirements with its primary customers who
       purchase chemical grade and specialty aluminum grade silicon metal.
       Satisfying these requirements may take up to two years. As a result, the
       Company believes that these rigorous qualification requirements
       constitute a significant barrier to entry into the high grade silicon
       metal market.
 
     - Low Cost Producer.  As a result of the major turnaround program executed
       by the current management team, the Company has been recognized by CRU as
       among the six most cost efficient silicon metal manufacturers in the
       world, as measured by cost per metric ton of silicon metal produced.
 
     - Production Facilities.  The Facility has recently undergone an extensive
       facility modernization program which has resulted in improved operational
       efficiency and greater consistency in the production of chemical and
       specialty aluminum grade silicon metal. In addition, because the Facility
       was originally designed to support the addition of a fourth smelting
       furnace, the Company can increase capacity at a relatively low cost and
       in a relatively short time, without significantly disrupting operations.
       Management estimates that construction of the fourth furnace can be
       accomplished for $7.0 to $10.0 million less than and approximately one
       year of construction time less than the construction cost and time that
       would have been required if the Facility had not been designed to support
       a fourth furnace. Management estimates that the fourth furnace can be
       constructed at a cost of approximately $25.0 million in approximately two
       years.
 
     - Experienced, Highly Qualified Management Team.  SIMCALA has assembled a
       highly qualified management team with over 75 years of combined
       experience in the silicon metal business. In particular, since 1969, C.
       Edward Boardwine, the Company's Chief Executive Officer, has worked in
       various capacities in the ferroalloy and silicon metal industries, most
       recently serving as Vice President--Silicon Metal Division of Elkem ASA,
       a position he held from 1990 until joining the Company in 1995. The
       Company believes that its management team has the operational and
       technical skill to continue to operate the Facility at world class levels
       of efficiency and to consistently produce high grade silicon metal.
 
                                       11
<PAGE>   12
 
                               BUSINESS STRATEGY
 
     SIMCALA intends to capitalize on the aforementioned competitive strengths
and has developed and is implementing the following business strategy aimed at
increasing revenues and EBITDA:
 
     - Focus on Chemical and Specialty Aluminum Markets.  The Company will
       remain focused on manufacturing high grade silicon metal for use by the
       chemical and specialty aluminum markets. Management has focused on the
       chemical market for four principal reasons: (i) as a result of diverse
       end-use applications of chemical grade silicon metal, demand has
       historically grown despite economic downturns, and demand and prices have
       historically been less volatile than the demand for, and the prices of,
       lower grade silicon metal; (ii) the United States market for chemical
       grade silicon metal is expected to grow at an average annual rate of
       approximately 7.6% (on a non-compounded basis) through the year 2005,
       according to CRU; (iii) sales of chemical grade silicon metal have
       historically provided higher profit margins than sales of lower grades of
       silicon metal because chemical grade silicon metal customers have paid
       higher prices for the required high quality silicon metal, resulting in
       part from the limited number of manufacturers able to supply silicon
       metal of such quality; and (iv) the Company's management has the
       operational and technical expertise necessary to consistently and
       efficiently produce high quality silicon metal. Similarly, management has
       focused on the specialty aluminum market because it is less susceptible
       to competition from low priced secondary grade silicon metal imports, and
       sales of specialty aluminum grade silicon metal have historically
       provided higher profit margins and been subject to less price volatility
       than sales of secondary grade silicon metal. In addition, because the
       United States International Trade Commission has concluded that there are
       no commercially feasible substitutes for silicon metal in either the
       chemical or aluminum industries, management believes that higher silicon
       metal prices will not result in customers purchasing silicon metal
       substitutes.
 
     - Maintain Low Cost Operations.  Management intends to maintain the
       Company's position as one of the six most cost-efficient manufacturers of
       silicon metal in the world. The Company intends to achieve this objective
       by continuing to increase the yield from its three existing smelting
       furnaces and increasing capacity by commissioning a fourth furnace. The
       Company believes it will effectively be able to spread fixed costs over
       the resulting increased production volume to further reduce costs per
       metric ton of silicon metal sold.
 
     - Expand Capacity to Meet Increasing Demand.  CRU projects that demand for
       silicon metal in the Western Industrialized Nations will exceed currently
       known sources of supply through 2005. The Company believes that it can
       take advantage of this increased demand by constructing a fourth smelting
       furnace. The Facility's infrastructure was originally designed and built
       to accommodate a fourth furnace. Within approximately two years, the
       Company believes a fourth furnace will enable it to increase its capacity
       by 12,000 metric tons of silicon metal and 5,000 metric tons of
       microsilica per year, making the Facility the second largest silicon
       metal production facility in the world. The Company intends to use a
       portion of the net proceeds from the Offering to fund in part the
       construction of a fourth furnace. Management believes that completion of
       a fourth furnace and the sale of the resulting silicon metal produced
       will increase profitability.
 
                      CGW AND SUMMARY OF THE TRANSACTIONS
 
     CGW.  CGW Southeast Partners III, L.P. ("CGW") is the most recently formed
investment fund sponsored by Cravey, Green & Wahlen, Incorporated, the
principals of which are Richard L. Cravey and Edwin A. Wahlen, Jr. The general
partner of CGW is CGW Southeast III, L.L.C. (the "General Partner") and Messrs.
Cravey and Wahlen are the only shareholders and directors of its manager. CGW
and other investment funds sponsored by Cravey, Green & Wahlen, Incorporated
seek to acquire, usually with participation by operating management, middle
market businesses whose profitability can be significantly enhanced through the
implementation of operating efficiencies, improved financial management or new
growth strategies, including follow-on acquisitions. Investment funds sponsored
by Cravey, Green & Wahlen,
 
                                       12
<PAGE>   13
 
Incorporated have historically taken an active, hands-on role in the
implementation of such efficiencies, management improvements and strategies with
respect to their portfolio companies.
 
     The Transactions.  On March 31, 1998, SAC Acquisition Corp., a Georgia
corporation ("SAC") and then wholly owned subsidiary of Holdings, acquired all
of the outstanding capital stock of the Company (the "Acquisition") from its
stockholders (the "Selling Stockholders") for a cash payment of approximately
$66.7 million (the "Cash Consideration"). See "The Transactions -- The
Acquisition."
 
     The aggregate purchase price paid by SAC for the Acquisition was financed
with the net proceeds of the Offering and the initial capital contribution by
CGW and C. Edward Boardwine, Dwight L. Goff and R. Myles Cowan, II (each, a
"Senior Manager" and collectively, the "Senior Management") of $22.0 million to
Holdings (the "Equity Contribution"), which was then contributed by Holdings to
SAC. Immediately following the Acquisition, SAC merged with and into the
Company, with the Company being the surviving corporation (the "Merger"). As a
result of the Merger, the Company became the obligor of the Notes and a wholly
owned direct subsidiary of Holdings. See "The Transactions -- Financing of the
Acquisition" and "Use of Proceeds."
 
     In connection with the Acquisition, the Company (i) repaid approximately
$9.2 million of term loan indebtedness (including accrued interest thereon and
fees) outstanding under its prior bank credit facility (the "Terminated Credit
Facility") with a portion of the net proceeds of the Offering and (ii) replaced
the Terminated Credit Facility and a related letter of credit reimbursement
agreement (the "Terminated Reimbursement Agreement") with a new credit facility
(the "New Credit Facility"). The New Credit Facility consists of a $15.0 million
revolving credit facility which provides availability for borrowings and letters
of credit. As part of the Company's industrial revenue bond financing (the "IRB
Financing"), an approximately $6.1 million letter of credit was issued under the
New Credit Facility to replace the letter of credit issued under the Terminated
Reimbursement Agreement. The Acquisition, the Merger, the replacement of the
Terminated Credit Facility and the Terminated Reimbursement Agreement with the
New Credit Facility and the Equity Contribution, the Offering and the
application of the net proceeds therefrom are referred to in this Prospectus as
the "Transactions." See "The Transactions" and "Description of Other
Indebtedness."
 
     The following table sets forth the approximate amounts of the sources and
uses of funds in connection with the Transactions:
 
<TABLE>
<CAPTION>
                                                              (IN THOUSANDS)
<S>                                                           <C>
SOURCES OF FUNDS:
Notes sold in the Offering..................................     $75,000
Equity Contribution(1)......................................      22,000
                                                                 -------
          Total Sources.....................................     $97,000
                                                                 =======
USES OF FUNDS:
The Acquisition.............................................     $66,703
Repayment of indebtedness(2)................................       9,159
Transaction fees and expenses(3)............................       6,000
General corporate purposes(4)...............................      15,138
                                                                 -------
          Total Uses........................................     $97,000
                                                                 =======
</TABLE>
 
- ---------------
 
(1) Of the total Equity Contribution, CGW contributed $20.0 million and Senior
    Management collectively contributed $2.0 million.
(2) Consists of (i) term loan indebtedness outstanding under the Terminated
    Credit Facility the principal amount of which was payable in quarterly
    installments with the last of such installments payable on March 31, 2002
    and which, as of March 31, 1998, accrued interest at a rate of approximately
    8% per annum, and (ii) accrued interest thereon and fees.
(3) Includes transaction fees and expenses of SAC and Holdings incurred in
    connection with the Transactions.
 
                                       13
<PAGE>   14
 
(4) The Company expects that a portion of the net proceeds of the Offering will
    be used to construct a fourth smelting furnace at the Facility and estimates
    that construction of the furnace will cost approximately $25.0 million. The
    Company anticipates that the balance of the construction costs will be
    funded by cash flow from the Company's operations during the construction
    period.
 
                                  RISK FACTORS
 
     Holders of both Series A Notes and Exchange Notes should consider the
following factors in connection with the decision to participate in the Exchange
Offer:
 
     - Significant Leverage and Debt Service.
     - Ranking of Senior Notes; Asset Encumbrance.
     - Restrictive Covenants.
     - Importance of Key Customers.
     - Dependence on Supply of Electrical Power.
     - Competition.
     - Anti-Dumping Duties on Foreign Competitors' Products.
     - Environmental Laws and Regulations.
     - Dependence on Key Personnel.
     - Control by Investors.
     - Potential Inability to Fund Change of Control Offer.
     - Fraudulent Conveyance Considerations.
     - Restrictions on Resale.
     - Absence of an Established Trading Market for the Notes.
     - Limited Registration Rights.
 
See "Risk Factors" for a discussion of these factors.
 
                                       14
<PAGE>   15
 
             SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
 
     The following table presents (i) summary selected historical financial
information of the Predecessor as of the dates and for the periods indicated and
(ii) summary pro forma financial information of the Company for the year ended
December 31, 1997 and for the three months ended March 31, 1998, adjusted to
reflect the effects of the Transactions. The term "the Predecessor" refers to
the Company for periods prior to the Acquisition on March 31, 1998. The summary
pro forma financial information and the financial position of the Company
subsequent to the Acquisition on March 31, 1998 are referred to as the
"Company." The historical financial information for the three months ended March
31, 1998 has been derived from the unaudited financial statements of the
Predecessor and the historical financial information as of March 31, 1998 has
been derived from the unaudited financial statements of the Company, each of
which are included elsewhere in this Prospectus. The historical financial
information for the year ended December 31, 1997 and as of such date has been
derived from the financial statements of the Predecessor which have been audited
by Deloitte & Touche LLP, independent auditors, and are included elsewhere in
this Prospectus. The historical financial information for the year ended
December 31, 1996 and as of such date has been derived from the financial
statements of the Predecessor which have been audited by Crowe, Chizek and
Company LLP, independent auditors, and are included elsewhere in this
Prospectus. The historical financial information for the period from February
10, 1995 (date of inception) to December 31, 1995 and as of December 31, 1995
has been derived from the financial statements of the Company which have been
audited by Ernst & Young LLP, independent auditors, and are included elsewhere
in this Prospectus. The summary pro forma financial information is not
necessarily indicative of the Company's future results of operations or
financial position and does not purport to indicate the Company's results of
operations for the year ended December 31, 1997 or for the three months ended
March 31, 1998 had the Transactions been completed on January 1, 1997. The
summary financial information is qualified in its entirety by, and should be
read in conjunction with, "Unaudited Condensed Pro Forma Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Predecessor's Financial Statements and the notes thereto
appearing elsewhere herein.
 
<TABLE>
<CAPTION>
                                                PREDECESSOR                                   COMPANY
                           ------------------------------------------------------   ---------------------------
                               PERIOD FROM
                              FEBRUARY 10,                                                          PRO FORMA
                                  1995                                               PRO FORMA     AS ADJUSTED
                           (DATE OF INCEPTION)      YEAR ENDED       THREE MONTHS   AS ADJUSTED    THREE MONTHS
                                   TO              DECEMBER 31,         ENDED        YEAR ENDED       ENDED
                              DECEMBER 31,       -----------------    MARCH 31,     DECEMBER 31,    MARCH 31,
                                 1995(1)          1996      1997         1998           1997           1998
                           -------------------   -------   -------   ------------   ------------   ------------
                                                                     (UNAUDITED)
                                           (DOLLARS IN THOUSANDS)                     (DOLLARS IN THOUSANDS)
<S>                        <C>                   <C>       <C>       <C>            <C>            <C>
INCOME STATEMENT DATA:
Net sales................        $31,523         $52,407   $62,184     $14,854        $62,184        $14,854
Cost of goods sold.......         32,391          42,798    47,972      11,679         50,189         12,233
                                 -------         -------   -------     -------        -------        -------
Gross profit (loss)......           (868)          9,609    14,212       3,175         11,995          2,621
Selling and
  administrative
  expenses...............          1,599           1,923     2,846       3,824          4,452          4,225
                                 -------         -------   -------     -------        -------        -------
Operating income
  (loss).................         (2,467)          7,686    11,366        (649)         7,543         (1,604)
Interest expense.........          1,111           1,511     1,710         314          8,293          2,073
          Other income,
            net..........            359             444       228         282            228            282
                                 -------         -------   -------     -------        -------        -------
Earnings (loss) before
  provision for income
  taxes..................         (3,219)          6,619     9,884        (681)          (522)        (3,395)
Provision for income
  taxes..................             --           1,169     3,513        (100)           369         (1,018)
                                 -------         -------   -------     -------        -------        -------
Net income (loss)........        $(3,219)        $ 5,450   $ 6,371     $  (581)       $  (891)       $(2,377)
                                 =======         =======   =======     =======        =======        =======
OTHER DATA (UNAUDITED):
EBITDA(2)................        $(1,038)        $ 9,723   $13,762     $   104        $13,762        $   105
EBITDA margin(3).........           (3.3)%          18.6%     22.1%        0.7%          22.1%           0.7%
</TABLE>
 
                                       15
<PAGE>   16
 
<TABLE>
<CAPTION>
                                                PREDECESSOR                                   COMPANY
                           ------------------------------------------------------   ---------------------------
                               PERIOD FROM
                              FEBRUARY 10,                                                          PRO FORMA
                                  1995                                               PRO FORMA     AS ADJUSTED
                           (DATE OF INCEPTION)      YEAR ENDED       THREE MONTHS   AS ADJUSTED    THREE MONTHS
                                   TO              DECEMBER 31,         ENDED        YEAR ENDED       ENDED
                              DECEMBER 31,       -----------------    MARCH 31,     DECEMBER 31,    MARCH 31,
                                 1995(1)          1996      1997         1998           1997           1998
                           -------------------   -------   -------   ------------   ------------   ------------
                                                                     (UNAUDITED)
                                           (DOLLARS IN THOUSANDS)                     (DOLLARS IN THOUSANDS)
<S>                        <C>                   <C>       <C>       <C>            <C>            <C>
Depreciation and
  amortization...........        $ 1,070         $ 1,593   $ 2,167     $   471        $ 5,991        $ 1,427
Capital expenditures.....          4,154           6,913     2,075       1,184          2,075          1,184
Cash interest expense....            929           1,238     1,560         161          8,143          1,920
Ratio of EBITDA to cash
  interest expense(4)....             --             7.9x      8.8x         --            1.7x            --
Ratio of earnings to
  fixed charges(5).......             --             4.8x      5.9x         --             --             --
Ratio of net debt to pro
  forma EBITDA(6)........             --              --        --          --           4.75x         622.6x
Cash flows from operating
  activities.............        $(1,408)        $ 9,235   $ 9,995     $ 1,168        $ 6,556        $   327
Cash flows from investing
  activities.............         (4,154)         (6,913)   (2,075)     (1,184)        (2,075)        (1,184)
Cash flows from financing
  activities.............          2,785          (2,144)   (7,472)         39             --             --
OPERATING DATA
  (UNAUDITED):
Silicon metal production
  (in metric tons).......         25,669          33,373    37,094       9,110         37,094          9,110
Average sales price per
  metric ton.............        $ 1,436         $ 1,641   $ 1,723     $ 1,661        $ 1,723        $ 1,661
Average cost per metric
  ton....................        $ 1,529         $ 1,358   $ 1,279     $ 1,279        $ 1,279        $ 1,279
</TABLE>
 
<TABLE>
<CAPTION>
                                                                   PREDECESSOR            COMPANY
                                                           ---------------------------   ---------
                                                                                           AS OF
                                                               AS OF DECEMBER 31,        MARCH 31,
                                                            1995      1996      1997       1998
                                                           -------   -------   -------   ---------
                                                                       (IN THOUSANDS)
<S>                                                        <C>       <C>       <C>       <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................  $     8   $   186   $   635   $ 15,796
Working capital (deficit)................................   (2,926)   (3,347)      885     20,446
Total assets.............................................   24,217    30,581    33,663    122,667
Long-term debt, less current portion.....................   12,014    13,207    12,763     81,083
Mandatorily redeemable preferred stock...................    3,000        --        --         --
Stockholders' equity.....................................     (718)    5,635     8,275     18,807
</TABLE>
 
- ---------------
 
(1) On February 10, 1995, the Company acquired the Facility from SiMETCO. At
    such time, SiMETCO was operating the Facility as a debtor-in-possession
    under Chapter 11 of the U.S. Bankruptcy Code of 1978, as amended (the
    "Bankruptcy Code"). In connection with the acquisition of the Facility, the
    Company (i) paid a purchase price of approximately $2.8 million to the
    estate of SiMETCO, (ii) assumed approximately $7.9 million of vendor
    indebtedness, accrued expenses and other indebtedness, (iii) incurred $6.0
    million of additional indebtedness and (iv) issued $3.0 million of its
    mandatorily redeemable Series A Preferred Stock, par value $1.00 per share
    (the "Series A Preferred Stock") to the estate of SiMETCO. In June 1996, the
    Series A Preferred Stock was converted into a non-interest bearing note,
    which the Company has repaid in full. See "Certain
    Transactions -- Transactions with
 
                                       16
<PAGE>   17
 
    CGW, its Affiliates and Certain Stockholders" and Notes 6 and 12 to the
    Predecessor's Financial Statements.
(2) "EBITDA" is defined as earnings (loss) from continuing operations before
    interest expense, income taxes, depreciation and amortization. While EBITDA
    should not be construed as a substitute for operating income or as a better
    measure of liquidity than cash flow from operations, both of which are
    determined in accordance with generally accepted accounting principles, it
    is included herein to provide additional information relating to the
    Company's ability to service indebtedness. EBITDA as presented herein is not
    necessarily comparable to EBITDA presented by other companies because not
    all companies define EBITDA similarly.
(3) EBITDA margin is EBITDA as a percentage of net sales.
(4) There was a deficiency of EBITDA to cover cash interest expense for the
    period from February 10, 1995 to December 31, 1995 of $2.0 million, for the
    three months ended March 31, 1998 of $.06 million and for the pro forma as
    adjusted three months ended March 31, 1998 of $1.8 million.
(5) For purposes of computing this ratio, earnings consist of earnings (loss)
    from continuing operations before provision for income taxes and fixed
    charges adjusted to exclude capitalized interest. Fixed charges consist of
    interest expense, whether expensed or capitalized, plus amortization of debt
    issuance costs and debt discount plus such portion of rental expense which
    is representative of the interest factor. There was a deficiency of earnings
    to cover fixed charges for the period from February 10, 1995 to December 31,
    1995 of $3.3 million and for the three months ended March 31, 1998 of $0.7
    million. On a pro forma as adjusted basis, there was a deficiency of
    earnings to cover fixed charges of $522,000 and $3.4 million for the year
    ended December 31, 1997 and for the three months ended March 31, 1998,
    respectively.
(6) In calculating the ratio of net debt to pro forma EBITDA, net debt equals
    long-term debt as of March 31, 1998, including the current portion, less
    cash and cash equivalents as of such date.
 
                                       17
<PAGE>   18
 
                                  RISK FACTORS
 
     Before tendering Series A Notes in the Exchange Offer, eligible holders of
Series A Notes should consider the specific factors set forth below, as well as
the other information set forth elsewhere in this Prospectus.
 
SIGNIFICANT LEVERAGE AND DEBT SERVICE
 
     The Company has significant outstanding indebtedness and will be
significantly leveraged. As of June 30, 1998, the Company had approximately
$83.1 million of indebtedness outstanding ($6.3 million of which was pari passu
in right of payment with the Notes and none of which was secured) and
approximately $15.0 million of secured indebtedness available to be incurred
under the New Credit Facility (as such availability is reduced by an
approximately $6.1 million letter of credit issued thereunder). In addition, on
a pro forma basis assuming the Transactions had occurred on January 1, 1997, the
Company would have had a deficiency of earnings to cover fixed charges of
$522,000 and $3.4 million, for the year ended December 31, 1997 and the three
months ended March 31, 1998, respectively. The Company and its subsidiaries may
incur additional indebtedness, including up to $15.0 million under the New
Credit Facility. See "Capitalization," "Description of the Notes" and
"Description of Other Indebtedness."
 
     The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Notes), or to fund planned capital expenditures will
depend on its future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. There can be no assurance that the
Company's business will generate sufficient cash flow from operations or that
future borrowings will be available under the New Credit Facility in an amount
sufficient to enable the Company to service its indebtedness, including the
Notes, or to fund its other liquidity needs, including the construction of a
fourth smelting furnace. In addition, the Company may need to refinance all or a
portion of the principal of the Notes on or prior to maturity. There can be no
assurance that the Company will be able to effect any such refinancing on
commercially reasonable terms or at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
 
     The degree to which the Company will be leveraged following the
consummation of the Transactions could have important consequences to the
holders of the Notes, including, but not limited to, (i) making it more
difficult for the Company to satisfy its obligations to the holders of the
Notes, (ii) increasing the Company's vulnerability to adverse general economic
and industry conditions, (iii) limiting the Company's ability to obtain
additional financing for future capital expenditures, general corporate or other
purposes, (iv) requiring the dedication of a substantial portion of the
Company's cash flow from operations to the payment of principal of, and interest
on, indebtedness, thereby reducing the funds available for operations and future
business opportunities, (v) limiting the Company's flexibility in reacting to
changes in its business and the industry and (vi) placing the Company at a
competitive disadvantage vis-a-vis less leveraged competitors. In addition, the
Indenture and the New Credit Facility contain financial and other restrictive
covenants that limit the ability of the Company to, among other things, borrow
additional funds. Failure by the Company to comply with such covenants could
result in an event of default which, if not cured or waived, could have a
material adverse effect on the Company. In addition, the degree to which the
Company is leveraged could prevent it from repurchasing all of the Notes
tendered to it upon the occurrence of a Change of Control. See "Description of
the Notes -- Repurchase at Option of Holders -- Change of Control" and
"Description of Other Indebtedness -- Credit Facilities."
 
RANKING OF SENIOR NOTES; ASSET ENCUMBRANCE
 
     The Notes are general unsecured obligations of the Company and rank senior
to all existing and future subordinated indebtedness of the Company and pari
passu in right of payment with all existing and future senior indebtedness of
the Company, including indebtedness under the New Credit Facility. However, the
Notes are effectively subordinated to all secured indebtedness of the Company to
the extent of the value of the assets securing such indebtedness. The
obligations of the Company under the New Credit Facility are secured by
substantially all of the Company's assets and the real and personal property
used in the Company's
 
                                       18
<PAGE>   19
 
operations which is, as a result of the IRB Financing, owned by the Montgomery
IDB and leased to the Company. Accordingly, the Notes are effectively
subordinated to the Company's obligations under the New Credit Facility to the
extent of the assets securing the New Credit Facility. Upon an event of default
under any such secured indebtedness, the lenders could elect to declare all
amounts outstanding, together with accrued and unpaid interest thereon, to be
immediately due and payable. If the Company were unable to repay such amounts,
the lenders could proceed against the collateral granted to them. After any
realization upon the collateral or a dissolution, reorganization or similar
proceeding involving the Company, there can be no assurance that there will be
sufficient available proceeds or other assets for the holders of the Notes to
recover all or any portion of their claims under the Notes and the Indenture.
See "Description of the Notes" and "Description of Other Indebtedness."
 
RESTRICTIVE COVENANTS
 
     The New Credit Facility and the Indenture contain numerous restrictive
covenants which limit, among other things, the ability of the Company to incur
additional indebtedness, to create liens or other encumbrances, to pay dividends
or make other restricted payments, to make investments, loans and guarantees and
to sell or otherwise dispose of a substantial portion of its assets to, or merge
or consolidate with, another entity. The New Credit Facility also contains a
number of financial covenants that require the Company to meet certain financial
ratios and tests and provides that a "change of control" constitutes an event of
default thereunder. A failure to comply with the obligations contained in the
New Credit Facility or the Indenture, if not cured or waived, could permit
acceleration of the related indebtedness and the acceleration of indebtedness
under other instruments of the Company that contain cross-acceleration or
cross-default provisions. Upon the occurrence of an event of default under the
New Credit Facility, the lenders thereunder would be entitled to exercise the
remedies available to a secured creditor under applicable law. If the Company
were obligated to repay all or a significant portion of its indebtedness, there
can be no assurance that it would have sufficient cash to do so or that it could
successfully refinance such indebtedness. In addition, other indebtedness that
the Company may incur in the future may contain financial or other covenants
more restrictive than those contained in the New Credit Facility or the
Indenture. See "Description of the Notes -- Certain Covenants" and "Description
of Other Indebtedness."
 
IMPORTANCE OF KEY CUSTOMERS
 
     Certain of the Company's customers are material to its business and
operations. In 1997 and the three months ended March 31, 1998, G.E. Silicones
accounted for approximately $18.0 million and $2.1 million, or approximately 29%
and 13.9%, of net sales, respectively; Dow Corning accounted for approximately
$15.0 million and $6.1 million, or approximately 24.2% and 40.3%, of net sales,
respectively; Wabash Alloys, L.L.C. ("Wabash Alloys") accounted for
approximately $9.9 million and $2.3 million, or approximately 16.0% and 14.8%,
of net sales, respectively; and Alcan accounted for approximately $4.9 million
and $1.2 million, or approximately 7.9% and 8.2%, of net sales, respectively. In
1997 and the three months ended March 31, 1998, the Company's five largest
customers accounted for approximately $49.3 million and $12.1 million, or
approximately 79.3% and 79.8%, of net sales, respectively. Dow Corning is
currently operating as a debtor-in-possession under Chapter 11 of the Bankruptcy
Code.
 
     The Company's prospects depend on the success of its customers, as well as
its customers' retention of the Company as a significant supplier of silicon
metal. A significant part of the Company's business strategy is directed toward
strengthening its relationships with its major customers that purchase chemical
grade silicon metal, such as G.E. Silicones and Dow Corning. The Company does
not generally have long-term contracts with its major customers and the loss of
any major customer, or a significant reduction of the Company's business with
any of them, would have a material adverse effect on the Company. See
"-- Competition."
 
DEPENDENCE ON SUPPLY OF ELECTRICAL POWER
 
     The production of silicon metal is heavily dependent upon a reliable supply
of electrical power. The Company's electrical power is supplied by Alabama Power
Company ("APCo") through a dedicated 110,000 volt line. The Facility operates
twenty four hours a day, seven days per week. Any interruption in the supply of
electrical power to the Facility would adversely effect production levels and a
sustained interruption in the power supply would have a material adverse effect
on the Company.
 
                                       19
<PAGE>   20
 
COMPETITION
 
     The silicon metal manufacturing industry is highly competitive. A number of
the Company's competitors are significantly larger and have greater financial
resources than the Company. In addition, certain of the Company's major
customers have in the past manufactured silicon metal for their own use, thereby
reducing their need to purchase silicon metal from suppliers such as the
Company. The resumption of silicon metal manufacturing by one or more of these
major customers would thus reduce the quantity of silicon metal purchased from
the Company and could have a material adverse effect on the Company. There can
be no assurance that the Company will be able to continue to compete
successfully in silicon metal manufacturing or that the Company will maintain or
increase its sales of chemical grade and specialty aluminum grade silicon metal.
See "Business -- Competition."
 
ANTI-DUMPING DUTIES ON FOREIGN COMPETITORS' PRODUCTS
 
     In 1990 and 1991, domestic producers of silicon metal successfully
prosecuted anti-dumping actions against unfairly traded imports of silicon metal
from the People's Republic of China (the "PRC"), Brazil and Argentina. These
actions were brought under the anti-dumping provisions of the Tariff Act of
1930, as amended. Under that statute, an anti-dumping duty order may be issued
if a domestic industry establishes in proceedings before the United States
Department of Commerce and the United States International Trade Commission that
imports from the country (or countries) covered by the action(s) are being sold
at less than normal value and are causing material injury or threat of such
injury to the domestic industry. An anti-dumping order requires special duties
to be imposed in the amount of the margin of dumping (i.e., the percentage
difference between the United States price for the goods received by the foreign
producer or exporter and the normal value of the merchandise).
 
     Once an order is in place, each year foreign producers, importers, domestic
producers and other interested parties may request a new investigation (or
"administrative review") to determine the margin of dumping during the
immediately preceding year. The rates calculated in these administrative reviews
(or the existing rates if no review is requested) are used to assess
anti-dumping duties on imports during the review period and to collect cash
deposits on future imports. An administrative review covering five Brazilian
producers and a review covering two PRC exporters are now in progress. The rates
established in these reviews and in future reviews will depend upon the prices
and costs during the periods covered by the reviews, the methodologies applied
and other factors. Anti-dumping orders remain in effect until they are revoked.
In order for an individual foreign producer or exporter to qualify for
revocation of an anti-dumping order, the United States Department of Commerce
must conclude that the producer or exporter has sold the merchandise at not less
than normal value for a period of at least three consecutive years and is not
likely to sell the merchandise at less than normal value in the future.
Anti-dumping orders may also be revoked as a result of periodic "sunset
reviews."
 
     No assurance can be given that one or more of such anti-dumping orders will
not be revoked or that effective duty rates will continue to be imposed. Any
such revocation or the imposition of ineffective duty rates could have a
material adverse effect on the Company. See "Business -- Environmental and
Regulatory Matters -- Anti-Dumping Duties on Foreign Competitors' Products."
 
ENVIRONMENTAL LAWS AND REGULATIONS
 
     The Company is subject to extensive federal, state and local environmental
laws and regulations governing the discharge, emission, storage, handling and
disposal of a variety of substances and wastes used in or resulting from the
Company's operations. There can be no assurance that environmental laws or
regulations (or the interpretation of existing laws or regulations) will not
become more stringent in the future, that the Company will not incur substantial
costs in the future to comply with such requirements or that the Company will
not discover currently unknown environmental problems or conditions. Any such
event could have a material adverse effect on the Company. See
"Business -- Environmental and Regulatory Matters -- Environmental."
 
                                       20
<PAGE>   21
 
DEPENDENCE ON KEY PERSONNEL
 
     The Company's operations are dependent, to a significant extent, on the
continued employment of each Senior Manager, with whom it has entered into
employment agreements containing non-compete provisions. If these employees of
the Company become unable to continue in their respective roles, or if the
Company is unable to attract and retain other skilled employees, the Company's
results of operations and financial condition could be adversely effected. See
"Management."
 
CONTROL BY INVESTORS
 
     As a result of the Acquisition and the Merger, 100% of the outstanding
shares of the Company's common stock is directly owned by Holdings. Holdings has
no business other than holding the capital stock of the Company, which is the
sole source of Holdings' financial resources. Holdings is controlled by CGW,
which beneficially owns shares representing 79.8% of the voting power of
Holdings (on a fully diluted basis) and has the power to elect all of the
directors of Holdings. Accordingly, CGW, through its control of Holdings,
controls the Company and has the power to elect all of its directors, appoint
new management and approve any action requiring the approval of the holders of
the Company's common stock, including adopting amendments to the Company's
Certificate of Incorporation and approving mergers or sales of substantially all
of the Company's assets. The directors elected by Holdings have the authority to
make decisions affecting the capital structure of the Company, including the
issuance of additional capital stock, the implementation of stock repurchase
programs and the declaration of dividends. See "Management," "Certain
Transactions" and "Beneficial Ownership."
 
POTENTIAL INABILITY TO FUND CHANGE OF CONTROL OFFER
 
     Upon a Change of Control (as defined in the Indenture), each holder of
Notes will have the right to require the Company to repurchase all or any part
of such holder's Notes at 101% of the principal amount thereof, plus accrued and
unpaid interest thereon and Liquidated Damages, if any, to the date of
repurchase. The source of funds for any such repurchase will be the Company's
available cash or cash generated from operations or other sources, including
borrowings, sales of equity or funds provided by a new controlling person.
However, there can be no assurance that sufficient funds will be available at
the time of any Change of Control to make any required repurchases of Notes
tendered. Moreover, a Change of Control would constitute an event of default
under the New Credit Facility. Notwithstanding these provisions, the Company
could enter into certain transactions, including certain recapitalizations, that
would not constitute a Change of Control but would increase the amount of debt
outstanding at such time. See "Description of the Notes" and "Description of
Other Indebtedness -- Credit Facilities."
 
FRAUDULENT CONVEYANCE CONSIDERATIONS
 
     Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent conveyance law, if, among other things, the
Company, at the time it incurred the indebtedness evidenced by the Notes, (i)(a)
was or is insolvent or rendered insolvent by reason of such occurrence or (b)
was or is engaged in a business or transaction for which the assets remaining
with the Company were unreasonably small or constituted unreasonably small
capital or (c) intended or intends to incur, or believed, believes or should
have believed that it would incur, debts beyond its ability to repay such debts
as they mature and (ii) the Company received or receives less than the
reasonably equivalent value or fair consideration for the incurrence of such
indebtedness, the Notes could be invalidated or subordinated to all other debts
of the Company. The Notes could also be invalidated or subordinated if it were
found that the Company incurred indebtedness in connection with the Notes with
the intent of hindering, delaying or defrauding current or future creditors of
the Company. In addition, the payment of Liquidated Damages, if any, interest
and principal by the Company pursuant to the Notes could be voided and required
to be returned to the person making such payment, or to a fund for the benefit
of the creditors of the Company.
 
                                       21
<PAGE>   22
 
     The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company would be considered insolvent if (i)
the sum of its debts, including contingent liabilities, were greater than the
sum of all of its assets at a fair valuation or if the present fair salable
value of its assets were less than the amount that would be required to pay its
probable liability on its existing debts, including contingent liabilities, as
they become absolute and mature or (ii) it could not pay its debts as they
become due.
 
     On the basis of its historical financial information and recent operating
history, as discussed in "Prospectus Summary," "Selected Historical Financial
Information," "Unaudited Condensed Pro Forma Financial Information," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Company believes that, after giving effect to the indebtedness
incurred in connection with the Transactions, it will not be insolvent, will not
have unreasonably small assets or capital for the businesses in which it is
engaged and will not incur debts beyond its ability to pay such debts as they
mature. In addition, the Company believes that it is receiving fair
consideration in return for its issuance and sale of the Notes. There can be no
assurance, however, as to what standard a court would apply in making such
determinations.
 
RESTRICTIONS ON RESALE
 
     The Series A Notes have not been registered under the Securities Act or any
state securities laws and, unless so registered or qualified, may not be offered
or sold except pursuant to an exemption from, or in transactions not subject to,
the registration requirements of the Securities Act or any applicable state
securities laws. The Exchange Notes have been registered under the Securities
Act and, generally, will be freely tradable. See "The Exchange Offer" and "Plan
of Distribution."
 
ABSENCE OF AN ESTABLISHED TRADING MARKET FOR THE NOTES
 
     The Series A Notes are new securities that were first issued on March 31,
1998. There is currently no established trading market for the Notes. Although
the Initial Purchaser has informed the Company that it currently intends to make
a market in the Series A Notes and, upon issuance, the Exchange Notes, it is not
obligated to do so and any such market making may be discontinued at any time
without notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Notes. To the extent Series A Notes are
exchanged in this Exchange Offer, the liquidity of the market for the remaining
Series A Notes may be reduced. The Series A Notes have been designated eligible
for trading in the PORTAL market. The Company does not intend to apply for
listing of the Exchange Notes on any securities exchange or for quotation
through Nasdaq. There is no assurance that an active public or other market will
develop for the Exchange Notes, and it is expected that the market, if any, that
develops for the Exchange Notes will be similar to the limited market that
currently exists for the Series A Notes.
 
LIMITED REGISTRATION RIGHTS
 
     EXCEPT AS OTHERWISE PROVIDED HEREIN, FOLLOWING THE CONSUMMATION OF THE
EXCHANGE OFFER, ANY HOLDERS OF SERIES A NOTES NOT TENDERED THEREIN WHO ARE NOT
ENTITLED TO RESELL THE SAME PURSUANT TO A RESALE PROSPECTUS, IF ANY, REQUIRED TO
BE FILED AS A POST-EFFECTIVE AMENDMENT TO THIS REGISTRATION STATEMENT OR
PURSUANT TO A SHELF REGISTRATION STATEMENT, WILL HAVE NO FURTHER EXCHANGE OR
REGISTRATION RIGHTS, AND SUCH NOTES WILL CONTINUE TO BE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER.
 
                               THE EXCHANGE OFFER
 
PERSONS NOT ELIGIBLE TO PARTICIPATE IN THE EXCHANGE OFFER
 
     ANY HOLDER OF SERIES A NOTES WHO IS PROHIBITED BY APPLICABLE LAW OR SEC
POLICY FROM PARTICIPATING IN THE EXCHANGE OFFER, INCLUDING ANY HOLDER WHO IS AN
AFFILIATE OF THE COMPANY OR A BROKER-DEALER WHO HOLDS SERIES A
 
                                       22
<PAGE>   23
 
NOTES ACQUIRED DIRECTLY FROM THE COMPANY OR ONE OF ITS AFFILIATES, AND ANY
PERSON WHO INTENDS TO, OR HAS ANY ARRANGEMENT OR UNDERSTANDING TO PARTICIPATE
IN, A DISTRIBUTION OF THE EXCHANGE NOTES, SHOULD CONTACT THE COMPANY WITHIN 20
BUSINESS DAYS OF THE CONSUMMATION OF THE EXCHANGE OFFER IN ORDER TO PRESERVE ITS
REGISTRATION RIGHTS THAT ARE DISCUSSED HEREIN.
 
REGISTRATION RIGHTS AND EFFECT OF EXCHANGE OFFER
 
     The Series A Notes were sold by the Company on the Closing Date to the
Initial Purchaser pursuant to a Purchase Agreement dated March 24, 1997, by and
between SAC and the Initial Purchaser and a Purchase Agreement Supplement dated
as of March 31, 1998 by and between the Company (as successor to SAC) and the
Initial Purchaser (collectively, the "Purchase Agreement"). Subsequently, the
Initial Purchaser sold the Series A Notes to "qualified institutional buyers"
("QIBs") and to a limited number of institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act ("Accredited
Investors")) in reliance upon Rule 144A and other available exemptions under the
Securities Act. As a condition to the Initial Purchaser's obligations under the
Purchase Agreement, the Company entered into the Registration Rights Agreement
with the Initial Purchaser, pursuant to which the Company agreed to file with
the Commission a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act with respect to an
offer to the holders of Series A Notes who are able to make certain
representations ("Eligible Holders"), the opportunity to exchange their Series A
Notes for a like principal amount of Exchange Notes.
 
     The Exchange Offer Registration Statement covers the offer of the Exchange
Notes pursuant to the Exchange Offer made hereby and resales by broker-dealers
that acquired Series A Notes for their own accounts as a result of market-making
and other trading activities. Such resales of Transfer Restricted Securities (as
defined herein) made in reliance upon the registration thereof under the
Securities Act may be made only pursuant to the "Plan of Distribution" set forth
in this Prospectus or the other prospectus, if any, filed as an amendment to the
Exchange Offer Registration Statement. To be eligible to effect resales of
Transfer Restricted Securities pursuant to a registration of the Notes for
resale by holders ineligible to participate in the Exchange Offer, holders of
Transfer Restricted Securities must (i) notify the Company within 20 business
days after the consummation of the Exchange Offer that it has determined that it
is not permitted by law or any policy of the Commission to participate in the
Exchange Offer made hereby or that such holder may not resell the Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and that this Prospectus is inappropriate or unavailable for such
resales by such holder or that such holder is a broker-dealer and holds Series A
Notes acquired directly from the Company or one of its affiliates and (ii)
provide to the Company, within 15 business days following the Company's request
therefor, such information as the Company may reasonably request for use in
connection with the registration statement. In the event that any holders of
Transfer Restricted Securities comply with the foregoing requirements, and
supply any additional information reasonably requested by the Company within 15
business days following such request, the Company will use commercially
reasonable efforts to file a shelf registration statement with the Commission on
the appropriate Commission form available to the Company pursuant to Rule 415
under the Securities Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration Statement")
containing an appropriate resale prospectus and will use its commercially
reasonable efforts to cause such Shelf Registration Statement to become
effective under the Securities Act and to remain continuously effective
thereunder for a period of two years following the Closing Date.
 
     Each holder of Series A Notes that wishes to exchange Series A Notes for
Exchange Notes in the Exchange Offer is required to establish that it is an
Eligible Holder that may participate in the Exchange Offer by making certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business and that
it did not acquire such Series A Notes directly from the Company, (ii) it has no
arrangement or understanding with any person to participate in and has no
 
                                       23
<PAGE>   24
 
intention of participating in, a distribution (within the meaning of the
Securities Act) of the Exchange Notes and (iii) it is not an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company.
 
     If the holder is a broker-dealer that will receive Exchange Notes for its
own account in exchange for Series A Notes that were acquired as a result of
market-making activities or other trading activities, it also will be required
to acknowledge that it will deliver a prospectus in connection with any resale
of such Exchange Notes, but that by delivering such a prospectus it is not
thereby deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
 
     Holders of Series A Notes acquired directly from the Company, affiliates of
the Company and persons participating in, or having any arrangement or
understanding with any person or participate in, a distribution of the Exchange
Notes will be ineligible, under the Commission policy, to participate in the
Exchange Offer, and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction of the Notes.
 
     If (i) the Company is not required to file an Exchange Offer Registration
Statement or to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) any holder of Series A
Notes notifies the Company within 20 business days after consummation of the
Exchange Offer that (a) it is prohibited by applicable law or Commission policy
from participating in the Exchange Offer, (b) it may not resell the Exchange
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and this Prospectus is not appropriate or available for such resales
by such holder or (c) it is a broker-dealer and holds Series A Notes acquired
directly from the Company or an affiliate of the Company, the Company will use
commercially reasonable efforts to file with the Commission a Shelf Registration
Statement to cover resales of the Transfer Restricted Securities by the holders
thereof. The Company has agreed to use its commercially reasonable efforts to
cause such Shelf Registration Statement to be declared effective as promptly as
possible by the Commission on or before the 105th day after the Shelf Filing
Deadline (as defined below).
 
     For purposes of the foregoing and as used elsewhere herein, "Transfer
Restricted Securities" means each Series A Note until the earliest to occur of:
(i) the date on which such Series A Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the holder thereof without complying with
the prospectus delivery requirements of the Securities Act, (ii) the date on
which such Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iii) the
date on which such Note is distributed to the public pursuant to Rule 144 under
the Securities Act or by a broker-dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including delivery of
this Prospectus).
 
     Under existing Commission interpretations, the Exchange Notes will, in
general, be freely transferable by holders after the Exchange Offer without
further registration under the Securities Act; provided that in the case of
eligible broker-dealers participating in the Exchange Offer, a prospectus
meeting the requirements of the Securities Act must be delivered upon resale by
such broker-dealers in connection with resales of the Exchange Notes. The
Company has agreed, for a period of 180 days after the date on which the
Exchange Offer Registration Statement is declared effective, to make available a
prospectus meeting the requirements of the Securities Act to any such
broker-dealer for use in connection with any resale of any Exchange Notes
acquired in the Exchange Offer. A broker-dealer which delivers such a prospectus
to purchasers in connection with such resales may be deemed a statutory
underwriter that may, as such, be subject to certain of the civil liability
provisions under the Securities Act. Pursuant to the terms of the Registration
Rights Agreement, such broker-dealers may be entitled to indemnification from
the Company for losses arising from Securities Act liability.
 
     The Company has agreed to pay all expenses incident to the Exchange Offer
and to indemnify the Initial Purchaser against certain liabilities, including
liabilities under the Securities Act.
 
     The Registration Rights Agreement provides that unless the Exchange Offer
is not permitted by applicable law or Commission policy, the Company will: (i)
use all commercially reasonable efforts to file the Exchange Offer Registration
Statement with the Commission on or prior to 60 days after the Closing Date,
 
                                       24
<PAGE>   25
 
(ii) use all commercially reasonable efforts to have the Registration Statement
declared effective by the Commission on or prior to 120 days after the Closing
Date and (iii) commence the Exchange Offer following the effectiveness of the
Exchange Offer Registration Statement and use all commercially reasonable
efforts to issue, on or prior to 30 business days after the date on which the
Exchange Offer Registration Statement was declared effective by the Commission,
Exchange Notes in exchange for all Series A Notes tendered prior thereto in the
Exchange Offer.
 
     In addition, the Registration Rights Agreement provides that, if obligated
to file the Shelf Registration Statement, the Company will use its commercially
reasonable efforts to file on or prior to the earliest to occur of (i) the 60th
day after the date on which the Company determines that it is not required to
file the Exchange Offer Registration Statement or (ii) the 60th day after the
date on which the Company receives notice from a holder of Transfer Restricted
Securities (such earliest date being the "Shelf Filing Deadline"). The Company
shall use its commercially reasonable efforts to (i) cause such Shelf
Registration Statement to be declared effective by the Commission on or before
the 105th day after the Shelf Filing Deadline and (ii) keep such Shelf
Registration Statement, if required, continuously effective, supplemented and
amended for a period of two years from the Closing Date or such shorter period
ending when all Transfer Restricted Securities covered by the Shelf Registration
Statement have been sold in the manner set forth and as contemplated in the
Shelf Registration Statement, such Notes are no longer outstanding or when the
Notes become eligible for resale pursuant to Rule 144 under the Securities Act
without volume restrictions.
 
     A holder of Notes that sells its Notes pursuant to the Shelf Registration
Statement generally will be required to be named as a selling securityholder in
the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such a holder (including
certain indemnification and contribution obligations). In addition, each holder
of the Notes will be required to timely deliver information to be used in
connection with the Shelf Registration Statement within the time periods set
forth in the Registration Rights Agreement in order to have their Notes included
in the Shelf Registration Statement and to benefit from the provisions regarding
Liquidated Damages set forth in the following paragraph.
 
     If (a) the Company fails to file any of the registration statements
required by the Registration Rights Agreement on or before the date specified
for such filing, (b) any of such registration statements is not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), or (c) the Company fails to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement, or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable in connection
with resales of Transfer Restricted Securities during the periods specified in
the Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then the Company will pay
Liquidated Damages to each holder of Transfer Restricted Securities, with
respect to the first 90-day period immediately following the occurrence of the
first Registration Default in an amount equal to $.05 per week per $1,000
principal amount of Transfer Restricted Securities held by such holder. The
amount of the Liquidated Damages will increase by an additional $.05 per week
per $1,000 principal amount of Transfer Restricted Securities with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of Liquidated Damages for all Registration Defaults of
$.30 per week per $1,000 principal amount of Transfer Restricted Securities. All
accrued Liquidated Damages will be paid by the Company on each Damages Payment
Date to the Global Note holder by wire transfer of immediately available funds
or by federal funds check and to holders of Certificated Securities by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults relating to any particular Transfer Restricted
Securities, the accrual of Liquidated Damages with respect to such Transfer
Restricted Securities will cease. However, the Registration Rights Agreement
provides that pending the announcement of a material corporate event, the
Company may issue a notice that the Shelf Registration Statement is unusable, so
long as the number of days in any consecutive twelve-month period for which all
such notices are issued does not exceed 30 days in the aggregate. In such event,
the Company will not be required to pay Liquidated Damages during such 30 days.
 
                                       25
<PAGE>   26
 
     EXCEPT AS OTHERWISE PROVIDED HEREIN WITH RESPECT TO THE SHELF REGISTRATION
STATEMENT, FOLLOWING THE CONSUMMATION OF THE EXCHANGE OFFER, ANY HOLDER OF
SERIES A NOTES THAT HAS NOT TENDERED AND EFFECTIVELY DELIVERED TO THE EXCHANGE
AGENT IN ACCORDANCE WITH THE EXCHANGE OFFER, AND ANY HOLDER OF EXCHANGE NOTES
WHO IS NOT ENTITLED TO RESELL SUCH EXCHANGE NOTES PURSUANT TO A RESALE
PROSPECTUS, IF ANY, REQUIRED TO BE FILED AS AN AMENDMENT TO THE EXCHANGE OFFER
REGISTRATION STATEMENT, WILL HAVE NO FURTHER EXCHANGE OR REGISTRATION RIGHTS AND
SUCH SERIES A NOTES WILL CONTINUE TO BE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER. See "-- Termination of Certain Rights," "-- Consequences of Failure to
Exchange," and "-- Resale of Exchange Notes." Accordingly, the ability of any
such holder of Notes to resell its Notes could be adversely affected.
 
TERMS OF THE EXCHANGE OFFER
 
     Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Series A
Notes validly tendered and not withdrawn prior to 5:00 P.M. Eastern Time, on the
Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Series A Notes
accepted in the Exchange Offer. Holders may tender some or all of their Series A
Notes pursuant to the Exchange Offer. However, Series A Notes may be tendered
only in integral multiples of $1,000.
 
     The form and terms of the Exchange Notes are substantially identical to the
form and terms of the Series A Notes except that (i) the Exchange Notes have
been registered under the Securities Act and hence will not bear the transfer
restrictions set forth on the Series A Notes and (ii) the holders of the
Exchange Notes generally will not be entitled to certain rights under the
Registration Rights Agreement, which rights generally will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Series A Notes and will be entitled to the benefits of the
Indenture.
 
     Holders of the Notes do not have any appraisal or dissenters' rights under
the Indenture or otherwise in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the Indenture, the
Registration Rights Agreement, and the applicable requirements of the Exchange
Act and the rules and regulations of the SEC thereunder, including Rule 14e-1
thereunder.
 
     The Company shall be deemed to have accepted validly tendered Series A
Notes when, as and if the Company has given telephonic, facsimile or written
notice thereof to the Exchange Agent. The Exchange Agent will act as agent for
the tendering holders for the purpose of receiving the Exchange Notes from the
Company.
 
     If any tendered Series A Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Series A Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
 
     Holders who tender Series A Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Series
A Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the Exchange Offer. See "-- Fees and Expenses."
 
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
 
   
     The term "Expiration Date" shall mean 5:00 P.M., Eastern Time, on Friday,
August 28, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
    
 
                                       26
<PAGE>   27
 
     To extend the Exchange Offer, the Company will notify the Exchange Agent of
any extension by oral or written notice, followed by a public announcement
thereof no later than 9:00 A.M., Eastern Time, on the next business day after
the previously scheduled Expiration Date.
 
     The Company reserves the right, in its reasonable judgment, (i) to delay
accepting any Series A Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "-- Conditions"
shall not have been satisfied, by giving telephonic, facsimile or written notice
of such delay, extension or termination to the Exchange Agent or (ii) to amend
the terms of the Exchange Offer in any manner. Any such delay in acceptance,
extension or termination, and any amendment will be followed as promptly as
practicable by a public announcement thereof. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders.
 
     If the Company does not consummate the Exchange Offer, or, in lieu thereof,
the Company does not file and cause to become effective a Shelf Registration
Statement for the Series A Notes within the time periods set forth herein,
Liquidated Damages will accrue and be payable on the Transfer Restricted
Securities. See "-- Registration Rights and Effect of Exchange Offer."
 
     Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
 
INTEREST ON THE EXCHANGE NOTES
 
     The Exchange Notes will bear interest from March 31, 1998, the date of
issuance of the Series A Notes that are exchanged for the Exchange Notes (or, if
later, the most recent Interest Payment Date to which interest on such Series A
Notes has been paid or duly provided for). Accordingly, holders of Series A
Notes that are accepted for exchange will not receive interest that is accrued
but unpaid on those Notes at the time of tender, but such interest will be
payable on the first Interest Payment Date following the Expiration Date.
Interest on the Exchange Notes will be payable semiannually on each April 15 and
October 15, commencing on October 15, 1998.
 
PROCEDURES FOR TENDERING
 
     Only an eligible holder of Series A Notes may tender such Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder of Series A Notes must
complete, sign and date the Letter of Transmittal, or a facsimile thereof, have
the signatures thereon guaranteed if required by the Letter of Transmittal and
mail or otherwise deliver the Letter of Transmittal or such facsimile, together
with the Series A Notes and any other required documents, to the Exchange Agent
so as to be received by the Exchange Agent at the address set forth below prior
to 5:00 P.M., Eastern Time, on the Expiration Date. Delivery of the Series A
Notes may be made by book-entry transfer in accordance with the procedures
described below. Confirmation of such book-entry transfer must be received by
the Exchange Agent prior to the Expiration Date. In addition, either (i)
certificates for such Series A Notes must be received by the Exchange Agent
along with the Letter of Transmittal, or (ii) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Series A Notes, if
such procedure is available, into the Exchange Agent's account at DTC (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Letter of
Transmittal or, in the case of a book-entry transfer, an Agent's Message in lieu
of a Letter of Transmittal, and all other required documents must be received by
the Exchange Agent at the address set forth below under "-- Exchange Agent"
prior to the Expiration Date. The term "Agent's Message" means a message
transmitted by DTC to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that DTC has received express
acknowledgment from the tendering DTC participant indicating that such
participant has received,
 
                                       27
<PAGE>   28
 
and agrees to be bound by, the Letter of Transmittal and that the Company may
enforce such Letter of Transmittal against such participant.
 
     The tender by a holder and the acceptance thereof by the Company will
constitute an agreement between such holder of Series A Notes and the Company
upon the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
 
     THE METHOD OF DELIVERY OF THE SERIES A NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE SOLE ELECTION
AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT
HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR SERIES A NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
 
     Any beneficial owner whose Series A Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee, including
Series A Notes held in book-entry form and who wishes to tender should contact
the registered holder of Series A Notes promptly, or in the case of book-entry
Series A Notes, the DTC participant who holds such Series A Notes at DTC on
behalf of the beneficial owner, and instruct such registered holder to tender on
such beneficial owner's behalf. See "The Exchange Offer."
 
     Signatures on the Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Series A Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
the Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
 
     If the Letter of Transmittal is signed by a person other than the
registered holder of any Series A Notes listed therein, such Series A Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Series A
Notes with the signature thereon guaranteed by an Eligible Institution.
 
     If the Letter of Transmittal or any Series A Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
 
     All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Series A Notes and withdrawal of tendered
Series A Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Series A Notes not properly tendered or any Series A Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive, to the
extent permitted by applicable law, any defects, irregularities or conditions of
tender as to particular Series A Notes. The Company's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Series A Notes must
be cured within such time as the Company shall determine. Although the Company
intends to notify holders of Series A Notes of defects or irregularities with
respect to tenders of Series A Notes, none of the Company, the Exchange Agent
nor any other person shall incur any liability for failure to give such
notification. Tenders of Series A Notes will not be
 
                                       28
<PAGE>   29
 
deemed to have been made until such defects or irregularities have been cured or
waived. Any Series A Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders as soon
as practicable following the Expiration Date.
 
BOOK-ENTRY TRANSFER
 
     The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Series A Notes at DTC for
the purpose of facilitating the Exchange Offer, and subject to the establishment
thereof, any financial institution that is a DTC Participant may make book-entry
delivery of the Series A Notes by causing DTC to transfer such Series A Notes
into the relevant Exchange Agent's account with respect to the Series A Notes in
accordance with DTC's ATOP procedures for such transfer. Although delivery of
the Series A Notes may be effected through book-entry transfer into the Exchange
Agent's account at DTC, an Agent's Message or an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to DTC does not constitute delivery to the
Exchange Agent.
 
GUARANTEED DELIVERY PROCEDURES
 
     Holders who wish to tender their Series A Notes and (i) whose Series A
Notes are not immediately available, (ii) who cannot deliver their Series A
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent or (iii) who cannot complete the procedures for book-entry transfer, in
each case prior to the Expiration Date, may effect a tender if:
 
          (a) the tender is made through an Eligible Institution;
 
          (b) prior to the Expiration Date, the Exchange Agent receives from
     such Eligible Institution a properly completed and duly executed Notice of
     Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
     setting forth the name and address of the holder of Series A Notes, the
     certificate number(s) of such holder's Series A Notes and the principal
     amount of Series A Notes tendered, stating that the tender is being made
     thereby and guaranteeing that, within three New York Stock Exchange trading
     days after the Expiration Date, the Letter of Transmittal (or facsimile
     thereof), together with the certificates(s) representing the tendered
     Series A Notes (or a confirmation of book-entry transfer of such Series A
     Notes into the Exchange Agent's account at DTC) and any other documents
     required by the Letter of Transmittal, will be deposited by the Eligible
     Institution with the Exchange Agent; and
 
          (c) such properly completed and executed Letter of Transmittal (or
     facsimile thereof), as well as the certificate(s) representing all tendered
     Series A Notes in proper form for transfer (or a confirmation of book-entry
     transfer of such Series A Notes into the Exchange Agent's account at DTC)
     and all other documents required by the Letter of Transmittal, are received
     by the relevant Exchange Agent within three New York Stock Exchange trading
     days after the Expiration Date.
 
     Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Series A Notes according to the
guaranteed delivery procedures set forth above.
 
WITHDRAWALS OF TENDERS
 
     Except as otherwise provided herein, tenders of Series A Notes may be
withdrawn at any time prior to 5:00 P.M., Eastern Time, on the Expiration Date.
 
     To withdraw a tender of Series A Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the relevant
Exchange Agent at its address set forth herein prior to 5:00 P.M., Eastern Time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the name
of the person having deposited the Series A Notes to be withdrawn (the
"Depositor"), (ii) identify the Series A
 
                                       29
<PAGE>   30
 
Notes to be withdrawn (including the certificate number(s) and principal amount
of such Series A Notes, or, in the case of Series A Notes transferred by
book-entry transfer, the name and number of the account at DTC to be credited
and the DTC participant through which such Series A Notes are held), (iii) be
signed by the holder of such Series A Notes in the same manner as the original
signature on the Letter of Transmittal by which such Series A Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the transfer agent and registrar with
respect to the Series A Notes register the transfer of such Series A Notes into
the name of the person withdrawing the tender, and (iv) specify the name in
which any such Series A Notes are to be registered, if different from that of
the Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Series A Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Series A Notes so withdrawn are validly and timely re-tendered. Any Series A
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder, as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Series A Notes may be retendered by following one of
the procedures described above under "-- Procedures for Tendering" at any time
prior to the Expiration Date.
 
CONDITIONS
 
     Notwithstanding any other term of the Exchange Offer including, without
limitation, the terms and conditions contained herein and in the Letter of
Transmittal, the Company shall not be required to accept for exchange, or to
exchange Exchange Notes for, any Series A Notes, and may terminate or amend the
Exchange Offer as provided herein before the acceptance of such Series A Notes,
if:
 
          (a) any law, statute, rule, regulation or interpretation by the
     Commission is proposed, adopted or enacted, which, in the reasonable
     judgment of the Company, might materially impair the ability of the Company
     to proceed with the Exchange Offer or materially impair the contemplated
     benefits of the Exchange Offer to the Company; or
 
          (b) any governmental approval has not been obtained, which approval
     the Company shall, in its reasonable judgment, deem necessary for the
     consummation of the Exchange Offer as contemplated hereby.
 
     If the Company determines in its reasonable judgment that any of the
conditions are not satisfied, the Company may, in its sole discretion (i) refuse
to accept any Series A Notes and return all tendered Notes to the tendering
holders, (ii) extend the Exchange Offer and retain all Series A Notes tendered
prior to the expiration of the Exchange Offer, subject, however, to the rights
of holders to withdraw such Series A Notes (see "-- Withdrawals of Tenders") or
(iii) waive such unsatisfied conditions with respect to the Exchange Offer and
accept all properly tendered Series A Notes which have not been withdrawn. If
such waiver constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver by means of a prospectus supplement that will
be distributed to the registered holders of Series A Notes.
 
TERMINATION OF CERTAIN RIGHTS
 
     Holders of the Series A Notes to whom this Exchange Offer is made have
special rights under the Registration Rights Agreement, certain of which will
terminate upon the consummation of the Exchange Offer. Such special rights which
will terminate include (a) the right to require the Company to comply with the
following: (x) to use all commercially reasonable efforts to cause to be filed
with the Commission an Exchange Offer Registration Statement no later than 60
days following the Closing Date, (y) to use all commercially reasonable efforts
to cause such Exchange Offer Registration Statement to be declared effective by
the Commission no later than 120 days after the Closing Date, and (z) unless the
Exchange Offer would not be permitted by applicable law or Commission policy, to
commence the Exchange Offer and use all commercially reasonable efforts to
issue, on or prior to 30 business days after the date on which the Exchange
Offer Registration Statement was declared effective by the Commission, Exchange
Notes in exchange for all
 
                                       30
<PAGE>   31
 
Series A Notes tendered prior thereto in the Exchange Offer, and (b) the right
to receive Liquidated Damages in the event of a breach by the Company of any of
its obligations set forth in the foregoing clauses (x), (y) or (z), in an
amount, during the first 90-day period immediately following the occurrence of
the first Registration Default, equal to $.05 per week per $1,000 principal
amount of Series A Notes held by such holder, such amount to increase by an
additional $.05 per week per $1,000 principal amount of Series A Notes with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of $.30 per week per $1,000 principal amount
of Series A Notes. See "-- Registration Rights and Effect of Exchange Offer."
 
     The Registration Rights Agreement also requires the registering for resale,
pursuant to Rule 415 under the Securities Act, the Transfer Restricted
Securities under certain circumstances. Such resale of Transfer Restricted
Securities made in reliance upon the registration thereof under the Securities
Act may be made only pursuant to the "Plan of Distribution" set forth in this
Prospectus or a separate resale prospectus, if any, filed as an amendment to the
Exchange Offer Registration Statement. To be eligible to effect resales of
Transfer Restricted Securities pursuant to the Shelf Registration Statement, a
holder of Transfer Restricted Securities must (i) notify the Company within 20
business days after the consummation of the Exchange Offer that (a) it is not
permitted by law or any policy of the Commission to participate in the Exchange
Offer, (b) it may not resell the Exchange Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and this Prospectus is not
appropriate or available for such resales by such holder or (c) it is a
broker-dealer and holds Series A Notes acquired directly from the Company or an
affiliate of the Company and (ii) furnish to the Company in writing, within 15
business days after receipt of a request therefor, such information as the
Company may reasonably request for use in connection with the Shelf Registration
Statement. In the event that any holders of Transfer Restricted Securities
comply with the foregoing requirements, and supply any additional information
reasonably requested by the Company within 15 business days following such
request, the Company will file a Shelf Registration Statement containing an
appropriate resale prospectus and will use commercially reasonable efforts to
cause such Shelf Registration Statement to become effective under the Securities
Act and to remain continuously effective thereunder for a period of at least two
years following the Closing Date. In the event that the Company fails to comply
with its obligations in connection with resales of Transfer Restricted
Securities under the Shelf Registration Statement it may be required to pay
Liquidated Damages. See "-- Registration Rights and Effect of Exchange Offer."
 
EXCHANGE AGENT
 
     The Trustee will act as Exchange Agent for the Exchange Offer with respect
to the Notes (the "Exchange Agent").
 
     Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal for the Series A Notes and
requests for copies of Notice of Guaranteed Delivery should be directed to the
Exchange Agent, addressed as follows:
 
          By Registered or Certified Mail:
 
          IBJ Schroder Bank & Trust Company
          P.O. Box 84
          Bowling Green Station
          New York, New York 10274-0084
          Attn: Reorganization Operations Department
 
          By Overnight Mail or Courier Service or in Person by Hand:
 
          IBJ Schroder Bank & Trust Company
          One State Street
          New York, New York 10004
          Attn: Securities Processing Window, Subcellar One (SC-1)
 
          By Facsimile:  (212) 858-2611
 
                                       31
<PAGE>   32
 
FEES AND EXPENSES
 
     The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone, facsimile or in person by officers and
regular employees of the Company and its affiliates, who may be reimbursed their
reasonable expenses incurred in connection with such solicitation, but who will
not otherwise receive special compensation for such efforts.
 
     The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
persons soliciting acceptance of the Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith
and pay other registration expenses, including reasonable fees and expenses of
the Trustee, filing fees, blue sky fees and printing and distribution expenses.
 
     The Company will pay all transfer taxes, if any, applicable to the exchange
of the Notes pursuant to the Exchange Offer. If, however, certificates
representing the Exchange Notes or the Series A Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the Series A Notes
tendered, or if tendered Series A Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of the Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder of Series A Notes.
 
ACCOUNTING TREATMENT
 
     The Exchange Notes will be recorded by the Company at the same carrying
value as the Series A Notes, which is the aggregate principal amount in the case
of the Series A Notes. Accordingly, no gain or loss for accounting purposes will
be recognized in connection with the Exchange Offer. The expenses of the
Exchange Offer will be amortized over the term of the Exchange Notes.
 
RESALE OF EXCHANGE NOTES
 
     Based on an interpretation by the staff of the SEC set forth in no-action
letters issued to unrelated third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Series A Notes may
be offered for resale, resold and otherwise transferred by any holder thereof
(other than any such holder which is a broker-dealer that holds Series A Notes
acquired for its own account as a result of market-making or other trading
activities or any such holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holder's
business and such holder does not intend to participate, and has no arrangement
or understanding with any person to participate, in the distribution of such
Exchange Notes. Any holder who tenders in the Exchange Offer with the intention
to participate, or for the purpose of participating, in a distribution of the
Exchange Notes may not rely on the position of the staff of the SEC enunciated
in Exxon Capital Holdings Corporation (available May 13, 1988) and Morgan
Stanley & Co., Incorporated (available June 5, 1991), or similar no-action
letters, but rather must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. In addition, any such resale transaction should be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K of the
Securities Act. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Series A Notes, where such Series A Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, may be a statutory underwriter and must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes.
 
     By tendering Series A Notes in the Exchange Offer, each holder tendering
such Series A Notes will represent to the Company that, among other things, (i)
the holder is not an affiliate of the Company, (ii) the
 
                                       32
<PAGE>   33
 
holder is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a distribution
of the Exchange Notes to be issued in the Exchange Offer and (iii) the holder is
acquiring the Exchange Notes in its ordinary course of business, and (iv) the
holder acknowledges that if it or any broker-dealer uses the Exchange offer to
participate in a distribution of the Exchange Notes they must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale of the Exchange Notes and cannot rely on the
no-action letters referenced above.
 
     Affiliates of the Company are not entitled to rely on the foregoing
interpretations of the staff of the SEC with respect to resales of the Exchange
Notes without compliance with the registration and prospectus delivery
requirements of the Securities Act. The Company has agreed to bear all
registration expenses incurred under the Registration Rights Agreement,
including printing and distribution expenses, reasonable fees of counsel, blue
sky fees and expenses, reasonable fees of independent accountants in connection
with the preparation of comfort letters (to the extent required), and SEC and
the NASD filing fees and expenses.
 
CONSEQUENCES OF FAILURE TO EXCHANGE
 
     As a result of the making of this Exchange Offer, the Company will have
fulfilled one of its obligations under the Registration Rights Agreement, and
holders of Series A Notes who do not tender their Series A Notes generally will
not have any further registration rights under the Registration Rights Agreement
or otherwise. Accordingly, any holder of Series A Notes that does not exchange
that holder's Series A Notes for Exchange Notes will continue to hold
unregistered Series A Notes and will be entitled to all the rights and
limitations applicable thereto under the Indenture, except to the extent that
such rights or limitations, by their terms, terminate or cease to have further
effectiveness as a result of the Exchange Offer.
 
     The Series A Notes that are not exchanged for Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Series A
Notes may be resold only (i) to the Company (upon redemption thereof or
otherwise), (ii) pursuant to an effective registration statement under the
Securities Act, (iii) so long as the Series A Notes are eligible for resale
pursuant to Rule 144A, to a qualified institutional buyer within the meaning of
Rule 144A under the Securities Act in a transaction meeting the requirements of
Rule 144A, (iv) outside the United States to a foreign person pursuant to the
exemption from the registration requirements of the Securities Act provided by
Regulation S thereunder, (v) pursuant to an exemption from registration under
the Securities Act provided by Rule 144 thereunder (if available) or (vi) to an
institutional accredited investor in a transaction exempt from the registration
requirements of the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States. See "Risk
Factors -- Restrictions on Resale."
 
NO RECOMMENDATION
 
     Participation in the Exchange Offer is voluntary and holders of Series A
Notes should carefully consider whether to accept. Holders of Series A Notes are
urged to consult their own financial and tax advisors in making their own
decision on what action to take. The Board of Directors of the Company makes no
recommendation as to whether or not holders should tender Series A Notes
pursuant to the Exchange Offer.
 
OTHER
 
     The Company may in the future seek to acquire unregistered Series A Notes
that are not tendered in the Exchange Offer in open market, privately negotiated
or other transactions, through subsequent exchange offers or otherwise. The
Company has no present plans to acquire any Series A Notes that are not tendered
in the Exchange Offer or, except as required by the Registration Rights
Agreement, to file a registration statement to permit resales of any untendered
Series A Notes.
 
                                       33
<PAGE>   34
 
                              PLAN OF DISTRIBUTION
 
     Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge (i) that by receiving Exchange
Notes for its own account in exchange for Series A Notes, where such Series A
Notes were acquired as a result of market-making activities or other trading
activities (other than Transfer Restricted Securities acquired directly from the
Company), such broker-dealer may be a statutory underwriter, and (ii) that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with the resales of Exchange Notes
received in exchange for the Series A Notes where such Series A Notes were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that for a period of 180 days after the date on which the
Exchange Offer Registration Statement is declared effective, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer upon
reasonable request for use in connection with any such resale.
 
     The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other persons. Exchange Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
 
     The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders (including any broker-dealers) and certain parties related
to the holders against certain liabilities, including liabilities under the
Securities Act.
 
                                THE TRANSACTIONS
 
THE ACQUISITION
 
     General.  Pursuant to the Stock Purchase Agreement, SAC purchased all of
the outstanding capital stock of the Company in the Acquisition. The aggregate
purchase price paid by SAC for the Acquisition was equal to the approximately
$66.7 million Cash Consideration. The Cash Consideration is subject to
adjustment (the "Post-Closing Adjustment") if the value of the net assets of the
Company as of March 31, 1998, the date of the closing of the Acquisition (the
"Acquisition Closing"), differs materially from the net assets of the Company as
of December 31, 1997. Because a determination has been made that the value of
the net assets of the Company as of March 31, 1998 did not differ materially
from the value of the net assets of the Company as of December 31, 1997, no
Post-Closing Adjustment will be made to the Cash Consideration.
 
     Indemnification.  The Selling Stockholders are required to indemnify,
defend and hold harmless SAC, the Company and certain affiliated persons,
against and for all Losses (as defined in the Stock Purchase Agreement)
resulting from, based upon or arising out of, among other things, breaches of
representations, warranties or covenants of the Company or the Selling
Stockholders contained in or made pursuant to the Stock Purchase Agreement. The
Selling Stockholders are obligated to provide such indemnity generally for a
period of 18 months following the Acquisition Closing, although indemnification
for tax related matters continues until September 15, 2002, and indemnification
for Losses related to title to the shares of the Company's capital stock
acquired (or the options exercised) is not limited by any time period. The
Selling Stockholders are not obligated to provide such indemnity until the total
of all Losses with respect thereto
 
                                       34
<PAGE>   35
 
exceeds $500,000, and the Selling Stockholders will only be liable for the
amount by which such Losses exceed $250,000. The maximum aggregate liability of
the Selling Stockholders may not exceed $8.2 million, except with respect to
Losses related to title to the Company's assets and title to the shares of the
Company's capital stock sold to SAC. Pursuant to the Stock Purchase Agreement,
$4.0 million of the Cash Consideration is being held in escrow for a limited
period of time to secure a portion of the indemnification obligations of the
Selling Stockholders under the Stock Purchase Agreement.
 
FINANCING OF THE ACQUISITION
 
     The aggregate purchase price paid by SAC for the Acquisition, which was
comprised of the Cash Consideration (subject to the Post-closing Adjustment),
together with $6.0 million of related fees and expenses, was financed with the
net proceeds of the Offering and the $22.0 million Equity Contribution by CGW
and the Senior Management to Holdings, which was then contributed by Holdings to
SAC. Immediately following the Acquisition, the Merger occurred in which SAC
merged with and into the Company, with the Company being the surviving
corporation. As a result of the Merger, the Company became the obligor of the
Notes and a wholly owned subsidiary of Holdings. In return for funding the
Equity Contribution, CGW received 20,000 shares of Holdings' no par value common
stock (the "Holdings Stock"), or 79.8% of the economic and voting power of
Holdings (on a fully diluted basis), and the Senior Management collectively
received 2,000 shares of Holdings Stock, or 8.0% of the economic and voting
power of Holdings (on a fully diluted basis). After taking into consideration
shares of Holdings Stock for which options held by Senior Management will be
exercisable, 20.2% of the economic and voting power of Holdings (on a fully
diluted basis) is held by Senior Management. See "Use of Proceeds," "Beneficial
Ownership" and "Certain Transactions."
 
CREDIT FACILITIES AND IRB FINANCING
 
     In connection with the Acquisition, the Company (i) repaid approximately
$9.2 million of term loan indebtedness (including accrued interest thereon and
fees) outstanding under the Terminated Credit Facility with a portion of the net
proceeds of the Offering and (ii) replaced the Terminated Credit Facility and
the Terminated Reimbursement Agreement with the New Credit Facility. The New
Credit Facility consists of a $15.0 million revolving credit facility which
provides availability for borrowings and letters of credit. As part of the IRB
Financing, the letter of credit issuing bank under the Terminated Reimbursement
Agreement issued an approximately $6.1 million letter of credit (the "Terminated
Bond Letter of Credit") for the account of the Company to Regions Bank, as
trustee (the "Bond Trustee") for the holders of the industrial revenue bonds
(the "IRBs") issued under the Trust Indenture dated as of January 1, 1995 (the
"Bond Indenture") between the Bond Trustee and the State Industrial Development
Authority, a public corporation organized under the laws of the State of Alabama
(the "SIDA"). As a result of the termination of the Terminated Reimbursement
Agreement, the Terminated Bond Letter of Credit was replaced by a new
approximately $6.1 million letter of credit (the "New Bond Letter of Credit")
issued under the New Credit Facility. In addition, as a consequence of the IRB
Financing, substantially all of the real and personal property used in SIMCALA's
operations (including the Facility) is owned by the Montgomery IDB and leased to
SIMCALA. See "Description of Other Indebtedness."
 
                                       35
<PAGE>   36
 
                                USE OF PROCEEDS
 
     The Company will not receive any proceeds from the issuance of the Exchange
Notes pursuant to the Exchange Offer. The net proceeds to SAC from the sale of
the Series A Notes were approximately $70.3 million after deducting underwriting
discounts and offering expenses. The net proceeds from the sale of the Series A
Notes, together with the Equity Contribution, have been used to fund the
purchase price for the Acquisition, to repay certain indebtedness of the Company
and to pay transaction fees and expenses and are being used for the Company's
general corporate purposes.
 
     The following table sets forth the approximate amounts of the sources and
uses of funds in connection with the Transactions, including the Offering:
 
<TABLE>
<CAPTION>
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>
SOURCES OF FUNDS:
Notes sold in the Offering..................................         $75,000
Equity Contribution(1)......................................          22,000
                                                                     -------
          Total Sources.....................................         $97,000
                                                                     =======
USES OF FUNDS:
The Acquisition.............................................         $66,703
Repayment of indebtedness(2)................................           9,159
Transaction fees and expenses(3)............................           6,000
General corporate purposes(4)...............................          15,138
                                                                     -------
          Total Uses........................................         $97,000
                                                                     =======
</TABLE>
 
- ---------------
 
(1) Of the total Equity Contribution, CGW contributed $20.0 million and Senior
    Management collectively contributed $2.0 million.
(2) Consists of (i) term loan indebtedness outstanding under the Terminated
    Credit Facility the principal amount of which was payable in quarterly
    installments with the last of such installments payable on March 31, 2002
    and which, as of March 31, 1998, accrued interest at the rate of
    approximately 8% per annum, and (ii) accrued interest thereon and fees. This
    term loan indebtedness was used to refinance certain indebtedness of the
    Company.
(3) Includes transaction fees and expenses of SAC and Holdings incurred in
    connection with the Transactions.
(4) The Company expects that a portion of the net proceeds of the Offering will
    be used to construct a fourth smelting furnace at the Facility and estimates
    that construction of the furnace will cost approximately $25.0 million. The
    Company anticipates that the balance of the construction costs will be
    funded by cash flow from the Company's operations during the construction
    period.
 
                                       36
<PAGE>   37
 
                                 CAPITALIZATION
 
     The following table sets forth, as of March 31, 1998, the capitalization of
the Company after giving effect to the Transactions. This table should be read
in conjunction with "The Transactions," "Description of the Notes," "Description
of Other Indebtedness," "Unaudited Condensed Pro Forma Financial Information"
and the Company's Financial Statements and the notes thereto appearing elsewhere
herein.
 
<TABLE>
<CAPTION>
                                                              AS OF MARCH 31, 1998
                                                              ---------------------
                                                                   (DOLLARS IN
                                                                   THOUSANDS)
<S>                                                           <C>
Cash and cash equivalents...................................         $15,796
                                                                     =======
Current maturities of long-term obligations.................         $    90
                                                                     =======
Long-term obligations (net of current maturities):
  Industrial revenue bonds..................................         $ 6,000
  New Credit Facility.......................................              --
  Capital lease obligations.................................              83
  Notes 9 5/8% due 2006.....................................          75,000
                                                                     -------
          Total long-term obligations.......................          81,083
Stockholders' equity:
  Common stock, par value $.01 per share; 20,000 shares
     authorized; 10,889 shares issued and outstanding.......              --
  Additional paid-in capital................................          18,807
  Retained earnings.........................................              --
                                                                     -------
          Total stockholders' equity........................          18,807
          Total capitalization..............................         $99,890
                                                                     =======
</TABLE>
 
                                       37
<PAGE>   38
 
              UNAUDITED CONDENSED PRO FORMA FINANCIAL INFORMATION
 
     The following Unaudited Condensed Pro Forma Financial Information of the
Company is based on the historical financial statements of the Predecessor
appearing elsewhere in this Prospectus, as adjusted to reflect the effects of
the Transactions. The Unaudited Condensed Pro Forma Financial Information has
been prepared to give effect to the Transactions, including the Acquisition, the
Offering and the application of the net proceeds therefrom. The unaudited
condensed pro forma statements of income for the year ended December 31, 1997
and the three months ended March 31, 1998 assume the Transactions occurred on
January 1, 1997.
 
     The Unaudited Condensed Pro Forma Financial Information is not necessarily
indicative of the Company's future results of operations or financial position
and does not purport to indicate the Company's results of operations for the
year ended December 31, 1997 and the three months ended March 31, 1998 had the
Transactions been completed on January 1, 1997. In connection with the
Acquisition, the purchase method of accounting was used to establish and record
a new cost basis for the assets acquired and liabilities assumed. The allocation
of the purchase price and acquisition costs to the assets acquired and
liabilities assumed is preliminary at March 31, 1998 and is subject to change
pending the finalization of appraisals and other studies of fair value and
finalization of management's plans which may result in the recording of
additional liabilities. These plans include finalization of purchase price
allocations and the filing of the March 31, 1998 federal and state income tax
returns, which are anticipated to be finalized by September 30, 1998. Management
does not expect such adjustments to be material or to have a material impact on
the pro forma financial information. The excess of the purchase price over
preliminary fair market value of assets acquired and liabilities assumed was
recorded as goodwill.
 
     The Unaudited Condensed Pro Forma Financial Information and the
accompanying notes should be read in conjunction with the historical financial
information pertaining to the Predecessor included in this Prospectus, including
the Financial Statements of the Predecessor and the notes thereto. See "The
Transactions," "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
 
UNAUDITED CONDENSED PRO FORMA INCOME STATEMENTS
 
<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED MARCH 31, 1998
                                                            ----------------------------------------
                                                                                          PRO FORMA
                                                            HISTORICAL    ADJUSTMENTS    AS ADJUSTED
                                                            ----------    -----------    -----------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                                         <C>           <C>            <C>
INCOME STATEMENT DATA:
Net sales.................................................   $14,854       $     --        $14,854
Cost of goods sold........................................    11,679            554(1)      12,233
                                                             -------       --------        -------
Gross profit (loss).......................................     3,175           (554)(1)      2,621
Selling and administrative expenses.......................     3,824            401(2)       4,225
                                                             -------       --------        -------
Operating loss............................................      (649)          (955)        (1,604)
Interest expense..........................................       314          1,759(3)       2,073
Other income, net.........................................       282             --            282
                                                             -------       --------        -------
Loss before provision for income taxes....................      (681)        (2,714)        (3,395)
Provision for income taxes................................      (100)          (918)(4)     (1,018)
                                                             -------       --------        -------
Net loss..................................................   $  (581)      $ (1,796)       $(2,377)
                                                             =======       ========        =======
</TABLE>
 
                                       38
<PAGE>   39
 
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31, 1997
                                                            ----------------------------------------
                                                                                          PRO FORMA
                                                            HISTORICAL    ADJUSTMENTS    AS ADJUSTED
                                                            ----------    -----------    -----------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                                         <C>           <C>            <C>
INCOME STATEMENT DATA:
Net sales.................................................   $62,184       $     --        $62,184
Cost of goods sold........................................    47,972          2,217(1)      50,189
                                                             -------       --------        -------
Gross profit (loss).......................................    14,212         (2,217)(1)     11,995
Selling and administrative expenses.......................     2,846          1,606(2)       4,452
                                                             -------       --------        -------
Operating income (loss)...................................    11,366         (3,823)         7,543
Interest expense..........................................     1,710          6,583(3)       8,293
Other income, net.........................................       228             --            228
                                                             -------       --------        -------
Earnings (loss) before provision for income taxes.........     9,884        (10,406)          (522)
                                                             -------       --------        -------
Provision for income taxes................................     3,513         (3,144)(4)        369
                                                             -------       --------        -------
Net income (loss).........................................   $ 6,371       $ (7,262)       $  (891)
                                                             =======       ========        =======
</TABLE>
 
- ---------------
 
(1) Reflects the increase in annual depreciation expense resulting from purchase
    accounting adjustments which increase the depreciable basis of the property,
    plant and equipment acquired in the Acquisition of $31.0 million. The
    estimated useful life of property, plant and equipment is approximately 14
    years.
 
(2) Reflects the increase in amortization expense resulting from the excess of
    the Cash Consideration over the estimated fair market value of the net
    assets acquired in the Acquisition as follows:
 
<TABLE>
    <S>                                                           <C>
    Total estimated Cash Consideration..........................  $ 66,703,000
    Less:
      Carryover basis allocated to goodwill.....................    (1,373,410)
      Property, plant and equipment.............................   (55,000,000)
      Other assets acquired.....................................    (7,702,000)
    Plus:
      Liabilities assumed.......................................    25,962,000
      Estimated fees and expenses related to the Acquisition....     1,250,000
      Net deferred tax liability associated with the change in
         basis of assets........................................    10,302,711
                                                                  ------------
      Excess of Cash Consideration over estimated fair market
         value of the net assets acquired.......................  $ 40,142,301
                                                                  ============
</TABLE>
 
     Pro forma amortization expense has been calculated based on the excess of
     the Cash Consideration over estimated fair market value of the net assets
     acquired amortized over a 25 year period using the straight-line method.
 
     The Company determined the carryover basis adjustment allocated to goodwill
     in accordance with Emerging Issues Task Force Consensus No. 88-16, "Basis
     in Leveraged Buyout Transactions," assuming the acquisition occurred on
     January 1, 1997. Such allocations reduced goodwill by $1,373,000. A
     similarly determined amount of $1,819,000 is considered in property, plant
     equipment. Senior Management's ownership in the Company prior to the
     transaction was 8% and their ownership subsequent to the transaction is 9%.
 
                                       39
<PAGE>   40
 
     (3) Reflects interest expense on a going forward basis for (i) interest
         costs associated with the Notes; (ii) amortization of debt issuance
         costs related to the Offering; and (iii) interest costs associated with
         the existing indebtedness of the Company that will not be paid off in
         conjunction with the Transactions.
 
<TABLE>
        <S>                                                           <C>
        Interest expense on the Notes...............................  $7,218,750
        Amortization of debt issuance costs.........................     593,750
                                                                      ----------
                  Total interest expense related to new
                   indebtedness.....................................   7,812,500
        Interest expense associated with existing indebtedness......  $  480,000
                                                                      ==========
        Pro forma interest expense..................................  $8,292,500
                                                                      ==========
</TABLE>
 
        Interest on Notes is based on the rate of 9.625% per annum. The debt
        issuance costs are amortized over the eight year term of the Notes.
        Interest on the existing $6,000,000 indebtedness is based on the rate of
        8% per annum.
 
     (4) Reflects the tax effect of pro forma adjustments to earnings before
         provision for income taxes adjusted for non-deductible amortization of
         goodwill multiplied by the statutory income tax rate of 34%.
 
                                       40
<PAGE>   41
 
                   SELECTED HISTORICAL FINANCIAL INFORMATION
 
     The selected financial information for the three months ended March 31,
1997 and March 31, 1998 has been derived from the unaudited financial statements
of the Predecessor and are included elsewhere in this Prospectus. The selected
financial information as of March 31, 1998 has been derived from the unaudited
financial statements of the Company which are included elsewhere in this
Prospectus. The selected financial information for the year ended December 31,
1997 and as of such date has been derived from the financial statements of the
Predecessor which have been audited by Deloitte & Touche LLP, independent
auditors, and are included elsewhere in this Prospectus. The selected financial
information for the year ended December 31, 1996 and as of such date has been
derived from the financial statements of the Predecessor which have been audited
by Crowe, Chizek and Company LLP, independent auditors, and are included
elsewhere in this Prospectus. The selected financial information for the period
from February 10, 1995 (date of inception) to December 31, 1995 and as of
December 31, 1995 has been derived from the financial statements of the
Predecessor which have been audited by Ernst & Young LLP, independent auditors,
and are included elsewhere in this Prospectus. The selected financial
information for the period from January 1, 1995 to February 10, 1995 and the
year ending December 31, 1994 has been derived from the unaudited financial
statements of SiMETCO, a predecessor. The selected financial information for the
year ended December 31, 1993 and as of such date has been derived from the
audited financial statements of SiMETCO, a predecessor. In the opinion of
management, the unaudited condensed statements of operations and cash flows
included herein reflect all normal recurring accruals necessary for a fair
statement of the results of the interim periods reflected. The selected
financial information below is qualified in its entirety by, and should be read
in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Predecessor's Financial Statements
and the notes thereto appearing elsewhere herein.
 
<TABLE>
<CAPTION>
                                  SIMETCO, INC.(1)                                 PREDECESSOR
                        ------------------------------------   ---------------------------------------------------
                                                               PERIOD FROM
                                                                FEB. 10,
                                                 PERIOD FROM   1995 (DATE                          THREE MONTHS
                              YEAR ENDED           JAN. 1,         OF           YEAR ENDED             ENDED
                             DECEMBER 31,          1995 TO     INCEPTION)      DECEMBER 31,          MARCH 31,
                        ----------------------    FEB. 10,     TO DEC. 31,   -----------------   -----------------
                          1993        1994          1995         1995(1)      1996      1997      1997      1998
                        --------   -----------   -----------   -----------   -------   -------   -------   -------
                                   (UNAUDITED)   (UNAUDITED)                                        (UNAUDITED)
                                              (DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA)
<S>                     <C>        <C>           <C>           <C>           <C>       <C>       <C>       <C>
  INCOME STATEMENT
  DATA:
Net sales............   $ 31,014     $31,127       $3,742        $31,523     $52,407   $62,184   $15,655   $14,854
Cost of goods sold...     29,864      30,310        3,314         32,391      42,798    47,972    12,225    11,679
                        --------     -------       ------        -------     -------   -------   -------   -------
Gross profit (loss)..      1,150         817          428           (868)      9,609    14,212     3,430     3,175
Selling and
  administrative
  expenses...........      2,241       1,749           66          1,599       1,923     2,846       682     3,824
                        --------     -------       ------        -------     -------   -------   -------   -------
Operating income
  (loss).............     (1,091)       (932)         362         (2,467)      7,686    11,366     2,748      (649)
Interest expense.....        776         800           72          1,111       1,511     1,710       415       314
Other (expense)
  income, net........       (861)       (211)          --            359         444       228        30       282
                        --------     -------       ------        -------     -------   -------   -------   -------
Earnings (loss)
  before provision
  for income taxes...     (2,728)     (1,943)         290         (3,219)      6,619     9,884     2,363      (681)
Provision for income
  taxes..............         --          --           --             --       1,169     3,513       793      (100)
                        --------     -------       ------        -------     -------   -------   -------   -------
Earnings (loss) from
  continuing
  operations before
  cumulative effect
  of a change in
  accounting
  principle..........     (2,728)     (1,943)         290         (3,219)      5,450     6,371     1,570      (581)
</TABLE>
 
                                       41
<PAGE>   42
 
<TABLE>
<CAPTION>
                                  SIMETCO, INC.(1)                                 PREDECESSOR
                        ------------------------------------   ---------------------------------------------------
                                                               PERIOD FROM
                                                                FEB. 10,
                                                 PERIOD FROM   1995 (DATE                          THREE MONTHS
                              YEAR ENDED           JAN. 1,         OF           YEAR ENDED             ENDED
                             DECEMBER 31,          1995 TO     INCEPTION)      DECEMBER 31,          MARCH 31,
                        ----------------------    FEB. 10,     TO DEC. 31,   -----------------   -----------------
                          1993        1994          1995         1995(1)      1996      1997      1997      1998
                        --------   -----------   -----------   -----------   -------   -------   -------   -------
                                   (UNAUDITED)   (UNAUDITED)                                        (UNAUDITED)
                                              (DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA)
<S>                     <C>        <C>           <C>           <C>           <C>       <C>       <C>       <C>
Loss on disposal of
  discontinued
  operations.........       (182)         --           --             --          --        --        --        --
                        --------     -------       ------        -------     -------   -------   -------   -------
Earnings (loss)
  before cumulative
  effect of change in
  accounting
  principle..........     (2,910)     (1,943)         290         (3,219)      5,450     6,371     1,570      (581)
                        --------     -------       ------        -------     -------   -------   -------   -------
Cumulative effect on
  prior years of a
  change in
  accounting for
  post-retirement
  benefits other than
  pensions...........     (9,292)         --           --             --          --        --        --        --
                        --------     -------       ------        -------     -------   -------   -------   -------
Net income (loss)....   $(12,202)    $(1,943)      $  290        $(3,219)    $ 5,450   $ 6,371   $ 1,570   $  (581)
                        ========     =======       ======        =======     =======   =======   =======   =======
OTHER DATA:
  (UNAUDITED)
EBITDA(2)............                                            $(1,038)    $ 9,723   $13,762   $ 3,202   $   104
EBITDA margin(3).....                                               (3.3)%      18.6%     22.1%     20.5%      0.7%
Depreciation and
  amortization.......                                            $ 1,070     $ 1,593   $ 2,167   $   424   $   471
Capital
  expenditures.......                                            $ 4,154     $ 6,913   $ 2,075   $   438   $ 1,184
Cash interest
  expense............                                            $   929     $ 1,238   $ 1,560   $   421   $ 1,920
Ratio of EBITDA to
  cash interest
  expense(4).........                                                 --         7.9x      8.8x      7.6x       --
Ratio of earnings to
  fixed charges(5)...         --          --          5.0x            --         4.8x      5.9x      6.5x       --
Cash flows from
  operating
  activities.........                                            $(1,408)    $ 9,235   $ 9,995   $   992   $ 1,168
Cash flows from
  investing
  activities.........                                            $(4,154)    $(6,913)  $(2,075)  $  (438)  $(1,184)
Cash flows from
  financing
  activities.........                                            $ 2,785     $(2,144)  $(7,472)  $  (119)  $    39
OPERATING DATA:
  (UNAUDITED)
Silicon metal
  production (in
  metric tons).......     23,435      23,987        2,395         25,669      33,373    37,094     9,076     9,110
Average sales price
  per metric ton.....   $  1,388     $ 1,366       $1,410        $ 1,436     $ 1,641   $ 1,723   $ 1,743   $ 1,661
Average cost per
  metric ton.........   $  1,419     $ 1,415       $1,481        $ 1,529     $ 1,358   $ 1,279   $ 1,320   $ 1,279
</TABLE>
 
                                       42
<PAGE>   43
 
<TABLE>
<CAPTION>
                                                   SIMETCO,
                                                    INC.(1)                PREDECESSOR               COMPANY
                                               -----------------   ---------------------------   ---------------
                                                     AS OF
                                                 DECEMBER 31,          AS OF DECEMBER 31,
                                               -----------------   ---------------------------   AS OF MARCH 31,
                                                1993      1994      1995      1996      1997          1998
                                               -------   -------   -------   -------   -------   ---------------
                                                                        (IN THOUSANDS)
<S>                                            <C>       <C>       <C>       <C>       <C>       <C>
BALANCE SHEET DATA:
Working capital (deficit)....................  $   483   $(4,069)  $(2,926)  $(3,347)  $   885      $ 20,446
Total assets.................................   13,356    12,342    24,217    30,581    33,663       122,667
Long-term debt, less current portion.........       --     2,219    12,014    13,207    12,763        81,083
Mandatorily redeemable preferred stock.......       --        --     3,000        --        --            --
</TABLE>
 
- ---------------
 
(1) On February 10, 1995, the Company acquired the Facility from SiMETCO. At
    such time, SiMETCO was operating the Facility as a debtor-in-possession
    under Chapter 11 of the Bankruptcy Code. In connection with the acquisition
    of the Facility, the Company (i) paid a purchase price of approximately $2.8
    million to the estate of SiMETCO, (ii) assumed approximately $7.9 million of
    vendor indebtedness, accrued expenses and other indebtedness, (iii) incurred
    $6.0 million of additional indebtedness and (iv) issued $3.0 million of its
    Series A Preferred Stock to the estate of SiMETCO. In June 1996, the Series
    A Preferred Stock was converted into a non-interest bearing note, which the
    Company has repaid in full. See "Certain Transactions -- Transactions with
    CGW, its Affiliates and Certain Stockholders" and Notes 6 and 12 to the
    Predecessor's Financial Statements.
(2) "EBITDA" is defined as earnings (loss) from continuing operations before
    interest expense, income taxes, depreciation and amortization. While EBITDA
    should not be construed as a substitute for operating income or as a better
    measure of liquidity than cash flow from operations, both of which are
    determined in accordance with generally accepted accounting principles, it
    is included herein to provide additional information relating to the
    Company's ability to service indebtedness. EBITDA as presented herein is not
    necessarily comparable to EBITDA presented by other companies because not
    all companies define EBITDA similarly.
(3) EBITDA margin is EBITDA as a percentage of net sales.
(4) There was a deficiency of EBITDA to cover cash interest expense for the
    three months ended March 31, 1998 of $0.06 million.
(5) For purposes of computing this ratio, earnings consist of earnings (loss)
    from continuing operations before provision for income taxes and fixed
    charges adjusted to exclude capitalized interest. Fixed charges consist of
    interest expense, whether expensed or capitalized, plus amortization of debt
    issuance costs and debt discount plus such portion of rental expense which
    is representative of the interest factor. There was a deficiency of earnings
    to cover fixed charges of $2.7 million, $1.9 million, $3.3 million and $0.7
    million in the year ended December 31, 1993, the year ended December 31,
    1994, the period from February 10, 1995 to December 31, 1995 and the three
    months ended March 31, 1998, respectively.
 
                                       43
<PAGE>   44
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
OVERVIEW
 
     The following discussion and analysis of the results of operations and
financial condition of the Company covers periods prior to consummation of the
Acquisition on March 31, 1998. Accordingly, the discussion and analysis of such
periods does not reflect the significant impact that the Transactions has had
and will have on the Company. See the discussion below under "Liquidity and
Capital Resources" for further discussion of certain effects that the
Transactions may have on the Company.
 
     SIMCALA was incorporated in 1994 and acquired the Facility from SiMETCO on
February 10, 1995. At the time of the acquisition, SiMETCO was operating the
Facility as a debtor-in-possession under Chapter 11 of the Bankruptcy Code.
Under SiMETCO's ownership, the Facility's operating potential was limited due to
high operating costs, low capacity utilization and an ineffective marketing
strategy. Through SIMCALA's management, operating costs have declined, capacity
utilization has increased and a more focused marketing strategy has been
implemented.
 
     Under SiMETCO's ownership, the Facility produced primarily low grade
silicon metal for the secondary aluminum market. The new management team has
successfully repositioned the Company as a manufacturer of high grade silicon
metal for the chemical and specialty aluminum markets. Historically, higher
grade silicon metal has yielded higher profit margins and been subject to less
demand and price volatility than lower grade silicon metal.
 
     At the time that SIMCALA acquired the Facility, only two of the three
silicon metal smelting furnaces were operating. Management immediately began to
rebuild the non-operating furnace and, in the third quarter of 1995, this
furnace was successfully recommissioned and began operating. In addition, a
refurbishment of the other two furnaces was completed by the fourth quarter of
1996. The recommissioning of the third furnace and the refurbishment of the
remaining two, resulted in a 55% increase in production from 1994 to 1997.
Despite the addition of a third operating furnace, employee headcount remained
constant at approximately 170.
 
     The principal cost components in the production of silicon metal are
electricity, carbon electrodes, quartz, coal, charcoal and woodchips.
Electricity is the largest cost component, comprising 25.5% and 24.4% of cost of
goods sold in 1997 and the three months ended March 31, 1998, respectively. The
balance of raw materials, consisting of electrodes, quartz, coal/charcoal and
woodchips, represented 14.4% and 14.3%, 3.6% and 3.7%, 12.6% and 12.2%, and 8.1%
and 8.2% of cost of goods sold, respectively, in 1997 and the three months ended
March 31, 1998, respectively. In addition, labor comprised 13.3% and 13.7% of
cost of goods sold in 1997 and the three months ended March 31, 1998,
respectively. The Company has a five-year contract with APCo through the year
2000 for the provision of electrical power. Power rates have remained steady for
the last three years and are not expected to increase for the remaining life of
the contract. The Company does not currently have any other long-term contracts
with its suppliers of raw materials.
 
     When the Facility was constructed in 1976, it was designed to support a
fourth smelting furnace. For example, the main electrical power supply, as well
as the non-contact cooling water system, can accommodate a fourth furnace. This
potential expansion is believed by the Company to be the most cost competitive
"brownfield" expansion opportunity in the United States. A "brownfield"
expansion is an addition to or expansion of an existing silicon metal
manufacturing facility, whereas a "greenfield" facility is one that is newly
constructed to manufacture silicon metal. Because the Facility is designed to
accommodate a fourth smelting furnace, construction of the furnace can be
accomplished for $7.0 million to $10.0 million less than, and approximately one
year of construction time less than the construction cost and time that would
have been required if the Facility were not designed to support a fourth
furnace. Management estimates that the fourth furnace can be constructed at a
cost of approximately $25.0 million in approximately two years. The expansion
will increase the Company's production capacity from 36,000 metric tons to
48,000 metric tons per year. After the expansion, management believes that the
Facility will be the second largest silicon metal production facility in the
world.
 
                                       44
<PAGE>   45
 
     From 1987 to 1997, demand for silicon metal in the United States increased
at an average annual rate of approximately 7.7% (on a non-compounded basis).
This increase was driven by an average annual rate of growth of approximately
10.1% (on a non-compounded basis) in the United States chemical market. While
the aluminum market has also grown during this period, demand for chemical grade
silicon metal has increased 73.8% and, in 1997, chemical grade silicon metal
represented approximately 55.0% of the silicon metal consumed in the United
States. The major factors contributing to the growth of the chemical market are
(i) the introduction of new silicones based product applications (such as
emulsions, release agents and sealants) and (ii) the displacement of
petrochemical based products (such as lubrication and hydraulic fluids). The
growth in the aluminum market is primarily attributable to the increased use of
aluminum in the transportation industry.
 
     CRU projects that the historical growth trends in both the chemical and
aluminum markets will continue. CRU expects that the most rapid growth in demand
will occur in the consumption of electronic grade silicon metal, with this
growth in demand primarily driven by the semi-conductor industry.
 
     The following table sets forth certain information regarding the Company's
production levels and product mix for the period from February 10, 1995 to
December 31, 1995, the years ended December 31, 1996 and 1997 and the three
months ended March 31, 1998:
 
<TABLE>
<CAPTION>
                                               PERIOD
                                                FROM
                                            FEBRUARY 10,
                                                1995
                                              (DATE OF                               THREE
                                             INCEPTION)         YEAR ENDED           MONTHS
                                                 TO            DECEMBER 31,          ENDED
                                            DECEMBER 31,      ---------------      MARCH 31,
                                                1995           1996     1997          1998
                                          -----------------   ------   ------   ----------------
                                                             (IN METRIC TONS)
<S>                                       <C>                 <C>      <C>      <C>
Silicon metal production................       25,669         33,373   37,094         9,110
Chemical grade silicon metal
  production............................       11,603         14,275   20,257         6,728
Specialty aluminum grade silicon
  metal production......................        6,350          9,979   10,304         1,397
</TABLE>
 
RESULTS OF OPERATIONS
 
     The following table sets forth certain of the Company's statement of
operations information as a percentage of net sales during the period from
February 10, 1995 to December 31, 1995, the years ended December 31, 1996 and
1997 and the three months ended March 31, 1997 and 1998:
 
<TABLE>
<CAPTION>
                                           PERIOD
                                            FROM
                                        FEBRUARY 10,
                                            1995
                                     (DATE OF INCEPTION)      YEAR ENDED        THREE MONTHS
                                             TO              DECEMBER 31,     ENDED MARCH 31,
                                        DECEMBER 31,        --------------    ----------------
                                            1995            1996     1997      1997      1998
                                     -------------------    -----    -----    ------    ------
<S>                                  <C>                    <C>      <C>      <C>       <C>
Net sales..........................         100.0%          100.0%   100.0%   100.0%    100.0%
Cost of goods sold.................         102.8            81.7     77.1     78.1      78.6
                                            -----           -----    -----    -----     -----
Gross profit (loss)................          (2.8)           18.3     22.9     21.9      21.4
Selling and administrative
  expenses.........................           5.1             3.7      4.6      4.4      25.7
                                            -----           -----    -----    -----     -----
Operating income (loss)............          (7.9)           14.6     18.3     17.5      (4.3)
Interest expense...................           3.5             2.9      2.7      2.7       2.1
Other income, net..................           1.1             0.9      0.4      0.2       1.9
                                            -----           -----    -----    -----     -----
Earnings (loss) before provision
  for income taxes.................         (10.3)           12.6     16.0     15.0      (4.5)
Provision for income taxes.........            --             2.2      5.7      5.1      (0.7)
                                            -----           -----    -----    -----     -----
Net income (loss)..................         (10.3)%          10.4%    10.3%     9.9%     (3.8)%
                                            =====           =====    =====    =====     =====
</TABLE>
 
                                       45
<PAGE>   46
 
  Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
 
     Net Sales.  Net sales decreased 5.1%, to $14.9 million in the first quarter
of 1998 from $15.7 million in the first quarter of 1997 due principally to
decreased selling prices in domestic silicon metal markets. Production increased
0.4% to 9,110 metric tons in the first quarter of 1998 from 9,076 metric tons in
the first quarter of 1997 due to improved efficiency and scrap recovery in the
silicon smelting process.
 
     Gross Profit.  Gross profit decreased 7.4%, to $3.2 million in the first
quarter of 1998 from $3.4 million in the first quarter of 1997. Gross profit
margin decreased to 21.4% in the first quarter of 1998 from 21.9% in the first
quarter of 1997. These decreases were principally due to decreased selling
prices in domestic silicon metal markets offset slightly by decreased production
costs and improved operating efficiencies realized in the silicon metal
production process.
 
     Average selling price per metric ton decreased to $1,661 in the first
quarter of 1998 from $1,743 in the first quarter of 1997 due to excess supply in
the secondary aluminum market coupled with the fact that secondary aluminum
prices were unusually high in March 1997. Part of this decrease in average
selling price was offset by the Company's shift away from secondary aluminum
sales to sales of more profitable products. Average production cost per metric
ton decreased to $1,279 in the first quarter of 1998 from $1,320 in the first
quarter of 1997 as a result of increased production which allowed broader
absorption of fixed costs.
 
     Selling and Administrative Expenses.  Selling and administrative expenses
increased 460.7% to $3.8 million in the first quarter of 1998 from $0.7 million
in the first quarter of 1997, primarily due to a bonus paid to management
related to the exercise of options of $1.5 million and the recognition of
compensation expenses of $0.9 million related to certain stock options. In
addition, the Company incurred increases in health insurance costs and franchise
taxes.
 
     Operating Income.  Operating income decreased 123.6% to a $0.7 million loss
in the first quarter of 1998 from $2.7 million in the first quarter of 1997,
while the operating margin decreased to a loss of 4.4% from 17.6% for the same
periods. Excluding the bonus costs discussed above recorded in the first quarter
of 1998, operating income decreased 62.6% to $0.8 million in the first quarter
of 1998 from $2.7 million in the first quarter of 1997, while the operating
margin decreased to 5.4% from 17.6% for the same periods.
 
     Interest Expense.  Interest expense decreased 24.3% to $0.3 million in the
first quarter of 1998 from $0.4 million in the first quarter of 1997 principally
due to lower average outstanding borrowing under the Company's credit
facilities. As a result of the substantial indebtedness incurred in connection
with the Acquisition, in the future the Company's interest expense will have a
greater proportionate impact on net income in comparison to pre-acquisition
periods.
 
     Other Income, Net.  Other income, net increased 840.0% to $0.3 million in
the first quarter of 1998 from $0.03 million in the first quarter of 1997
primarily due to increased benefits associated with the State of Alabama's
Mercedes Act which allows the Company to retain and recognize the state taxes
withheld from employees as income. Income recognized as a result of the Mercedes
Act was $292,000 in the first quarter of 1998 compared to $50,000 in the first
quarter of 1997. Such income is based upon the amount of state taxes withheld
from employees, not to exceed the annual debt service on the IRBs. The benefits
recognized by the Company are expected to continue at least at the 1997 level
until the IRBs are redeemed in 2010.
 
     Provision for Income Taxes.  Provision for income taxes decreased to a
benefit of $0.1 million in the first quarter of 1998 from a provision of $0.8
million in the first quarter of 1997. This decrease was primarily due to the
decrease in taxable income from $2.4 million in 1997 to a loss of $.7 million in
1998.
 
     Net Income.  As a result of the above factors, net income decreased to a
loss of $0.6 million in the first quarter of 1998 from $1.6 million in the first
quarter of 1997.
 
  Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
 
     Net Sales.  Net sales increased 18.7%, to $62.2 million in 1997 from $52.4
million in 1996. The increase was principally due to increased production from
furnaces #1 and #3 which were refurbished in the third and fourth quarters of
1996 and, as a result, operated at or near full capacity during 1997. Production
increased
 
                                       46
<PAGE>   47
 
11.1%, to 37,094 metric tons in 1997 from 33,373 metric tons in 1996. Increased
sales of higher priced chemical grade silicon metal, as well as increased sales
of microsilica, also contributed to this increase.
 
     Gross Profit.  Gross profit increased 47.9%, to $14.2 million in 1997 from
$9.6 million in 1996. Gross margin increased to 22.9% in 1997 from 18.3% in 1996
primarily as a result of increased sales of higher margin chemical grade silicon
metal and the continuation of improved operating efficiencies. In this regard,
the fixed components of cost of goods sold remained relatively unchanged from
1996 to 1997. However, variable components did increase as a result of higher
production volumes.
 
     Average selling price per metric ton increased to $1,723 in 1997 from
$1,641 in 1996 due to increased demand in the secondary aluminum market. The
Company chose to sell more product in this market to take advantage of the
higher price. Average production cost per metric ton decreased to $1,279 in 1997
from $1,358 in 1996. This decrease resulted primarily from increased production
which allowed broader absorption of fixed costs coupled with more efficient use
of raw materials.
 
     Selling and Administrative Expenses.  Selling and administrative expenses
increased 47.4%, to $2.8 million in 1997 from $1.9 million in 1996. This
increase was principally due to professional fees incurred in 1997 in connection
with the Company's consideration of various strategic business alternatives,
offset in part by a decrease in bad debt expense. The Company maintains credit
insurance which reduces the risk of loss related to bad debts. In addition,
selling and administrative expenses increased in 1997 primarily due to
compensation expense recorded in connection with the Company's variable stock
option plan.
 
     Operating Income.  As a result of the above factors, operating income
increased $3.7 million, to $11.4 million in 1997 from $7.7 million in 1996. As a
percentage of net sales, operating income increased to 18.3% in 1997 from 14.6%
in 1996.
 
     Interest Expense.  Interest expense increased 13.3%, to $1.7 million in
1997 from $1.5 in 1996. This increase was primarily the result of interest costs
associated with the repayment of certain non-interest bearing indebtedness of
the Company in 1997, offset by decreased average levels of indebtedness used to
fund the Company's operations. See Notes 5 and 6 to the Company's Financial
Statements.
 
     Other Income, Net.  Other income, net decreased 48.6%, to $228,000 in 1997
from $444,000 in 1996 primarily as a result of the Company's receipt of
approximately $200,000 of insurance proceeds for losses resulting from hurricane
damage in 1996.
 
     Provision for Income Taxes.  Provision for income taxes increased to $3.5
million in 1997 from $1.2 million in 1996. The Company's effective tax rate was
35.5% in 1997 compared to 17.7% in 1996. This increase in the effective tax rate
resulted primarily from the Company's reduction of its deferred tax valuation
allowance by approximately $1.1 million in 1996.
 
     Net Income.  As a result of the above factors, net income increased $1.0
million, to $6.4 million in 1997 from $5.4 million in 1996. As a percentage of
net sales, net income remained unchanged.
 
  Year Ended December 31, 1996 Compared to the Period from February 10, 1995 to
December 31, 1995
 
     Net Sales.  Net sales increased 66.3%, to $52.4 million in 1996 from $31.5
million in 1995. The increase was due primarily to the effects of the
recommissioning of furnace #2 in the third quarter of 1995, which operated
during all of 1996, the completion of the refurbishment of furnaces #1 and #3 in
the third and fourth quarters of 1996, and the resulting increase in production.
Production increased to 33,373 metric tons in 1996 from 25,669 metric tons in
1995. Sales at newly established price levels to major customers and a shift to
higher priced grades of silicon metal also contributed to the increase.
 
     Gross Profit.  Gross profit increased to $9.6 million in 1996 from a loss
of $868,000 in 1995. Gross margin increased to 18.3% in 1996 from a loss of 2.8%
in 1995. The increase was attributable to increased net sales, particularly with
respect to higher margin products, and significantly improved operating
efficiencies. The greater operating efficiencies were achieved primarily as a
result of the refurbishment of two furnaces and the solution of production
problems resulting from the inaccuracy of the Company's raw material mix system
and higher than normal electrode consumption.
 
                                       47
<PAGE>   48
 
     Average selling price per metric ton increased to $1,641 in 1996 from
$1,436 in 1995 due to price increases for higher quality product being sold by
the Company, new volume at higher prices and increased demand in the secondary
aluminum market. For the year, these measures accounted for $632, $8,755 and
$1,484 in increased revenues, respectively. Average production cost per metric
ton decreased to $1,358 in 1996 from $1,529 in 1995. This decrease resulted
primarily from increased production due to the complete refurbishment of all
three of the Company's smelting furnaces. The increased production allowed
broader absorption of fixed costs resulting in a lower production cost per
metric ton. In addition, the Company significantly improved its efficiency in
the use of raw materials, which further lowered the production cost per metric
ton.
 
     Selling and Administrative Expenses.  Total selling and administrative
expenses increased 18.8%, to $1.9 million in 1996 from $1.6 million in 1995. The
increase was principally attributable to increased selling expenses resulting
from the hiring of a salesperson. As a percentage of net sales, selling and
administrative expenses decreased to 3.7% in 1996 from 5.1% in 1995.
 
     Operating Income.  As a result of the above factors, operating income
increased $10.2 million, to $7.7 million in 1996 from a loss of $2.5 million in
1995.
 
     Interest Expense.  Interest expense increased 36.4%, to $1.5 million in
1996 from $1.1 million in 1995. This increase was primarily the result of
increased levels of indebtedness used to fund the Company's operations.
 
     Other Income, Net.  Other income, net increased 23.7%, to $444,000 in 1996
from $359,000 in 1995. The principal reason for this increase was the Company's
receipt of approximately $200,000 of insurance proceeds for losses resulting
from hurricane damage in 1996.
 
     Provision for Income Taxes.  Provision for income taxes increased to $1.2
million in 1996 from no provision in 1995, as a result of the Company's
profitability in 1996 as compared with a loss in 1995 and recording a valuation
allowance in 1995. This valuation allowance was reversed in 1996. The Company's
effective tax rate was 17.7% in 1996.
 
     Net Income.  As a result of the above factors, net income increased $8.6
million, to $5.4 million in 1996 from a net loss of $3.2 million in 1995.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company's primary sources of liquidity are cash flow from operations,
borrowings under the New Credit Facility and a portion of the net proceeds from
the Offering. The Company's principal uses of liquidity are to fund operations,
meet debt service requirements and finance the Company's planned capital
expenditures, including the construction of a fourth smelting furnace.
 
     The Company's cash flows from its operations are influenced by selling
prices of its products and raw materials costs, and are subject to moderate
fluctuation due to market supply factors driven by imports. The Company's
silicon metal business experiences price fluctuations principally due to the
competitive nature of one of its market, the secondary aluminum market.
Historically, the Company's microsilica business has been affected by the
developing nature of the markets for this product. Average transaction selling
prices for the Company's microsilica in the first quarter of 1998 were very near
the average transaction selling prices at the end of the first quarter of 1997.
 
     Depreciation and amortization is expected to increase significantly in the
future as a result of the Acquisition, which was accounted for under the
purchase method of accounting. The Company has assigned a twenty-five year life
to goodwill based upon industry practices as well as the nature of the Company's
business and the limited changes expected to occur in the industry. The increase
in depreciation is expected to be approximately $2.1 million on an annualized
basis. The annual increase in amortization expense related to intangible assets
is expected to be approximately $1.4 million. Additionally, as a result of the
Transactions, interest expense is expected to increase approximately $7.8
million.
 
                                       48
<PAGE>   49
 
     For the three months ended March 31, 1997 and March 31, 1998, net cash
provided by operating activities was $992,000 and $1.2 million, respectively.
Net cash used in investing activities increased to $1.2 million for the three
months ended March 31, 1998 from $438,000 for the three months ended March 31,
1997. This increase was primarily a result of the Company purchasing additional
production equipment. For the three months ended March 31, 1998, financing
activities provided net cash of $39,000 compared to $119,000 of net cash used in
financing activities for the three months ended March 31, 1997. This decrease in
net cash used in financing activities was principally the result of larger debt
payments made during 1997.
 
     In 1996 and 1997, net cash provided by operating activities was $9.2
million and $10.0 million, respectively. Net cash used in investing activities
decreased to $2.1 million in 1997 from $6.9 million in 1996. This decrease was
primarily a result of a decrease in the level of investment by the Company in
property, plant and equipment. Net cash used in financing activities increased
to $7.5 million in 1997 from $2.1 million in 1996. This increase was principally
a result of (i) the net repayment of $3.2 million of indebtedness outstanding
under the Company's revolving line of credit, (ii) the repayment of $12.8
million of other indebtedness, (iii) the redemption of the Company's Series B
Preferred Stock, par value $1.00 per share, for $1.5 million, (iv) a payment to
stockholders of $2.3 million and (v) the payment of a $270,000 preferred stock
dividend, all of which was offset by the Company's borrowing of $13.0 million of
term loan indebtedness under the Existing Credit Facility.
 
     In April 1997, the Company entered into the Existing Credit Facility, which
provided for (i) a $5.0 million revolving line of credit, including a $1.5
million letter of credit subfacility, which terminates on June 30, 1998, and
(ii) a $13.0 million term loan which requires repayment of principal in
quarterly installments with the last of such installments payable on March 31,
2002. As of December 31, 1997, $9.0 million principal amount of such term loan
indebtedness was outstanding, and it accrued interest at a LIBOR-based, variable
interest rate equal to approximately 8.4% per annum. Borrowings under the
revolving line of credit are limited to 85% of eligible accounts receivable and
60% of eligible inventory, each as defined in the Existing Credit Agreement. As
of December 31, 1997, no amounts were outstanding under the revolving line of
credit and the Company had availability thereunder equal to approximately $5.0
million.
 
     Pursuant to the Bond Loan Agreement (as defined herein) the Company has
agreed to pay the principal of, premium, if any, and interest on, the IRBs,
which mature on December 1, 2019. Interest on the IRBs, which is payable
monthly, currently accrues at a rate which is reset every seven days as
determined by Merchant Capital, L.L.C., the remarketing agent for the IRB
Financing (the "Remarketing Agent"), based on its evaluation of certain factors
including, among others, market interest rates for comparable securities, other
financial market rates and indices, general financial market conditions, the
credit standing of SIMCALA and the bank issuing the letter of credit which
provides credit support for the IRBs, and other relevant facts regarding the
Facility ("Rate Determination Factors"). However, interest borne by the IRBs
cannot exceed the lower of 15% per annum and the maximum rate per annum
specified in any letter of credit which provides credit support for the IRBs. As
of March 31, 1998, interest on the IRBs accrued at a rate equal to approximately
5.8% per annum. As part of the IRB Financing, the Company is required to provide
the $6.1 million Existing Bond Letter of Credit to the Bond Trustee as credit
support for the IRBs. As of March 31, 1998, no drawings were outstanding under
the Existing Bond Letter of Credit.
 
     In 1996, the Company refurbished two of its smelting furnaces.
Consequently, the Company spent almost $4.0 million more on capital items in
1996 than it had budgeted. While all spending was done with internally generated
funds, this capital program exceeded the limits on permitted capital
expenditures in the Company's loan agreement. In addition, the calculation of
fixed charge coverage fell to .99 to 1.0 where a requirement of 1.0 to 1.0 was
required. The Company's lender provided all required waivers.
 
     In 1997, the Company began a project to replace a gantry crane in its raw
material loading operation. As a result, capital spending exceeded the limits on
permitted capital expenditures set out in the Company's loan agreement. The
Company's lender provided all required waivers.
 
     In the ordinary course of its business, the Company expects to make annual
capital expenditures aggregating approximately $3.0 million to $4.0 million. The
Company anticipates that these capital expenditures will be made for routine
maintenance of the smelting furnaces, air abatement equipment and other
 
                                       49
<PAGE>   50
 
equipment used in its operations. In addition, the Company expects that
approximately $16.3 million of the net proceeds of the Offering will be used to
construct a fourth smelting furnace at the Facility and estimates that
construction of the furnace will cost a total of approximately $25.0 million.
The Company anticipates that the balance of the construction costs will be
funded by cash flow from the Company's operations during the construction
period.
 
     As of March 31, 1998, the Company had entered into contracts totaling
approximately $1.0 million for the construction of certain production equipment
and had a commitment to purchase lumber totaling approximately $145,000. The
Company is involved in litigation arising in the normal course of business.
Management believes that the ultimate resolution of such litigation will not
have a material adverse effect on the financial statements.
 
     In connection with the Acquisition, the Company replaced the Existing
Credit Facility and the Reimbursement Agreement with the New Credit Facility.
The New Credit Facility consists of a $15.0 million revolving credit facility
which provides availability for borrowings and letters of credit. Revolving
loans will bear interest at a variable rate equal, at the option of the Company,
to (i) a LIBOR-based rate plus a margin of up to 2.25% per annum or (ii) the
base rate (defined to mean the higher of (a) the publicly announced "prime rate"
of the agent thereunder and (b) a rate tied to the rates on overnight Federal
funds transactions with members of the Federal Reserve System) plus a margin of
up to 1.25% per annum. In addition, the Existing Bond Letter of Credit, which
was issued for the account of the Company to the Bond Trustee as credit support
for the IRBs, was replaced by the $6.1 million New Bond Letter of Credit issued
under the New Credit Facility. Drawings under letters of credit (including the
New Bond Letter of Credit) which are not promptly reimbursed by the Company will
accrue interest at a variable rate equal to the base rate plus a margin of up to
3.25% per annum.
 
     As of June 30, 1998, the Company had $83.1 million of long term
indebtedness, $15.0 million of availability under the New Credit Facility (as
such availability is reduced by the issuance of the $6.1 million New Bond Letter
of Credit thereunder) and $20.0 million in cash.
 
     The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Notes), or to fund planned capital expenditures will
depend on its future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. Based upon the current level of operations,
management believes that cash flow from operations and available cash, together
with availability under the New Credit Facility, will be adequate to meet the
Company's future liquidity needs for at least the next two years. There can be
no assurance that the Company's business will generate sufficient cash flow from
operations or that future borrowings will be available under the New Credit
Facility in an amount sufficient to enable the Company to service its
indebtedness, including the Notes, or to fund its other liquidity needs,
including the construction of a fourth smelting furnace. In addition, the
Company may need to refinance all or a portion of the principal of the Notes on
or prior to maturity. There can be no assurance that the Company will be able to
effect any such refinancing on commercially reasonable terms or at all. See
"Risk Factors -- Significant Leverage and Debt Service."
 
     Moreover, the New Credit Agreement imposes restrictions on the Company's
ability to make capital expenditures and both the Credit Agreement and the
Indenture limit the Company's ability to incur additional indebtedness. Such
restrictions, together with the highly leveraged nature of the Company, could
limit the Company's ability to respond to market conditions, to make capital
expenditures, to provide for unanticipated capital investments or to take
advantage of business opportunities. The covenants contained in the New Credit
Agreement also, among other things, restrict the ability of the Company and its
subsidiaries to dispose of assets, incur guarantee obligations, repay the Notes,
pay dividends, create liens on assets, enter into sale and leaseback
transactions, make investments, loans or advances, make acquisitions, engage in
acquisitions or consolidations, make capital expenditures or engage in certain
transactions with affiliates, and otherwise restrict corporate activities. The
covenants contained in the Indenture also impose restrictions on the operation
of the Company's business.
 
                                       50
<PAGE>   51
 
     The Indenture contains a limitation on the incurrence of indebtedness by
the Company and its subsidiaries which is tied, in part, to the Company's "Fixed
Charge Coverage Ratio." For any period, the Fixed Charge Coverage Ratio
generally consists of the ratio of (x) the Company's consolidated net income
during such period (subject to certain adjustments) to (y) certain fixed charges
(generally determined on a consolidated basis) during such period. The Indenture
provides that the Company will not, and will not permit its subsidiaries to,
incur "Indebtedness" or issue "Disqualified Stock," subject to the following
exceptions. The Company may incur any amount of Indebtedness or issue any amount
of Disqualified Stock if, during its most recently ended four fiscal quarters
for which internal financial statements are available immediately prior to such
incurrence or issuance, the Company's Fixed Charge Coverage Ratio would have
been at least (A) 2.0 to 1 on or prior to April 15, 2000 and (B) 2.25 to 1 after
April 15, 2000 (determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness or
Disqualified Stock had been incurred or issued, as the case may be, at the
beginning of such four-quarter period). If the Company's Fixed Charge Coverage
Ratio does not meet these levels (i.e., the ratio is less than 2.0 to 1 and 2.25
to 1 for the periods indicated, respectively), the Company and its subsidiaries
may only incur certain types of Indebtedness described under "Description of the
Notes -- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock." As of April 1, 1998, the Fixed Charge Coverage Ratio for the
most recently ended four fiscal quarter period would have been 1.3 to 1, on a
pro forma basis. See "Description of the Notes -- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock."
 
     The New Credit Facility contains covenants requiring the maintenance of
certain "Interest Coverage Ratio," "Net Leverage Ratio" and "Consolidated Net
Worth." The "Interest Coverage Ratio" as of the last day of each fiscal quarter
of the Company must be greater than or equal to (A) 1.5 to 1 for the period from
June 30, 1998 to and including December 30, 2001 and (B) 2.25 to 1 from and
after December 31, 2001. Interest Coverage Ratio is defined to generally mean
the ratio of the Company's consolidated EBITDA to its consolidated interest
expense for the twelve month period ending on the last day of any fiscal quarter
of the Company.
 
     The "Net Leverage Ratio" as of the last day of each fiscal quarter of the
Company must be less than or equal to (A) 5.50 to 1 for the period from June 30,
1998 to and including December 30, 1998, (B) 6.00 to 1 for the period from
December 31, 1998 to and including December 30, 2001, (C) 3.50 to 1 for the
period from December 31, 2001 to and including December 30, 2002 and (D) 3.00 to
1 for the period from and after December 31, 2002. Net Leverage Ratio is defined
to generally mean the ratio of the Company's funded indebtedness (less cash and
cash equivalents) to its consolidated EBITDA for the twelve month period ending
on the last day of any fiscal quarter of the Company.
 
     The Company must at all times maintain a "Consolidated Net Worth" of at
least $18.0 million. As of the end of each fiscal quarter of the Company
(commencing with the fiscal quarter ending June 30, 1998), such minimum
Consolidated Net Worth will increase based upon the Company's after-tax
consolidated net income (to the extent positive) for the fiscal quarter then
ended. Consolidated Net Worth is defined to generally mean the Company's
consolidated shareholders' equity or net worth.
 
     As of March 31, 1998 the Interest Coverage Ratio and the Net Leverage Ratio
would have been 1.6 to 1 and 5.2 to 1, respectively. As of March 31, 1998, the
Company's Consolidated Net Worth was $18.8 million.
 
NEW ACCOUNTING STANDARDS
 
     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130) and Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS 131). SFAS 130
establishes standards for the reporting and displaying of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. SFAS 131 establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in financial reports issued to
stockholders. The Company adopted SFAS 130 effective January 1,
 
                                       51
<PAGE>   52
 
1998. The adoption of this standard did not have an effect on its financial
statements. Comprehensive income equaled net income for the three months ending
March 31, 1998. SFAS 131 will be adopted by the Company in its annual financial
statements for 1998. The adoption of this standard is not expected to
significantly impact the Company's financial statements.
 
YEAR 2000
 
     The Company uses several application programs written over many years using
two-digit year fields to define the applicable year, rather than four-digit year
fields. Programs that are time-sensitive may recognize a date using "00" as the
year 1900 rather than the year 2000. This misinterpretation of the year could
result in an incorrect computation or a computer shutdown.
 
     The Company has identified the systems that could be affected by the year
2000 issue and is developing a plan to resolve the issue. The plan contemplates,
among other things, the replacement or modification of existing data processing
systems as necessary. Management has estimated the costs associated with the
implementation of the plan to be approximately $50,000.
 
                                       52
<PAGE>   53
 
                                    BUSINESS
 
THE COMPANY
 
     The Company is a leading domestic manufacturer of silicon metal which is
used in the chemical and aluminum industries. Silicon metal is an essential raw
material used by the chemical industry to produce silicones and polysilicon and
by the aluminum industry primarily as an alloying agent. The Company produces
and sells higher margin chemical grade and specialty aluminum grade silicon
metal, both of which contain the highest concentrations of silicon and the
lowest levels of impurities when compared to lower grades of silicon metal. In
1997, approximately 55% and 45% of the silicon metal consumed in the United
States was consumed by the chemical industry and the aluminum industry,
respectively. Silicones are the basic ingredient used in numerous consumer
products, including lubricants, cosmetics, shampoos, gaskets, building sealants,
automotive hoses, water repellent fluids and high temperature paints and
varnishes. Polysilicon is an essential raw material used in the manufacture of
silicon wafers for semi-conductor chips and solar cells. Aluminum containing
silicon metal as an alloy can be found in a variety of automobile components,
including engine pistons, housing and cast aluminum wheels. Management believes
that there are no commercially feasible substitutes for silicon metal in either
the chemical or aluminum industries. In addition to silicon metal, the Company
produces microsilica, a co-product of the silicon metal smelting process.
Microsilica is a strengthening and filler agent which has applications in the
refractory, concrete, fibercement, oil exploration and minerals industries.
 
     The Company is one of the three largest manufacturers, in terms of volume,
of silicon metal in the United States, and its Facility, located in Mt. Meigs,
Alabama is the nation's second largest in terms of capacity. The Facility is the
newest "greenfield" silicon metal manufacturing facility in the United States
and is strategically located near abundant supplies of high quality raw
materials necessary for the production of high grade silicon metal. A
"greenfield" silicon metal manufacturing facility is a facility that is newly
constructed to manufacture silicon metal, whereas a "brownfield" facility is an
addition to or expansion of an existing silicon metal manufacturing facility.
SIMCALA intends to use a portion of the net proceeds of the Offering to expand
the Facility by constructing a fourth smelting furnace and the Company believes
that after this expansion, the Facility will be the second largest silicon metal
production facility in the world. The Company believes that the increased
capacity resulting from the construction of a fourth furnace will enable it to
benefit from levels of demand for silicon metal in the Western Industrialized
Nations which CRU estimates will exceed currently known sources of supply
through 2005. Upon completion of the fourth furnace, the Company's production
capacity will increase by approximately 12,000 metric tons to approximately
48,000 metric tons per year.
 
     The Company is one of the most cost efficient silicon metal manufacturers
in the world, as measured by operating cost per metric ton of silicon metal
sold. The Company estimates that it held a market share of approximately 13% of
the total United States chemical market and approximately 13% of the total
United States aluminum market in 1997, based on metric tons of silicon metal
sold. In 1997, the Company had net sales and EBITDA of $62.2 million and $13.8
million, respectively. For the three months ended March 31, 1998, the Company
had net sales and EBITDA of $14.8 million and $0.1 million, respectively. On a
pro forma basis, the Company had net losses of $891,000 and $2.4 million for
1997 and the three months ended March 31, 1998, respectively.
 
                                       53
<PAGE>   54
 
RECENT HISTORY AND TURNAROUND
 
     SIMCALA was incorporated in 1994 and acquired the Facility from SiMETCO on
February 10, 1995. At the time of the acquisition, SiMETCO was operating the
Facility as a debtor-in-possession under Chapter 11 of the Bankruptcy Code.
Under SiMETCO's management, the Facility was underutilized and inefficient and
consistently incurred operating losses as a result of poor management and a
focus on the lower margin, less stable secondary aluminum business. Immediately
after the acquisition of the Facility, the Company hired C. Edward Boardwine,
its current Chief Executive Officer. Mr. Boardwine installed a new senior
management team which implemented a major turnaround program aimed at increasing
the operating efficiency of the Facility and focusing on the production and
effective marketing of higher margin chemical grade and specialty aluminum grade
silicon metal. The Company's turnaround program included the following:
 
     - Increased Production.  The Company increased production by improving the
       efficiency and yield of two furnaces that were operating when the
       acquisition of the Facility occurred and by recommissioning a third
       furnace that was not operational at the time of the Facility's
       acquisition. From 1994 to 1997, the Facility's annual production volume
       increased approximately 55%, from approximately 24,000 metric tons to
       approximately 37,100 metric tons.
 
     - Customer Relationships.  The Company established relationships with the
       major consumers of higher margin chemical grade and specialty aluminum
       grade silicon metal. As part of this effort, the Company sought and
       obtained key customer certifications, requiring it to demonstrate the
       ability to consistently meet customers' proprietary quality and sizing
       requirements. The Company is currently a certified supplier of chemical
       grade silicon metal to G.E. Silicones and Dow Corning, the two largest
       consumers of chemical grade silicon metal in the United States, and a
       certified supplier of specialty aluminum grade silicon metal to Alcan and
       Alumax. Production of chemical grade, primary aluminum grade and
       secondary aluminum grade silicon metal at the Facility changed from
       29.6%, 15.1% and 55.3%, respectively, of total net sales in 1994 to 55%,
       28.2% and 16.8%, respectively, of total net sales in 1997. This change in
       product mix has significantly increased the Company's profitability.
 
     - Facility Modernization.  In 1996, the Company completed a $12.0 million
       facility modernization program pursuant to which all the Company's
       production and air abatement equipment was rebuilt. This program
       modernized the Facility and resulted in improved operating efficiency and
       greater consistency in the production of chemical and specialty aluminum
       grade silicon metal. To further enhance operating reliability, the
       Company is in the process of upgrading its raw material handling
       equipment.
 
     - Supplier Relationships.  The Company discontinued relationships with
       suppliers of lower grade raw materials and established relationships with
       suppliers of higher quality raw materials in order to secure a reliable,
       long-term source of the ingredients necessary to produce high quality
       silicon metal. By using high quality raw materials, the Company has been
       able to decrease the levels of impurities in the silicon metal it
       produces, resulting in more efficient production of a consistently high
       quality product.
 
     - Workforce Efficiency.  The Company improved the efficiency of its
       workforce by creating performance based incentives and establishing
       technical training programs. In addition, despite recommissioning a third
       furnace in the third quarter of 1995, the number of employees at the
       Facility from 1994 to 1997 remained constant at approximately 170
       (consisting of approximately 124 hourly employees and 46 salaried
       employees). Consequently, the amount of silicon metal produced per hourly
       employee at the Facility improved from approximately 210 metric tons in
       1994 to approximately 299 metric tons in 1997.
 
     As a result of the foregoing measures, net sales doubled to $62.2 million
in 1997 from $31.1 million in 1994. During that period, EBITDA increased to
$13.8 million from a loss of $3.0 thousand. On a pro forma basis, the Company
had a net loss of $891,000 in 1997. In addition, operating cost per metric ton
of silicon metal produced at the Facility decreased 9.6%, to $1,279.0 in 1997
from $1,415.0 in 1994.
 
                                       54
<PAGE>   55
 
COMPETITIVE STRENGTHS
 
     The Company believes that it has a strong competitive position attributable
to a number of factors, including the following:
 
     - Preferred Supplier Status with Key Customers.  SIMCALA has satisfied
       rigorous qualification requirements with its primary customers who
       purchase chemical grade and specialty aluminum grade silicon metal.
       Satisfying these requirements may take up to two years. As a result, the
       Company believes that these rigorous qualification requirements
       constitute a significant barrier to entry into the high grade silicon
       metal market.
 
     - Low Cost Producer.  As a result of the major turnaround program executed
       by the current management team, the Company has been recognized by CRU as
       among the six most cost efficient silicon metal manufacturers in the
       world, as measured by cost per metric ton of silicon metal produced.
 
     - Production Facilities.  The Facility has recently undergone an extensive
       facility modernization program which has resulted in improved operational
       efficiency and greater consistency in the production of chemical and
       specialty aluminum grade silicon metal. In addition, because the Facility
       was originally designed to support the addition of a fourth smelting
       furnace, the Company can increase capacity at a relatively low cost and
       in a relatively short time, without significantly disrupting operations.
       Management estimates that construction of the fourth furnace can be
       accomplished for $7.0 to $10.0 million less than, and approximately one
       year of construction time less than the construction cost and time that
       would have been required if the Facility had not been designed to support
       a fourth furnace. Management estimates that the fourth furnace can be
       constructed at a cost of approximately $25.0 million in approximately two
       years.
 
     - Experienced, Highly Qualified Management Team.  SIMCALA has assembled a
       highly qualified management team with over 75 years of combined
       experience in the silicon metal business. In particular, since 1969, C.
       Edward Boardwine, the Company's Chief Executive Officer, has worked in
       various capacities in the ferroalloy and silicon metal industries, most
       recently serving as Vice President--Silicon Metal Division of Elkem ASA,
       a position he held from 1990 until joining the Company in 1995. The
       Company believes that its management team has the operational and
       technical skill to continue to operate the Facility at world class levels
       of efficiency and to consistently produce high grade silicon metal.
 
BUSINESS STRATEGY
 
     SIMCALA intends to capitalize on the aforementioned competitive strengths
and has developed and is implementing the following business strategy aimed at
increasing revenues and EBITDA:
 
     - Focus on Chemical and Specialty Aluminum Markets.  The Company will
       remain focused on manufacturing high grade silicon metal for use by the
       chemical and specialty aluminum markets. Management has focused on the
       chemical market for four principal reasons: (i) as a result of diverse
       end-use applications of chemical grade silicon metal, demand has
       historically grown despite economic downturns, and demand and prices have
       historically been less volatile than the demand for, and the prices of,
       lower grade silicon metal; (ii) the United States market for chemical
       grade silicon metal is expected to grow at an average annual rate of
       approximately 7.6% (on a non-compounded basis) through the year 2005,
       according to CRU; (iii) sales of chemical grade silicon metal have
       historically provided higher profit margins than sales of lower grades of
       silicon metal because chemical grade silicon metal customers have paid
       higher prices for the required high quality silicon metal, resulting in
       part from the limited number of manufacturers able to supply silicon
       metal of such quality; and (iv) the Company's management has the
       operational and technical expertise necessary to consistently and
       efficiently produce high quality silicon metal. Similarly, management has
       focused on the specialty aluminum market because it is less susceptible
       to competition from low priced secondary grade silicon metal imports, and
       sales of specialty aluminum grade silicon metal have historically
       provided higher profit margins and been subject to less price volatility
       than sales of secondary grade silicon metal. In addition, because the
       United States International Trade Commission has concluded that there are
       no
 
                                       55
<PAGE>   56
 
       commercially feasible substitutes for silicon metal in either the
       chemical or aluminum industries, management believes that higher silicon
       metal prices will not result in customers purchasing silicon metal
       substitutes.
 
     - Maintain Low Cost Operations.  Management intends to maintain the
       Company's position as one of the six most cost-efficient manufacturers of
       silicon metal in the world. The Company intends to achieve this objective
       by continuing to increase the yield from its three existing smelting
       furnaces and increasing capacity by commissioning a fourth furnace. The
       Company believes it will effectively be able to spread fixed costs over
       the resulting increased production volume to further reduce costs per
       metric ton of silicon metal sold.
 
     - Expand Capacity to Meet Increasing Demand.  CRU projects that demand for
       silicon metal in the Western Industrialized Nations will exceed currently
       known sources of supply through 2005. The Company believes that it can
       take advantage of this increased demand by constructing a fourth smelting
       furnace. The Facility's infrastructure was originally designed and built
       to accommodate a fourth furnace. Within approximately two years, the
       Company believes a fourth furnace will enable it to increase its capacity
       by 12,000 metric tons of silicon metal and 5,000 metric tons of
       microsilica per year, making the Facility the second largest silicon
       metal production facility in the world. The Company intends to use a
       portion of the net proceeds from the Offering to fund in part the
       construction of a fourth furnace. Management believes that completion of
       a fourth furnace and the sale of the resulting silicon metal produced
       will increase profitability.
 
INDUSTRY
 
  Industry Markets
 
     The silicon metal industry consists of two general markets: the chemical
industry market and the aluminum industry market. The chemical industry market
is subdivided into the silicones market and the polysilicon market, both of
which require the highest grade of silicon metal. The aluminum industry market
is subdivided into the primary aluminum market (producing aluminum from ore) and
the secondary aluminum market (producing aluminum from scrap). The Company
defines the primary aluminum market and the higher-end of the secondary aluminum
market as the "specialty aluminum" market because the aluminum produced for
those markets requires higher quality silicon metal.
 
     In 1997, approximately 55% and 45% of the silicon metal consumed in the
United States was consumed by the chemical industry and the aluminum industry,
respectively. Of the 45% of silicon metal consumed in the United States that was
consumed by the aluminum industry, management believes that approximately 12% of
all silicon metal consumed in the United States was used in primary aluminum
production and approximately 33% of all silicon metal consumed in the United
States was used in secondary aluminum production. The production of silicones
and polysilicon requires the highest quality silicon metal or "chemical grade"
silicon metal. Specialty aluminum production requires higher grade silicon metal
or "specialty aluminum grade."
 
  Supply
 
     From 1993 to 1997, the production capacity of silicon metal in major
industrialized nations other than the PRC, the Confederation of Independent
States and certain other Eastern European nations (collectively, the "Western
Industrialized Nations") increased approximately 14.9%, from 716,000 metric tons
in 1993 to an estimated 823,000 metric tons in 1997. Production capacity in the
United States increased approximately 10.5% from 190,000 metric tons in 1993 to
an estimated 210,000 metric tons in 1997.
 
     During this period, production of silicon metal in the Western
Industrialized Nations increased approximately 26.8% from 542,000 metric tons in
1993 to an estimated 687,000 metric tons in 1997, while United States production
increased approximately 14.5% from 159,000 metric tons in 1993 to an estimated
182,000 metric tons in 1997. As a result of the greater increase in the rate of
production as compared to capacity, capacity utilization in the Western
Industrialized Nations increased from 85.7% in 1993 to an estimated 89.7% in
1997, and capacity utilization in the United States increased from 89.8% to an
estimated
 
                                       56
<PAGE>   57
 
90.1% over the same period. In the United States, most of the demand for
chemical grade and specialty aluminum grade silicon metal is satisfied by
domestic production. However, the demand for lower quality secondary aluminum
grade silicon metal is satisfied by both domestic and foreign suppliers.
 
  Demand
 
     From 1993 to 1997, demand for silicon metal in the Western Industrialized
Nations increased approximately 26.5% from 706,000 metric tons in 1993 to an
estimated 893,000 metric tons in 1997, representing an average annual rate of
increase of approximately 6.6% (on a non-compounded basis). Demand in the United
States increased approximately 23.8% from 227,000 metric tons in 1993 to an
estimated 281,000 metric tons in 1997, representing an average annual rate of
increase of approximately 6% (on a non-compounded basis).
 
     Demand in the United States for chemical grade silicon metal increased
approximately 36% from 114,000 metric tons in 1993 to an estimated 155,000
metric tons in 1997, representing an average annual rate of increase of
approximately 9% (on a non-compounded basis). The United States constitutes the
largest individual market for chemical grade silicon metal in the world,
followed by Germany, Japan, the United Kingdom and France. The customer base for
chemical grade silicon metal is highly concentrated. In 1997, G.E. Silicones and
Dow Corning collectively consumed almost all of the chemical grade silicon metal
that was consumed in the United States.
 
     Demand in the United States for aluminum grade silicon metal increased
approximately 11.5% from 113,000 metric tons in 1993 to an estimated 126,000
metric tons in 1997, representing an average annual rate of increase of
approximately 2.9% (on a non-compounded basis). In the United States the primary
aluminum market, which is dominated by Alcan, Alumax, Aluminum Company of
America ("Alcoa") and Reynolds Metals Company, is characterized by fairly
concentrated demand and less volatile prices. In contrast, the market for
secondary aluminum is characterized by widely diffused demand, more volatile
prices and by many small plants supplying specific customers in the
transportation industry.
 
  Trends
 
     According to CRU, demand for silicon metal in the Western Industrialized
Nations and in the United States will increase over the next eight years at an
average annual rate of approximately 5.1% and 5.3% (on a non-compounded basis),
respectively. During the same period, CRU projects that demand for chemical
grade silicon metal in the United States will increase at an average annual rate
of approximately 7.6% (on a non-compounded basis). Demand in the United States
for aluminum grade silicon metal is also projected by CRU to increase over the
next eight years at an average annual rate of approximately 2.4% (on a
non-compounded basis).
 
     Against this backdrop of steadily increasing demand, capacity utilization
in the Western Industrialized Nations and the United States is at or near
maximum historic levels. Management believes this supply/ demand imbalance will
cause silicon metal prices to continue to rise until new or "greenfield"
capacity becomes available. The following graph demonstrates that within three
to four years, demand in the Western Industrialized Nations will need to be
satisfied by greenfield facilities because demand is expected to exceed the
amount of supply that reasonably can be generated by production facilities
already operating and by confirmed and probable additions to existing facilities
(primarily through the conversion of existing facilities to silicon metal
manufacturing and the rehabilitation of older facilities).
 
                                       57
<PAGE>   58
 
                      (Supply and Demand Comparison Chart)
 
     Management does not believe that foreign imports will substantially affect
domestic demand, especially for chemical grade and specialty aluminum grade
silicon metal, because management believes that foreign manufacturers are not
reliable alternative sources of high-grade silicon metal, primarily due to
quality issues and high freight costs. In addition, because the United States
International Trade Commission has concluded that there are no commercially
feasible substitutes for silicon metal in either the chemical or aluminum
industries, management believes that higher silicon metal prices will not result
in customers purchasing silicon metal substitutes. Management believes its
fourth smelting furnace will become operational at or about the time prices rise
to a level sufficient to warrant construction of greenfield facilities.
 
PRODUCTS AND MARKETS
 
  Silicon Metal
 
     The chemical industry uses silicon metal as a raw material in the
manufacture of silicones and polysilicon. Silicones are the basic ingredient
used in numerous consumer products, including lubricants, cosmetics, shampoos,
gaskets, building sealants, automotive hoses, water repellent fluids and high
temperature paints and varnishes. Silicones are readily adaptable to a variety
of uses because they possess several desirable qualities, including electrical
resistance, resistance to extreme temperatures, resistance to deterioration from
aging, water repellency, lubricating characteristics, relative chemical and
physiological inertness and resistance to ultraviolet radiation. Polysilicon is
the essential raw material used by the chemical industry in the manufacture of
silicon wafers for semi-conductor chips and solar cells.
 
     The aluminum industry uses silicon metal in the production of aluminum
alloys, both in primary and secondary aluminum production. Aluminum containing
silicon metal as an alloy can be found in a variety of automobile components
including engine pistons, housing and cast aluminum wheels. The addition of
silicon metal to aluminum in the casting process improves castability and
minimizes shrinkage and cracking. In the finished aluminum product, silicon
metal increases corrosion resistance, hardness, tensile strength and wear
resistance.
 
                                       58
<PAGE>   59
 
     In 1997 the Company produced approximately 20,257 metric tons of chemical
grade silicon metal and approximately 10,304 metric tons of specialty aluminum
grade silicon metal, representing approximately 55% and approximately 28% of its
total silicon metal output, respectively.
 
  Microsilica (Silica Fume)
 
     During the silicon metal production process the offtake gases are drawn
from the smelting furnaces by large fans and are collected in baghouses. As the
material cools it oxidizes to amorphous silicon dioxide (SiO(2)) and condenses
in the form of spheres consisting of non-crystalline silicon dioxide. These
extremely fine particles (less than one micron in size) are referred to as
microsilica (silica fume). Microsilica is widely used in the refractory,
concrete, fibercement, oil exploration and minerals industry. Because there are
more than 50,000 particles of microsilica for each grain of cement, microsilica
is used in cement-based products to fill the microscopic voids between cement
particles. In concrete applications microsilica increases the strength,
durability and reduces permeability in applications such as parking garages,
bridge decks and marine structures. SIMCALA collects approximately 16,000 metric
tons of microsilica annually. In 1997, the Company sold approximately 11,700
metric tons of microsilica.
 
MANUFACTURING OPERATIONS
 
  Overview
 
     Silicon metal is produced by smelting quartz (SiO(2)) with carbon
substances (typically low ash coal and/or charcoal) and wood chips. Wood chips
provide porosity to the raw material mix. At the Facility, an automated weighing
system accurately measures the mixture of quartz, coal, charcoal and wood chips.
The mixture is fed into the top of a submerged-arc electric furnace by automatic
conveyors. SIMCALA's furnaces measure 28 feet in diameter and nine feet in
depth. Electric power is delivered to the furnaces by pre-baked amorphous carbon
electrodes. The electrodes act as conductors of electricity in each furnace,
generating heat in excess of 3,000(degree) C. At this temperature, the mix of
raw materials reaches a molten state. The carbon, acting as a reducing agent,
combines with the oxygen in the silicate to form the silicon metal.
 
     The molten silicon metal is intermittently tapped out of the furnaces into
ladles, where it is refined by injecting oxygen to meet specific customer
requirements. After the refining process, the silicon metal is cast into iron
chills (molds) for cooling. When the casts have cooled, they are weighed and
crushed to the desired size. The finished silicon metal is then shipped to the
customer in bulk, pallet boxes or bags by railcars or trucks.
 
     The emissions from the electric arc furnaces are collected by dust
collecting hoods and passed through a dust collection and bagging system. The
resulting co-product is microsilica.
 
  Technology
 
     The carbothermic smelting process used in the production of silicon metal
is well established. Since acquiring the Facility, the Company has made
significant technological advances in key areas. The batch weighing system for
raw materials is computer controlled to adjust weights for incoming batches
based on feedback from prior batches. Computers monitor key operational
variables in the smelting process for increased production controls. The Company
employs the most advanced furnace electrodes produced by UCAR International
Inc., the world leader in electrode technology. The Company has also installed
an advanced oxygen-air system that enables refining of the molten silicon metal
in order to consistently meet the quality requirements for chemical grade and
specialty aluminum grade silicon metal.
 
  Product Quality
 
     SIMCALA is committed to being a leading manufacturer of high grade silicon
metal. To achieve this goal, SIMCALA is dedicated to a total quality assurance
program which is tied to complying with ISO 9000 standards, including the use of
statistical techniques to improve process capability, audits by trained and
qualified personnel and a documented system for disposing of nonconforming
materials. The Company
 
                                       59
<PAGE>   60
 
warrants to its customers that its products will meet their specifications and
provides a Certificate of Analysis with each shipment. Customers are permitted
to return products that do not meet their specifications. The certified analysis
is based on samples taken during the process at key control points with real
time analysis provided by the Company's in-house X-ray fluorescent analytical
instruments.
 
  Employee Training
 
     The Company believes that it has one of the most experienced and efficient
management teams in the silicon metal business. This management team is
supported by a productive and experienced workforce equipped with skills in
metallurgical operations, maintenance, quality control and marketing. Employees
participate in SIMCALA's training program which has been jointly developed by
the Alabama State Department of Education and the John M. Patterson State
Technical College. The program is designed to provide each employee with the
skills required to evaluate, control and continuously improve production and
support service processes. Since the Facility was acquired from SiMETCO,
employee productivity has improved from approximately 210 metric tons of silicon
metal per hourly employee in 1994 to approximately 299 metric tons per hourly
employee in 1997.
 
RAW MATERIALS
 
     The Facility is located in close proximity to abundant sources of
high-quality and competitively priced raw materials and electricity. Where
strategically important, the Company may enter into long-term contracts to
secure a stable supply of raw materials at favorable prices, although it
currently has only a long-term contract for the supply of electricity. The
Company believes that the quality of its raw materials is among the highest
available and that supplies are adequate to satisfy its long-term requirements.
Because the Company believes there are sufficient alternative sources of quality
raw materials available to it, it is not expected that the loss of any one of
its suppliers would have a material adverse effect on the Company.
 
     The principal cost components in the production of silicon metal are
electricity, carbon electrodes, quartz, coal, charcoal and wood chips.
Electricity is the largest cost component, comprising 25.5% and 24.4% of cost of
goods sold in 1997 and the three months ended March 31, 1998, respectively. The
balance of raw materials, consisting of electrodes, quartz, coal/charcoal and
wood chips, represented 14.4% and 14.3%, 3.6% and 3.7%, 12.6% and 12.2%, and
8.1% and 8.2% of cost of goods sold, respectively, in 1997 and the three months
ended March 31, 1998, respectively. In addition, labor comprised 13.3% and 13.7%
of cost of goods sold in 1997 and the three months ended March 31, 1998,
respectively.
 
     Electrical power used in the smelting process is supplied by APCo through a
dedicated 110,000 volt line into SIMCALA's high voltage main substation. The
Company has a five-year contract with APCo through February 2000. Although the
Company does not expect any rate increases through the contract period, the
current rate schedule could be revised during the contract term pursuant to
regulation by the Alabama Public Service Commission. If, however, electric rates
did increase significantly, such increases would have an adverse effect on the
Company's operating performance and the Company may not be able to pass the
additional cost on to its customers. See "Risk Factors -- Dependence on Supply
of Electrical Power."
 
     The Company purchases two sizes of quartz from a local supplier. The low
level of iron and titanium impurities found in local Alabama quartz is ideally
suited to produce chemical grade silicon metal. High grade metallurgical coal is
supplied by one supplier located in Alabama and two in Kentucky. Metallurgical
grade charcoal is purchased from one supplier in Kentucky and one in Missouri.
Hardwood logs are purchased and processed into metallurgical wood chips on-site
by an independent contractor. The logs are harvested in close proximity to the
Facility.
 
CUSTOMERS
 
     The Company is a supplier to two of the largest producers of silicones in
the United States, G.E. Silicones and Dow Corning. G.E. Silicones' production
facility, which is located in Waterford, New York, consumes over 50,000 metric
tons of silicon metal per year. The facility produces feedstock for silicones,
electronic and fumed silica applications. In 1996 and 1997, G.E. Silicones
accounted for approximately 27.2% and 29%,
 
                                       60
<PAGE>   61
 
respectively, of the Company's net sales. In the three months ended March 31,
1998, G.E. Silicones accounted for approximately 13.9% of the Company's net
sales. At December 31, 1996 and 1997 and at March 31, 1998, G.E. Silicones
accounted for approximately 20.0%, 31.0% and 17.3%, respectively, of the
Company's outstanding accounts receivable.
 
     Dow Corning's production facilities are located in Carrollton, Kentucky and
Midland, Michigan. Dow Corning consumes over 100,000 metric tons of silicon
metal per year with the Carrollton facility being the dominant consumer. The
Midland facility primarily produces feedstock for polysilicon applications in
electronics while Carrollton produces siloxane for silicones applications. In
1996 and 1997, Dow Corning accounted for approximately 12.4% and 24.2%,
respectively, of the Company's net sales. In the three months ended March 31,
1998, Dow Corning accounted for approximately 40.3% of the Company's net sales.
At December 31, 1996 and 1997 and at March 31, 1998, Dow Corning accounted for
approximately 15.0%, 26.0% and 40.7%, respectively, of the Company's outstanding
accounts receivable.
 
     SIMCALA also supplies many of the leading companies in the specialty
aluminum industry. The Company's three largest customers in the specialty
aluminum industry are Wabash Alloys, Alcan and Alumax, which in 1996 and 1997
collectively accounted for approximately 32.9% and 26.1%, respectively, of the
Company's net sales. In the three months ended March 31, 1998, Wabash Alloys,
Alcan and Alumax collectively accounted for approximately 24.1% of the Company's
net sales. In 1996 and 1997, Wabash Alloys accounted for approximately 24.0% and
16.0%, respectively, of the Company's net sales. At March 31, 1998, Wabash
Alloys accounted for 9.5% of the Company's outstanding accounts receivable. At
December 31, 1996 and 1997, Alcan accounted for approximately 14.0% and 12.0%,
respectively, of the Company's outstanding accounts receivable.
 
     In 1997 and the three months ended March 31, 1998, the Company's five
largest customers accounted for approximately 79.3% and 79.8% of net sales,
respectively. The Company does not generally have long-term contracts with its
major customers and the loss of any major customer, or a significant reduction
of the Company's business with any of them, would have a material adverse effect
on the Company. See "Risk Factors -- Importance of Key Customers."
 
     The Company does, however, currently have contracts for the supply of
silicon metal with two of its major customers. The Company has two separate
two-year agreements with Wabash Alloys (the "Wabash Agreements"), each of which
is scheduled to expire on December 31, 1998. Either party may cancel the Wabash
Agreements prior to expiration with six months' advance written notice. The
Company also has entered into a supply agreement with Alcan (the "Alcan
Agreement"). The initial three-year term of the Alcan Agreement will expire on
December 31, 1999, but the Alcan Agreement will continue year to year thereafter
unless cancelled by either party. Either party may cancel the Alcan Agreement
upon 180 days written notice prior to the expiration of the initial term or any
renewal term. The Alcan Agreement also provides that, if for any reason beyond
the control of the parties, economic circumstances change in such a way as to
cause undue hardship to either party or unduly favor one party to the detriment
of the other party, and the parties are unable to find a mutually acceptable
solution within ninety days, the Alcan Agreement can be canceled.
 
     Most of the Company's customers require their suppliers to pass a rigorous
qualification process. Although each customer has established its own testing
requirements, qualification processes are generally designed to test for (i) low
variability of critical chemical elements and (ii) reliable and predictable
chemical reactivity. The process can take anywhere from two to three years
depending upon the customer's testing requirements and the manufacturer's
ability to comply with such requirements. The Company views the qualification
process as a competitive barrier to entry in its business.
 
COMPETITION
 
     The Company competes in the silicon metal market primarily on the basis of
product quality (particularly in the production of chemical grade silicon
metal), service and price. In the chemical and specialty aluminum markets, the
Company considers itself in competition only with other domestic producers.
Management believes that foreign manufacturers are not reliable alternative
sources of high-grade silicon metal, primarily
 
                                       61
<PAGE>   62
 
due to quality issues and high freight costs. The Company, however, does compete
with a number of domestic companies, including Globe Metallurgical Inc. ("Globe
Metallurgical") and Elkem Metals Company ("Elkem Metals"). According to CRU, in
1997, Globe Metallurgical and Elkem Metals had estimated production capacity in
the United States of 92,000 metric tons and 57,000 metric tons, respectively,
compared to the Company's estimated production capacity for the same period of
38,000 metric tons.
 
     SIMCALA is strongly positioned in the chemical and specialty aluminum
markets. In 1997, the Company estimates that it held a market share of
approximately 13% of the total United States chemical market and approximately
13% of the United States aluminum market, based on metric tons of silicon metal
sold.
 
EMPLOYEES
 
     As of March 31, 1998, the Company employed 169 people, of which 126 people
were paid on an hourly basis. Approximately 76% of the employees paid on an
hourly basis are represented by the United Steelworkers of America, Local 8538
(the "Union"). On August 8, 1995, the Company and the Union entered into a
five-year collective bargaining contract. Although wages remain fixed over the
life of the Union contract, the Company has agreed in the contract to discuss
wages with the Union beginning in February 1998. In mid-February 1998,
management held meetings with Union and non-Union employees to discuss various
matters, including wage levels. There has been no increase in wages as a result
of such meetings. The Company does not believe that this provision in the Union
contract requires the renegotiation of wage levels. The Company believes that
its relations with all its employees are good.
 
THE FACILITY
 
     The Facility consists of a silicon metal production plant and
administrative offices, which are located on 129 acres in Mt. Meigs, Alabama,
approximately 15 miles from Montgomery. The Facility contains three identical 20
megawatt submerged-arc electric furnaces with an annual capacity of 36,000
metric tons of silicon metal and 16,000 metric tons of microsilica. As a
consequence of the IRB Financing, substantially all of the real and personal
property used in SIMCALA's operations (including the Facility) is owned by the
Montgomery IDB and leased to SIMCALA. The lease expires on June 1, 2010. See
"Description of Other Indebtedness--Industrial Revenue Bond Financing."
 
ENVIRONMENTAL AND REGULATORY MATTERS
 
  Environmental
 
     The Company is subject to extensive federal, state and local environmental
laws and regulations governing the discharge, emission, storage, handling and
disposal of a variety of substances and wastes used in or resulting from the
Company's operations. Although the Company believes that it is currently in
material compliance with those laws and regulations, it has historically, and
expects to continue to, incur costs related to environmental remediation.
However, the Company is not aware of any material remediation contingencies
associated with any of its real estate or facilities. The Company estimates that
approximately $1.0 million of budgeted capital expenditures in each of 1998 and
1999 will relate to air abatement equipment.
 
  Taxes
 
     As an economic incentive to facilitate the rehabilitation of the Facility,
the SIDA granted SIMCALA significant tax credits against corporate income tax
and the collection of state income tax withholding from employees under Alabama
Act No. 93-851, also known as the "Mercedes Act." Subject to certain
requirements, these benefits allow the Company to (i) apply state employee
withholding tax, otherwise payable to the Alabama Department of Revenue, toward
the payment of the Company's debt obligation under the Bond Loan Agreement and
(ii) take a corporate income tax credit equal to the amount paid pursuant to the
Bond Loan Agreement. The Mercedes Act has been repealed in favor of a new
incentives package for projects subsequent to January 1995. In addition, because
legal title to substantially all of the real and personal property used in the
Company's operations is held by the Montgomery IDB, the Company receives, and
 
                                       62
<PAGE>   63
 
expects to continue to receive, an exemption from property tax through May 30,
2010. However, it is not expected that the property tax exemptions will apply to
the fourth smelting furnace the Company intends to construct. See "Description
of Other Indebtedness -- Industrial Revenue Bond Financing."
 
  Anti-Dumping Duties on Foreign Competitors' Products
 
     In 1990 and 1991, domestic producers of silicon metal successfully
prosecuted anti-dumping actions against unfairly traded imports of silicon metal
from the PRC, Brazil and Argentina. These actions were brought under the
antidumping provisions of the Tariff Act of 1930, as amended. Under that
statute, an anti-dumping duty order may be issued if a domestic industry
establishes in proceedings before the United States Department of Commerce and
the United States International Trade Commission that imports from the country
(or countries) covered by the action(s) are being sold at less than normal value
and are causing material injury or threat of such injury to the domestic
industry. An anti-dumping order requires special duties to be imposed in the
amount of the margin of dumping (i.e., the percentage difference between the
United States price for the goods received by the foreign producer or exporter
and the normal value of the merchandise).
 
     Once an order is in place, each year foreign producers, importers, domestic
producers and other interested parties may request a new investigation (or
"administrative review") to determine the margin of dumping during the
immediately preceding year. The rates calculated in these administrative reviews
(or the existing rates if no review is requested) are used to assess
anti-dumping duties on imports during the review period and to collect cash
deposits on future imports. An administrative review covering five Brazilian
producers and a review covering two PRC exporters are now in progress. The rates
established in these reviews and in future reviews will depend upon the prices
and costs during the periods covered by the reviews, the methodologies applied
and other factors. Anti-dumping orders remain in effect until they are revoked.
In order for an individual producer or exporter to qualify for revocation of an
anti-dumping order, the United States Department of Commerce must conclude that
the producer or exporter has sold the merchandise at not less than normal value
for a period of at least three consecutive years and is not likely to sell the
merchandise at less than normal value in the future. Anti-dumping orders may
also be revoked as a result of periodic "sunset reviews."
 
     The domestic silicon metal industry has aggressively sought to maintain
effective relief under the antidumping orders by actively participating in
administrative reviews, appeals and circumvention proceedings. Although these
efforts have been successful in protecting the industry from dumped imports from
the countries covered by the orders, no assurance can be given that one or more
of such anti-dumping orders will not be revoked or that effective duty rates
will continue to be imposed.
 
LEGAL PROCEEDINGS
 
     The Company is involved in routine litigation from time to time in the
regular course of its business. There are no material legal proceedings pending
or known to be contemplated to which the Company is a party or to which any of
its property is subject.
 
                                       63
<PAGE>   64
 
                                   MANAGEMENT
 
DIRECTORS AND OFFICERS OF THE COMPANY
 
     Set forth below are the names and positions of the directors, officers and
significant employees of the Company.
 
<TABLE>
<CAPTION>
NAME                                          AGE                     POSITION
- ----                                          ---                     --------
<S>                                           <C>   <C>
C. Edward Boardwine.........................  51    President, Chief Executive Officer and
                                                    Director
Dwight L. Goff..............................  43    Vice President
R. Myles Cowan, II..........................  46    Vice President of Finance
Donald J. Williams..........................  47    Director of Human Resources
Howard L. McHenry...........................  54    Senior Metallurgist
Roger Hall..................................  57    Superintendent of Engineering and Maintenance
Edwin A. Wahlen, Jr.........................  50    Director
William A. Davies...........................  52    Director
James A. O'Donnell..........................  45    Director
</TABLE>
 
     C. EDWARD BOARDWINE has been the President and Chief Executive Officer of
the Company since February 1995. Prior to joining the Company, he was Vice
President -- Silicon Metal Division of Elkem ASA ("Elkem ASA"), a ferroalloy and
silicon metal manufacturer based in Oslo, Norway, since July 1990. Mr. Boardwine
became a director of the Company on the date of the Acquisition Closing.
 
     DWIGHT L. GOFF has been the Vice President of the Company since February
1995. Prior to joining the Company, he was President of Elkem Materials, Inc., a
microsilica marketing company, since November 1989. In addition, from June 1989
until February 1995, Mr. Goff was the Division Controller for the Silicon Metal
Division of Elkem Metals, a ferroalloy manufacturer.
 
     R. MYLES COWAN, II has been the Vice President -- Finance of the Company
since October 1995. Prior to joining the Company, he was employed by the Thermal
Components Group, a division of Insilco Corporation, a diversified manufacturing
company, since October 1990, where he had most recently been Director of
Business Planning. Mr. Cowan filed a voluntary petition under Chapter 7 of the
Bankruptcy Code in December 1995, and the case resulting therefrom was
discharged in April 1996.
 
     DONALD J. WILLIAMS has been the Director of Human Resources of the Company
since February 1995. Prior thereto, he was employed in a similar capacity by
SiMETCO at the Facility since October 1988.
 
     HOWARD L. MCHENRY has been the Senior Metallurgist of the Company since
July 1995. Prior thereto, he was employed by Elkem Metals since July 1981, where
he had most recently been the Senior Metallurgist.
 
     ROGER HALL has been the Superintendent of Engineering and Maintenance of
the Company since February 1995. Prior thereto, he was employed in a similar
capacity by SiMETCO at the Facility since May 1988.
 
     EDWIN A. WAHLEN, JR. is a member of the General Partner and is jointly
responsible for all major decisions of the General Partner. Mr. Wahlen is also a
member of CGW Southeast Management III, L.L.C. (the "Management Company"), an
affiliate of CGW. Mr. Wahlen has been a member of the General Partner, the
Management Company or affiliated entities for more than five years. He is a
director of AMRESCO, Inc., Cameron Ashley Building Products, Inc. and several
private companies. Mr. Wahlen became a director of the Company on the date of
the Acquisition Closing.
 
     WILLIAM A. DAVIES is a member of the General Partner, and is responsible
for sourcing, structuring and negotiating transactions, participating in
strategic planning with members of management of various CGW portfolio companies
to increase value and manage exit strategies. Mr. Davies has been a member of
the General Partner or an employee of affiliates of the General Partner for more
than five years. He is a director of
 
                                       64
<PAGE>   65
 
Gorges/Quik-to-Fix Foods, Inc. and several private companies. Mr. Davies became
a director of the Company on the date of the Acquisition Closing.
 
     JAMES A. O'DONNELL has been a member of the General Partner since 1995, and
is responsible for sourcing, structuring and negotiating transactions,
participating in strategic planning with members of management of various CGW
portfolio companies to increase value and manage exit strategies. Mr. O'Donnell
has been a general partner of Sherry Lane Partners, a private equity investment
firm based in Dallas, Texas since 1992. Also, Mr. O'Donnell has been a general
partner of O'Donnell & Masur, a private equity investment firm based in Dallas,
Texas, since 1989. He is a director of Bestway Rental, Inc., Gorges/Quik-to-Fix
Foods, Inc. and several private companies. Mr. O'Donnell became a director of
the Company on the date of the Acquisition Closing.
 
MANAGEMENT COMPENSATION
 
  Summary Compensation Table
 
     The following table sets forth the compensation earned during the year
ended December 31, 1997 by the Chief Executive Officer of the Company and each
other executive officer of the Company who served as such at December 31, 1997
and whose total salary and bonus exceeded $100,000 (collectively, the "Named
Executive Officers"). The Company did not grant any options or stock
appreciation rights or make any long-term incentive plan payouts during the year
ended December 31, 1997.
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                              ANNUAL COMPENSATION
                                                              --------------------      ALL OTHER
NAME AND PRINCIPAL POSITION                            YEAR   SALARY($)   BONUS($)   COMPENSATION($)
- ---------------------------                            ----   ---------   --------   ---------------
<S>                                                    <C>    <C>         <C>        <C>
C. Edward Boardwine,.................................  1997   $189,545    $99,000        $11,185(1)
  President and Chief Executive Officer
Dwight L. Goff,......................................  1997     95,206     54,000             --
  Vice President
R. Myles Cowan, II,..................................  1997     83,000     49,800             --
  Vice President -- Finance
</TABLE>
 
- ---------------
 
(1) Includes $8,567 for premiums paid by the Company with respect to a split
    dollar life insurance policy for Mr. Boardwine and $2,618 for payments made
    by the Company to Mr. Boardwine with respect to a mortgage interest
    differential. The mortgage interest differential was paid to Mr. Boardwine
    in connection with his relocation to Mt. Meigs, Alabama from Pennsylvania
    and represents the difference that he must pay due to the greater interest
    rate under his current home mortgage as compared to his prior mortgage in
    Pennsylvania.
 
                                       65
<PAGE>   66
 
OPTION EXERCISES AND YEAR-END VALUES
 
     The following table sets forth information regarding the number of
unexercised options held by the Named Executive Officers at December 31, 1997
and the aggregate dollar value of unexercised options held at December 31, 1997.
No options were exercised during the year ended December 31, 1997.
 
                    AGGREGATED FISCAL YEAR-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                  NUMBER OF SECURITIES
                                                 UNDERLYING UNEXERCISED            VALUE OF UNEXERCISED
                                                       OPTIONS AT                  IN-THE-MONEY OPTIONS
                                                  DECEMBER 31, 1997(#)          AT DECEMBER 31, 1997($)(2)
                                             ------------------------------   ------------------------------
NAME                                         EXERCISABLE   UNEXERCISABLE(1)   EXERCISABLE   UNEXERCISABLE(1)
- ----                                         -----------   ----------------   -----------   ----------------
<S>                                          <C>           <C>                <C>           <C>
C. Edward Boardwine........................      346             216          $2,084,903       $1,301,558
Dwight L. Goff.............................       42              67             253,081          403,724
Myles Cowan, II............................       27              82             162,695          494,110
</TABLE>
 
- ---------------
 
(1) All options became immediately exercisable at the Acquisition Closing.
(2) Value is based on the difference between the option exercise price of
    $100.00 and the fair market value of $6,125.73 per share at December 31,
    1997 multiplied by the number of shares underlying the option. The fair
    market value per share is based on the price per share paid by SAC in
    connection with the Acquisition, based on a total purchase price of $66.7
    million.
 
EMPLOYMENT AGREEMENTS
 
     SIMCALA has an employment agreement (collectively, the "Employment
Agreements") with each Senior Manager (previously defined herein as Messrs.
Boardwine, Goff and Cowan) for a term expiring on the fifth anniversary of the
Acquisition Closing. The Company will have the right to terminate the Employment
Agreements at any time prior to their scheduled expiration upon thirty (30) days
written notice. However, if a Senior Manager is terminated other than for cause,
whether pursuant to such Senior Manager's Employment Agreement or following the
termination or expiration of the term of such Employment Agreement, such Senior
Manager will receive, in addition to earned salary and bonus, a severance
payment equal to 12 months' base salary. If a Senior Manager is terminated for
cause, death or disability, or upon the voluntary termination by such Senior
Manager of his employment under such Senior Manager's Employment Agreement, such
Senior Manager will receive only earned salary and, in the case of termination
due to death or disability, bonus due as of the date of termination. The
Employment Agreements also contain non-competition, non-solicitation and
confidentiality provisions.
 
     Mr. Boardwine's Employment Agreement provides for a base salary of
$205,000, Mr. Goff's Employment Agreement provides for a base salary of
$100,000, and Mr. Cowan's Employment Agreement provides for a base salary of
$90,000. Mr. Boardwine will be eligible to receive a bonus of up to 75% of his
base salary, while Messrs. Goff and Cowan will be eligible to receive a bonus of
up to 65% of their respective base salaries. Half of the bonus available to the
Senior Managers will be awarded based upon earnings of the Company (subject to
certain adjustments) if certain performance targets of the Company are reached.
The other half of the bonus will be awarded to each Senior Manager and paid at
the discretion of the Company's Board of Directors. The amount of any
discretionary bonus awarded will be based primarily on the performance of the
Company and whether and to what extent it achieves or exceeds its annual budget.
 
STOCK INCENTIVE PLAN
 
     Holdings has adopted a Stock Incentive Plan (the "Plan") pursuant to which
options to purchase up to 8,000 shares of Holdings Stock (the "Options") may be
granted to the Senior Management or other employees (each an "Optionee")
selected for participation in the Plan by the Compensation Committee of the
Company's Board of Directors. At the time of the Acquisition Closing, Senior
Management collectively was issued Options to acquire 3,070 shares of Holdings
Stock. The Options are subject to a five-year vesting period and the Options
issued on the date of the Acquisition Closing are exercisable at an initial
price per
 
                                       66
<PAGE>   67
 
share of $1,000. The Options will immediately and fully vest in the event of a
merger or consolidation of Holdings with, or the sale of substantially all of
the assets or stock of Holdings to, any person other than CGW or a CGW
affiliate. The Plan also provides for other equity-based forms of incentive
compensation in addition to the Options. See "Certain Transactions."
 
                              CERTAIN TRANSACTIONS
 
SHAREHOLDERS AGREEMENT
 
     At the Acquisition Closing, CGW and the Senior Management, as the
shareholders of Holdings, entered into a Shareholders Agreement (the
"Shareholders Agreement"). All future purchasers of Holdings capital stock will
be required to enter into the Shareholders Agreement. The Shareholders Agreement
contains restrictions on the transferability of the capital stock of Holdings
and other rights and obligations of Holdings, CGW and the Senior Management with
respect to the capital stock of Holdings.
 
     In addition, the Shareholders Agreement grants to the Senior Managers
pre-emptive rights, exercisable pro rata in accordance with their respective
ownership of capital stock of Holdings, to purchase shares or equity securities
of Holdings (other than shares of capital stock issued upon exercise of options,
rights, awards or grants pursuant to the Plan). The Shareholders Agreement also
provides for certain co-sale rights of the Senior Managers in the event CGW
elects to sell all or a portion of its shares of Holdings' capital stock and
co-sale obligations of the Senior Managers in the event of a sale of Holdings or
its subsidiaries (including SIMCALA). Holdings has a right of first refusal in
connection with any proposed sale by any Senior Manager of his investment in
Holdings.
 
     The Shareholders Agreement further provides that if a Senior Manager's
employment is terminated for any reason other than for cause, such Senior
Manager will have the right to sell to Holdings any shares of Holdings' capital
stock owned by such Senior Manager at the greater of cost or fair value. Such
right is exercisable within one month (six months in the event of the death or
disability of the Senior Manager) following such termination of employment of
the Senior Manager. If a Senior Manager's employment is terminated for cause,
Holdings will have the right, exercisable within 120 days following such
termination, to repurchase any shares of Holdings' capital stock owned by such
Senior Manager at the lesser of cost or fair value. Fair value of the
repurchased shares will be determined by agreement between Holdings and the
Senior Manager whose shares are being repurchased or, failing such agreement, by
an independent appraiser.
 
     If Holdings is unable to, or elects not to, exercise any right to purchase
such shares of capital stock from a Senior Manager or his transferee, Holdings
may assign such right to CGW, which may then exercise such right with respect to
the purchase of such shares of capital stock as to which such right is assigned.
 
TRANSACTIONS WITH CGW, ITS AFFILIATES AND CERTAIN STOCKHOLDERS
 
     At the Acquisition Closing, CGW Southeast III, L.L.C. (the "General
Partner") entered into a consulting agreement (the "Consulting Agreement") with
the Company whereby the Company will pay the General Partner a monthly retainer
fee of $15,000 for financial and management consulting services. The General
Partner may also receive additional compensation if approved by the Board of
Directors of the Company at the end of each fiscal year of the Company, based
upon the overall performance of the Company. The Consulting Agreement expires
five years from the Acquisition Closing. At the Acquisition Closing, the General
Partner delegated its rights and obligations under the Consulting Agreement to
CGW Southeast Management III, L.L.C. (the "Management Company"), an affiliate of
CGW. At the Acquisition Closing, the Company also paid to the Management Company
an investment banking fee of $1.35 million for its services in assisting the
Company in structuring and negotiating the Transactions.
 
     Messrs. Wahlen, Davies and O'Donnell are each a director of the Company and
a member of the General Partner. Mr. Wahlen is also a member of the Management
Company.
 
     In June 1997, Mr. Cowan received a loan of $75,000 from a third-party
lender, which was guaranteed by the Company. This guarantee was terminated on
the date of the Acquisition Closing.
 
                                       67
<PAGE>   68
 
     In connection with the exercise of certain stock options by members of
Senior Management immediately prior to the Acquisition Closing, the Company was
responsible to certain tax authorities for payment of $1,799,863 of withholding
taxes (the "Tax Obligation") by June 15, 1998. Upon the payment by the Company
of the Tax Obligation, each of the members of Senior Management reimbursed the
Company for his pro rata portion of the Tax Obligation. C. Edward Boardwine,
Dwight L. Goff and R. Myles Cowan, II reimbursed the Company $1,358,501,
$220,681 and $220,681, respectively.
 
     During October 1996, a limited partnership formed by the former
stockholders of the Company, including the members of Senior Management,
purchased from the estate of SiMETCO $7.7 million aggregate principal amount of
the Company's non-interest bearing notes payable for an aggregate purchase price
of $3.1 million (the "SiMETCO Notes"). On the date of the purchase, the Company
was in default under the SiMETCO Notes. During April 1997, the Company paid $7.7
million to the limited partnership, prepayment in full of the SiMETCO Notes,
together with $464,000 of prepayment penalties and fees. See Note 7 to the
Company's Financial Statements.
 
INDEMNIFICATION OF OFFICERS AND DIRECTORS
 
     The Certificate of Incorporation of the Company contains a provision
eliminating, to the full extent permitted by Delaware law or any other
applicable law, the personal liability of directors to the Company or its
stockholders with respect to any acts or omissions in the performance of a
director's duties as a director of the Company. The Certificate of Incorporation
of the Company also provides that directors and officers of the Company will be
indemnified by the Company to the full extent permitted by Delaware law or any
other applicable law, but the Company may enter into agreements providing for
greater or different indemnification.
 
     The Articles of Incorporation of Holdings contains a provision eliminating
the personal liability of directors to Holdings or its shareholders for monetary
damages for breaches of their duty of care or other duty as a director, except
in certain prescribed circumstances. The Bylaws of Holdings provide that
directors and officers of Holdings will be indemnified by Holdings to the extent
allowed by Georgia law, against all expenses, judgments, fines and amounts paid
in settlement that are actually and reasonably incurred in connection with
service for or on behalf of Holdings. The Bylaws of Holdings further provide
that Holdings may purchase and maintain insurance on behalf of its directors and
officers whether or not Holdings would have the power to indemnify such
directors and officers against any liability under Georgia law.
 
                                       68
<PAGE>   69
 
                              BENEFICIAL OWNERSHIP
 
     Holdings owns 100% of the issued and outstanding capital stock of the
Company. The issued and outstanding capital stock of Holdings (the "Holdings
Stock") is owned 90.9% by CGW and 9.1% by the Senior Management. Affiliated
entities of each of Edwin A. Wahlen, Jr., William A. Davies and James A.
O'Donnell are limited partners of CGW. See "The Transactions," "Management" and
"Certain Transactions."
 
     The following table sets forth, as of June 30, 1998, certain additional
information regarding the ownership of the Holdings Stock by: (i) each director
of the Company; (ii) each executive officer of the Company; (iii) all directors
and executive officers of the Company as a group; and (iv) each person known to
the Company to be the beneficial owner of more than 5% of the Holdings Stock.
 
<TABLE>
<CAPTION>
                                                                                       PERCENT OF ALL
                                                                NUMBER OF SHARES       HOLDINGS STOCK
NAME OF STOCKHOLDER                                           BENEFICIALLY OWNED(1)     OUTSTANDING
- -------------------                                           ---------------------    --------------
<S>                                                           <C>                      <C>
CGW Southeast Partners III, L.P.(2).........................         20,000                 90.9%
C. Edward Boardwine(3)......................................          1,655                  7.5%
Dwight L. Goff..............................................            195                  0.9%
R. Myles Cowan, II..........................................            150                  0.7%
All directors and executive officers as a group (3
  persons)..................................................          2,000                  9.1%
</TABLE>
 
- ---------------
 
(1) Excludes 2,046, 512, and 512 shares of Holdings Stock which may be acquired
    upon the exercise of Options granted to Messrs. Boardwine, Goff and Cowan,
    respectively, on the date of the Acquisition Closing. None of these Options
    will begin to vest until March 31, 1999.
(2) The address of CGW is 12 Piedmont Center, Suite 210, Atlanta, Georgia 30305.
(3) The address of Mr. Boardwine is c/o SIMCALA, Inc., Ohio Ferro Alloys Road,
    Mt. Meigs, Alabama 36057.
 
                                       69
<PAGE>   70
 
                            DESCRIPTION OF THE NOTES
 
GENERAL
 
     The Exchange Notes are substantially identical (including principal amount,
interest rate, maturity and redemption rights) to the Series A Notes for which
they may be exchanged pursuant to this offer, except that (i) the offering and
sale of the Exchange Notes will have been registered under the Securities Act,
and (ii) holders of Exchange Notes will not be entitled to certain rights of
holders of the Series A Notes under the Registration Rights Agreement. The
Exchange Notes will be issued, and the Series A Notes were issued, pursuant to
the Indenture between the Company and the Trustee. The terms of the Exchange
Notes and the Series A Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (the
"Trust Indenture Act"). The Exchange Notes will be, and the Series A Notes are,
subject to all such terms, and holders of Notes are referred to the Indenture
and the Trust Indenture Act for a statement thereof. The following summary of
the material provisions of the Indenture and the Registration Rights Agreement
does not purport to be complete and is qualified in its entirety by reference to
the Indenture and the Registration Rights Agreement, including the definitions
therein of certain terms used below. The definitions of certain terms used in
the following summary are set forth below under "-- Certain Definitions."
 
     The Exchange Notes will be, and the Series A Notes are, general unsecured
obligations of the Company ranking senior in right of payment to all existing
and future subordinated Indebtedness of the Company and pari passu in right of
payment with all existing and future senior Indebtedness of the Company,
including Indebtedness under the New Credit Facility. The obligations of the
Company under the New Credit Facility, however, are secured by substantially all
of the Company's assets and the real and personal property used in the Company's
operations which are, as a result of the IRB Financing, owned by the Montgomery
IRB and leased to the Company. Accordingly, the New Credit Facility effectively
ranks senior in right of payment to the Notes to the extent of the assets
subject to such security interest. As of June 30, 1998, the Company had
approximately $83.1 million of indebtedness outstanding ($6.3 million of which
was pari passu in right of payment with the Notes and none of which was secured)
and approximately $15.0 million of secured Indebtedness available to be incurred
under the New Credit Facility (as such availability is reduced by a $6.1 million
letter of credit issued thereunder). The terms of the Indenture permit the
Company and its subsidiaries to incur additional Indebtedness (including secured
Indebtedness), subject to certain limitations. See "Use of Proceeds" and
"Description of Other Indebtedness."
 
PRINCIPAL, MATURITY AND INTEREST
 
     The Notes are limited in aggregate principal amount to $75.0 million and
will mature on April 15, 2006. Interest on the Notes will accrue at the rate of
9 5/8% per annum and will be payable semi-annually in arrears on April 15 and
October 15, commencing on October 15, 1998, to holders of record on the
immediately preceding April 1 and October 1. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the date of original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Principal, premium,
if any, and interest and Liquidated Damages on the Notes will be payable at the
office or agency of the Company maintained for such purpose within the City and
State of New York or, at the option of the Company, payment of interest and
Liquidated Damages may be made by check mailed to the holders of the Notes at
their respective addresses set forth in the register of holders of Notes;
provided that all payments of principal, premium, interest and Liquidated
Damages with respect to Notes the holders of which have given wire transfer
instructions to the Company will be required to be made by wire transfer of
immediately available funds to the accounts specified by the holders thereof.
Until otherwise designated by the Company, the Company's office or agency in New
York will be the office of the Trustee maintained for such purpose. The Exchange
Notes will be, and the Series A Notes have been, issued in denominations of
$1,000 and integral multiples thereof.
 
SUBSIDIARY GUARANTEES
 
     The Company does not currently have any Subsidiaries. The Indenture
provides that the Company's payment obligations under the Notes will be jointly
and severally guaranteed on a full and unconditional basis (the "Subsidiary
Guarantees") by each of the future Domestic Subsidiaries of the Company that,
directly or
 
                                       70
<PAGE>   71
 
indirectly, guarantee or pledge any assets to secure the payment of any other
Indebtedness of the Company (the "Guarantors"). The obligations of each
Guarantor under its Subsidiary Guarantee will be limited so as not to constitute
a fraudulent conveyance under applicable law. See "Risk Factors -- Fraudulent
Conveyance Considerations."
 
     The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Registration Rights Agreement;
(ii) immediately after giving effect to such transaction, no Default or Event of
Default exists; (iii) such Guarantor, or any Person formed by or surviving any
such consolidation or merger, would have Consolidated Net Worth (immediately
after giving effect to such transaction), equal to or greater than the
Consolidated Net Worth of such Guarantor immediately preceding the transaction;
and (iv) the Company would be permitted by virtue of the Company's pro forma
Fixed Charge Coverage Ratio, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the covenant described below under
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock." Notwithstanding the foregoing, a Guarantor may consolidate with or merge
with or into the Company or another Guarantor.
 
     The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor by way of merger, consolidation or otherwise,
or a sale or other disposition of all of the capital stock of any Guarantor,
then such Guarantor (in the event of a sale or other disposition, by way of such
a merger, consolidation or otherwise, of all of the capital stock of such
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all of the assets of such Guarantor) will be released and
relieved of any obligations under its Subsidiary Guarantee; provided that the
Net Proceeds of such sale or other disposition are applied in accordance with
the applicable provisions of the Indenture (other than in the case of a sale
from a Guarantor to the Company or a Subsidiary of the Company). See
"-- Repurchase at the Option of Holders -- Asset Sales."
 
OPTIONAL REDEMPTION
 
     The Notes will not be redeemable at the Company's option prior to April 15,
2002. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on April 15 of the years indicated below:
 
<TABLE>
<CAPTION>
YEAR                                                          PERCENTAGE
- ----                                                          ----------
<S>                                                           <C>
2002........................................................   104.8125%
2003........................................................   103.2083
2004........................................................   101.6042
2005 and thereafter.........................................   100.0000%
</TABLE>
 
     Notwithstanding the foregoing, at any time on or before, April 15, 2001,
the Company may redeem up to 30% of the aggregate principal amount of Notes
originally issued under the Indenture at a redemption price of 109.625% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of a
public offering of common stock of the Company; provided that at least 70% of
the original aggregate principal amount of Notes remain outstanding immediately
after the occurrence of such redemption (excluding Notes held by the Company and
its Subsidiaries); and provided, further, that such redemption shall occur
within 60 days of the date of the closing of such public offering.
 
                                       71
<PAGE>   72
 
SELECTION AND NOTICE
 
     If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
 
MANDATORY REDEMPTION
 
     The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
 
REPURCHASE AT THE OPTION OF HOLDERS
 
  Change of Control
 
     Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within ten days following any Change of Control,
the Company will mail a notice to each holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
 
     On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such Note will be in a principal amount
of $1,000 or an integral multiple thereof. The Company will publicly announce
the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date.
 
     The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
 
     The Company's other senior indebtedness contains prohibitions of certain
events that would constitute a Change of Control. In addition, the exercise by
the holders of Notes of their right to require the Company to repurchase the
Notes could cause a default under such other senior indebtedness, even if the
Change of
 
                                       72
<PAGE>   73
 
Control itself does not, due to the financial effect of such repurchases on the
Company. Finally, the Company's ability to pay cash to the holders of Notes upon
a repurchase may be limited by the Company's then existing financial resources.
See "Risk Factors -- Potential Inability to Fund Change of Control Offer."
 
     The New Credit Facility also provides that certain change of control events
with respect to the Company would constitute a default thereunder. Any future
credit agreements or other agreements relating to Senior Debt to which the
Company becomes a party may contain similar restrictions and provisions. In the
event a Change of Control occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
the New Credit Facility.
 
     The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
 
     The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company taken as a whole
to another Person or group may be uncertain.
 
  Asset Sales
 
     The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors (whose determination, if made in good faith, shall be
conclusive) set forth in an Officers' Certificate delivered to the Trustee) of
the assets or Equity Interests issued or sold or otherwise disposed of and (ii)
at least 75% of the consideration therefor received by the Company or such
Subsidiary is in the form of cash; provided that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet) of the Company or any Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes) that are assumed
by the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Subsidiary from further liability and (y) any
securities, notes or other obligations received by the Company or any such
Subsidiary from such transferee that are contemporaneously (subject to ordinary
settlement periods) converted by the Company or such Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
 
     Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds at its option, (a) to permanently
reduce, repurchase, repay or redeem any Indebtedness (and other amounts) under
the New Credit Facility or any one or more successor or additional Credit
Facilities, or (b) to the acquisition of a majority of the assets of, or a
majority of the Voting Stock of, another Permitted Business, the making of a
capital expenditure or the acquisition of other long-term assets that are used
or useful in a Permitted Business. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0
million, the Company will be required to make an offer to all holders of Notes
and all holders of other Indebtedness containing provisions similar to those set
forth in the
 
                                       73
<PAGE>   74
 
Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount
of Notes and such other Indebtedness that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase, in accordance with the procedures set forth in
the Indenture and such other Indebtedness. To the extent that any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
such Excess Proceeds for any purpose not otherwise prohibited by the Indenture.
If the aggregate principal amount of Notes and such other Indebtedness tendered
into such Asset Sale Offer surrendered by holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness
to be purchased on a pro rata basis. Upon completion of such offer to purchase,
the amount of Excess Proceeds shall be reset at zero.
 
CERTAIN COVENANTS
 
  Restricted Payments
 
     The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend
or make any other payment or distribution on account of the Company's or any of
its Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or any of
its Subsidiaries) or to the direct or indirect holders of the Company's or any
of its Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or to the Company or a Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company or other Affiliate of the Company (other than any such Equity
Interests owned by the Company or any Wholly Owned Subsidiary of the Company);
(iii) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is pari passu with
or subordinated to the Notes (other than Notes), except a payment of interest or
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments," unless, at the time of and
after giving effect to such Restricted Payment:
 
          (a) no Default or Event of Default shall have occurred and be
     continuing or would occur as a consequence thereof; and
 
          (b) the Company would, at the time of such Restricted Payment and
     after giving pro forma effect thereto as if such Restricted Payment had
     been made at the beginning of the applicable four-quarter period, have been
     permitted to incur at least $1.00 of additional Indebtedness pursuant to
     the Fixed Charge Coverage Ratio test set forth in the first paragraph of
     the covenant described below under caption "-- Incurrence of Indebtedness
     and Issuance of Preferred Stock"; and
 
          (c) such Restricted Payment, together with the aggregate amount of all
     other Restricted Payments made by the Company and its Subsidiaries after
     the date of the Indenture (excluding Restricted Payments permitted by
     clauses (ii), (iii) and (iv) of the next succeeding paragraph), is less
     than the sum, without duplication, of (i) 50% of the Consolidated Net
     Income of the Company for the period (taken as one accounting period) from
     the beginning of the first fiscal quarter commencing after the date of the
     Indenture to the end of the Company's most recently ended fiscal quarter
     for which internal financial statements are available at the time of such
     Restricted Payment (or, if such Consolidated Net Income for such period is
     a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
     cash proceeds received by the Company since the date of the Indenture as a
     contribution to its common equity capital or from the issue or sale of
     Equity Interests of the Company (other than Disqualified Stock) or from the
     issue or sale of Disqualified Stock or debt securities of the Company that
     have been converted into such Equity Interests (other than Equity Interests
     (or Disqualified Stock or convertible debt securities) sold to a Subsidiary
     of the Company), plus (iii) to the extent that any Restricted Investment
     that was made after the date of the Indenture is sold for cash or otherwise
     liquidated or repaid for cash,
 
                                       74
<PAGE>   75
 
     the lesser of (A) the cash return of capital with respect to such
     Restricted Investment (less the cost of disposition, if any) and (B) the
     initial amount of such Restricted Investment, plus (iv) $5.0 million.
 
     The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of,
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c) (ii) of the immediately preceding paragraph; (iii)
the defeasance, redemption, repurchase or other acquisition of pari passu or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Subsidiary of the Company to the holders of its common Equity Interests on a pro
rata basis; and (v) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Subsidiary of
the Company held by any member of the Company's (or any of its Subsidiaries')
management pursuant to any management equity subscription agreement or stock
option agreement in effect as of the date of the Indenture or entered into after
the Closing Date with members of the management of any Person acquired after the
Closing Date in connection with the acquisition of such Person or the repurchase
of Equity Interests of the Company or any Subsidiary of the Company held by
employees, former employees, directors or former directors pursuant to the terms
of agreements (including employment agreements) approved by the Board of
Directors; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $500,000 in any
twelve-month period and no Default or Event of Default shall have occurred and
be continuing immediately after any such transaction; (vi) payments to Holdings
in an amount not to exceed the amount of the Company's federal and state income
tax liability that the Company would owe if it were filing a separate income tax
return as a stand alone company (or, if there are any subsidiaries of the
Company, the amount of the federal and state income tax liability for which the
Company and such subsidiaries would be liable if the Company and such
subsidiaries were filing a separate consolidated (or combined) income tax
return) plus $100,000; provided, that any such payment shall not exceed the tax
liability of Holdings that is actually then due and payable; (vii) loans,
advances, dividends or distributions by the Company or any of its Subsidiaries
to Holdings to pay for corporate, administrative and operating expenses in the
ordinary course of business, including payment of directors' and officers
liability insurance premiums, directors' fees, and fees, expenses and
indemnities in connection with the Transactions, in an aggregate amount not to
exceed $250,000 in any fiscal year; and (viii) (A) loans, advances, dividends or
distributions by the Company or any of its Subsidiaries to Holdings not to
exceed an amount necessary to permit Holdings to pay (1) its costs (including
all professional fees and expenses) incurred to comply with its reporting
obligations under federal or state laws or in connection with reporting or other
obligations under the New Credit Facility or any related collateral documents or
guarantees, (2) its expenses incurred in connection with any public offering of
equity securities which has been terminated by the board of directors of
Holdings, the net proceeds of which were specifically intended to be received by
or contributed or loaned to the Company as evidenced by a resolution of the
Board of Directors of Holdings and (B) loans or advances by the Company or any
of its Subsidiaries to Holdings not to exceed an amount necessary to permit
Holdings to pay its interim expenses incurred in connection with any public
offering of equity securities the net proceeds of which are specifically
intended to be received by or contributed or loaned to the Company, which,
unless such offering shall have been terminated by the board of directors of
Holdings shall be repaid to the Company promptly out of the proceeds of such
offering; provided, that no Default or Event of Default shall have occurred and
be continuing immediately after any of the foregoing payments.
 
     The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $1.0
 
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<PAGE>   76
 
million. Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed,
together with a copy of any fairness opinion or appraisal required by the
Indenture.
 
  Incurrence of Indebtedness and Issuance of Preferred Stock
 
     The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided that the Company may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been (A) on or prior to April 15, 2000, at least 2.0 to 1 and (B) after
April 15, 2000, 2.25 to 1; determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period;
 
     The Indenture also provides that the Company will not incur any
Indebtedness that is contractually subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness is also contractually
subordinated in right of payment to the Notes on substantially identical terms;
provided that no Indebtedness of the Company shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of the Company solely
by virtue of being unsecured.
 
     The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
 
          (i) the incurrence by the Company of Indebtedness and letters of
     credit pursuant to Credit Facilities; provided that the aggregate principal
     amount of all Indebtedness and letters of credit (with letters of credit
     being deemed to have a principal amount equal to the maximum potential
     liability of the Company and its Subsidiaries thereunder) outstanding under
     all Credit Facilities after giving effect to such incurrence does not
     exceed an amount equal to $20.0 million less the aggregate amount of all
     Net Proceeds of Asset Sales applied to repay Indebtedness under a Credit
     Facility or a credit agreement pursuant to the covenant described above
     under "-- Repurchase at the Option of Holders -- Asset Sales";
 
          (ii) the incurrence by the Company of the Existing Indebtedness;
 
          (iii) the incurrence by the Company of Indebtedness represented by the
     Notes;
 
          (iv) the incurrence by the Company or any of its Subsidiaries of
     Indebtedness represented by Capital Lease Obligations, mortgage financings
     or purchase money obligations, in each case incurred for the purpose of
     financing all or any part of the purchase price or cost of construction or
     improvement of property, plant or equipment used in the business of the
     Company or such Subsidiary, in an aggregate principal amount not to exceed
     5% of total assets;
 
          (v) the incurrence by the Company or any of its Subsidiaries of
     Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
     which are used to refund, refinance or replace Indebtedness (other than
     intercompany Indebtedness) that was permitted by the Indenture to be
     incurred under the first paragraph hereof or clauses (ii), (iii), (iv) or
     (x) of this paragraph;
 
          (vi) the incurrence by the Company or any of its Subsidiaries of
     intercompany Indebtedness between or among the Company and any of its
     Wholly Owned Subsidiaries; provided that (i) if the Company is the obligor
     on such Indebtedness, such Indebtedness is expressly subordinated to the
     prior payment in full in cash of all Obligations with respect to the Notes
     and (ii)(A) any subsequent issuance
 
                                       76
<PAGE>   77
 
     or transfer of Equity Interests that results in any such Indebtedness being
     held by a Person other than the Company or a Subsidiary thereof and (B) any
     sale or other transfer of any such Indebtedness to a Person that is not
     either the Company or a Wholly Owned Subsidiary thereof shall be deemed, in
     each case, to constitute an incurrence of such Indebtedness by the Company
     or such Subsidiary, as the case may be, that was not permitted by this
     clause (vi);
 
          (vii) the incurrence by the Company or any of its Subsidiaries of
     Hedging Obligations that are incurred for the purpose of fixing or hedging
     interest rate risk with respect to any floating rate Indebtedness that is
     permitted by the terms of the Indenture to be outstanding;
 
          (viii) the guarantee by the Company of Indebtedness of the Company or
     a Subsidiary of the Company that was permitted to be incurred by another
     provision of this covenant;
 
          (ix) Indebtedness of the Company or any of its Subsidiaries
     represented by letters of credit or guarantees by or for the account of the
     Company or such Subsidiary as the case may be, in each case, in order to
     provide security for workers' compensation claims, payment obligations in
     connection with self-insurance or similar requirements in the ordinary
     course of business;
 
          (x) Acquired Debt of a Subsidiary, which Subsidiary was acquired after
     the Closing Date and which Acquired Debt was in existence at the time of
     acquisition of such Subsidiary, and not incurred in contemplation of such
     acquisition, if such Acquired Indebtedness is Non-Recourse Debt (except
     with respect to such Subsidiary and its Subsidiaries) and such Acquired
     Debt does not exceed $5.0 million in the aggregate outstanding at any time;
 
          (xi) Indebtedness in the form of holdback notes or deferred purchase
     price in connection with an acquisition in an amount not to exceed the
     lesser of $5.0 million or 20% of the purchase price at any time
     outstanding;
 
          (xii) Indebtedness arising from agreements of the Company or a
     Subsidiary of the Company providing for indemnification, adjustment of
     purchase price or similar obligations, in each case, incurred in connection
     with the disposition of any business, assets or subsidiary, other than
     guarantees of Indebtedness incurred by any Person acquiring all or any
     portion of such business, assets or subsidiary for the purpose of financing
     such acquisition; provided that the maximum aggregate liability in respect
     of all such Indebtedness shall at no time exceed the gross proceeds
     actually received by the Company in connection with such disposition;
 
          (xiii) Obligations in respect of performance bonds and completion
     guarantees provided by the Company or any Subsidiary of the Company in the
     ordinary course of business;
 
          (xiv) the guarantee by the Company or any of the Guarantors of
     Indebtedness of the Company or a Subsidiary of the Company that was
     permitted to be incurred by another provision of this covenant; and
 
          (xv) the incurrence by the Company or any of its Subsidiaries of
     additional Indebtedness in an aggregate principal amount (or accreted
     value, as applicable) at any time outstanding, including all Permitted
     Refinancing Indebtedness incurred to refund, refinance or replace any
     Indebtedness incurred pursuant to this clause (xv), not to exceed $5.0
     million.
 
     For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xv) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant. Accrual of interest, accretion or
amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this covenant;
provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
 
                                       77
<PAGE>   78
 
  Liens
 
     The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien securing Indebtedness and trade payables on any asset now
owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
 
  Dividend and Other Payment Restrictions Affecting Subsidiaries
 
     The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (1) on its Capital Stock
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries or (iii) transfer any of its properties or assets to the Company or
any of its Subsidiaries. However, the foregoing restrictions will not apply to
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the New Credit
Facility as in effect as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the New Credit Facility as in effect on the date of the Indenture, (c) the
Indenture and the Notes, (d) applicable law, (e) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (f) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) any agreement for the sale of a Subsidiary that
restricts distributions by that Subsidiary pending its sale, (i) Permitted
Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced, (j) Liens securing Indebtedness otherwise
permitted to be incurred pursuant to the provisions of the covenant described
above under the caption "-- Liens" that limits the right of the debtor to
dispose of the assets securing such Indebtedness, (k) provisions with respect to
the disposition or distribution of assets or property in joint venture
agreements and other similar agreements entered into in the ordinary course of
business and (l) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
 
  Merger, Consolidation, or Sale of Assets
 
     The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Registration Rights Agreement, the Notes and the Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such
 
                                       78
<PAGE>   79
 
transaction no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Wholly Owned Subsidiary of the
Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under
"-- Incurrence of Indebtedness and Issuance of Preferred Stock." The Indenture
will provide that the foregoing covenant shall not apply to the Merger.
 
  Transactions with Affiliates
 
     The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million, an opinion as to the fairness to the holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing. Notwithstanding the foregoing, the
following items shall not be deemed to be Affiliate Transactions: (i) any
employment agreement entered into by the Company or any of its Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Subsidiary, (ii) transactions between or among the Company
and/or its Subsidiaries, (iii) payment of reasonable directors fees to Persons
who are not otherwise Affiliates of the Company, (iv) Restricted Payments that
are permitted by the provisions of the Indenture described above under the
caption "--Restricted Payments", (v) the payment to CGW Southeast Management
III, L.L.C. or its designees of the Investment Banking Fee, and (vi) the payment
to CGW Southeast III, L.L.C. or its designees of the Management Fee.
 
  Limitation on Issuances and Sales of Equity Interests in Wholly Owned
Subsidiaries
 
     The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests in any Wholly Owned Subsidiary of the
Company to any Person (other than the Company or a Wholly Owned Subsidiary of
the Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests in such Wholly Owned Subsidiary and
(b) the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with the covenant described above under
the caption "-- Asset Sales," and (ii) will not permit any Wholly Owned
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Subsidiary of
the Company.
 
  Business Activities
 
     The Company will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses, except to such extent as would not be
material to the Company and its Subsidiaries taken as a whole.
 
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<PAGE>   80
 
  Payments for Consent
 
     The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
 
  Reports
 
     The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports, in each case within the
time periods specified in the Commission's rules and regulations. In addition,
following the consummation of this Exchange Offer, whether or not required by
the rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability within
the time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company has agreed that, for so long as any Notes remain outstanding, it will
furnish to the holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
 
SUBSIDIARY GUARANTEES
 
     The Indenture provides that the Company will not permit any Subsidiary,
directly or indirectly, to Guarantee or pledge any assets to secure the payment
of any other Indebtedness of the Company unless such Subsidiary simultaneously
executes and delivers a supplemental indenture to the Indenture providing for
the Guarantee of the payment of the Notes by such Subsidiary, which Guarantee
shall be senior to or pari passu with such Subsidiary's Guarantee of or pledge
to secure such other Indebtedness.
 
EVENTS OF DEFAULT AND REMEDIES
 
     The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes; (ii) default in payment when due
of the principal of or premium, if any, on the Notes; (iii) failure by the
Company or any of its Subsidiaries to comply with the provisions described under
the captions "-- Change of Control," "-- Asset Sales," "-- Restricted Payments"
or "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; (iv) failure
by the Company or any of its Subsidiaries for 60 days after notice to comply
with any of its other agreements in the Indenture or the Notes; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Subsidiaries (or the payment of which is guaranteed
by the Company or any of its Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any
of its Subsidiaries to pay final judgments not covered by insurance aggregating
in excess of $5.0 million, which judgments are not paid, discharged, bonded or
stayed for a period of 60 days; (vii) except as permitted by the Indenture, any
 
                                       80
<PAGE>   81
 
Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall
deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Significant Subsidiaries.
 
     If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
 
     In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to April
15, 2002 by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to April 15, 2002 then the premium specified in
the Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
 
     The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
 
     The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
 
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
 
     No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
 
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
 
     The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company
 
                                       81
<PAGE>   82
 
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
 
     In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the holders of the outstanding Notes
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 amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the holders of Notes over the other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and (viii) the Company must deliver to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
 
TRANSFER AND EXCHANGE
 
     A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
 
     The registered holder of a Note will be treated as the owner of it for all
purposes.
 
AMENDMENT, SUPPLEMENT AND WAIVER
 
     Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the Notes then
 
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<PAGE>   83
 
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, Notes), and any existing
default or compliance with any provision of the Indenture or the Notes may be
waived with the consent of the holders of a majority in principal amount of the
then outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
 
     Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder): (i) reduce the
principal amount of Notes whose holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders"), (iii) reduce the rate of or change
the time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders") or (viii) make any change in
the foregoing amendment and waiver provisions.
 
     Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to holders of Notes in the case of a
merger or consolidation or sale of all or substantially all of the Company's
assets, to make any change that would provide any additional rights or benefits
to the holders of Notes or that does not adversely affect the legal rights under
the Indenture of any such holder, or to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
 
CONCERNING THE TRUSTEE
 
     The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
 
     The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any holder of Notes, unless such holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
 
ADDITIONAL INFORMATION
 
     Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to SIMCALA, Inc., P.O.
Box 68, Mt. Meigs, Alabama 36057; Attention: Chief Financial Officer.
 
                                       83
<PAGE>   84
 
BOOK-ENTRY, DELIVERY AND FORM
 
  Series A Global Notes
 
     The Series A Notes were offered and sold (i) to qualified institutional
buyers in reliance on Rule 144A under the Securities Act ("Rule 144A Notes") and
(ii) to institutional "accredited investors" as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act ("Accredited Investor Notes") and in each
case are represented by a separate note in registered, global form
(collectively, the "Series A Global Notes").
 
  Series B Global Note
 
     The Series B Notes will initially be issued in the form of one global
certificate (the "Series B Global Note" and collectively with the Series A
Global Notes, the "Global Notes"). The Series B Global Note will be deposited on
the date of the consummation of the Exchange Offer with or on behalf of DTC and
registered in the name of DTC or its nominee.
 
     DTC has advised the Company that DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies, and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers, and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
 
     So long as DTC, or its nominee, is the registered owner or holder of the
Series B Global Note, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Series B
Global Note for all purposes under the Indenture. The Company understands that
pursuant to procedures established by DTC (i) upon deposit of the Series B
Global Note, DTC or its custodian will credit, on its book entry registration
and transfer system, the respective principal amount of Series B Notes of the
individual beneficial interests represented by such Series B Global Note to the
accounts of Persons who have accounts with such depositary and (ii) ownership of
the Series B Notes evidenced by the Series B Global Note will be shown on, and
the transfer of ownership thereof will be effected only through, records
maintained by DTC or its nominee (with respect to the interests of DTC's
participants), DTC's participants and DTC's indirect participants. No beneficial
owner of an interest in the Series B Global Note will be able to transfer that
interest except in accordance with DTC's applicable procedures, in addition to
those provided for under the Indenture.
 
     Payments made with respect to the Series B Global Note will be made to DTC
or its nominee, as the case may be, as the registered owner thereof. The Company
will have no responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Series B
Global Note or for maintaining, supervising, or reviewing any records relating
to such beneficial ownership interests.
 
     The Company expects that DTC or its nominee, upon receipt of any payments
made with respect to the Series B Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Series B Global Note as shown on the
records of DTC or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such Series B Global Note held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
 
     Transfers between participants in DTC will be effected in accordance with
DTC rules and will be settled in same-day funds.
 
                                       84
<PAGE>   85
 
     Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Series B Global Note among participants
of DTC, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Company nor the Trustee nor any of their respective agents will have any
responsibility for the performance by DTC or its respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
 
  Certificated Notes
 
     Subject to certain conditions contained in the Indenture, any person having
a beneficial interest in the Global Notes may, upon request to the Trustee,
exchange such beneficial interest for Notes in registered certificated form
("Certificated Notes"). Upon any such issuance, the Trustee is required to
register such Certificated Notes in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof). In
addition, if (i) the Company notifies the Trustee in writing that DTC is no
longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
the form of Certificated Notes under the Indenture, then, upon surrender by the
Global Note holder of the Global Notes, Notes in such form will be issued to
each person that the Global Note holder and the DTC identify as being the
beneficial owner of the related Notes.
 
     Neither the Company nor the Trustee will be liable for any delay by the
Global Note holder or the DTC in identifying the beneficial owners of the Notes
and the Company and the Trustee may conclusively rely on, and will be protected
in relying on, instructions from the Global Note holder or the DTC for all
purposes.
 
  Same Day Settlement and Payment
 
     The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note holder. With respect to Notes in
certificated form, the Company will make all payments of principal, premium, if
any, interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the holders thereof or, if no such
account is specified, by mailing a check to each such holder's registered
address. The Notes represented by the Global Notes are expected to trade in the
DTC's Same-Day Funds Settlement System, and any permitted secondary market
trading activity in such Notes will, therefore, be required by the DTC to be
settled in immediately available funds. The Company expects that secondary
trading in any certificated Notes will also be settled in immediately available
funds.
 
     Because of time zone differences, the securities account of a Euroclear
System ("Euroclear") or Cedel Bank societe anonyme ("Cedel") participant
purchasing an interest in a Global Note from a participant in DTC will be
credited, and any such crediting will be reported to the relevant Euroclear or
Cedel participant, during the securities settlement processing day (which must
be a business day for Euroclear and Cedel) immediately following the settlement
date of DTC. DTC has advised the Company that cash received in Euroclear or
Cedel as a result of sales of interests in a Global Note by or through a
Euroclear or Cedel participant to a participant in DTC will be received with
value on the settlement date of DTC but will be available in the relevant
Euroclear or Cedel cash account only as of the business day for Euroclear or
Cedel following DTC's settlement date.
 
CERTAIN DEFINITIONS
 
     Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
 
     "Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other
 
                                       85
<PAGE>   86
 
Person merging with or into or becoming a Subsidiary of such specified Person,
and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
 
     "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
 
     "Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory or obsolete or excess equipment or
equipment that is not longer useable, in each case, in the ordinary course of
business (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company and its Subsidiaries taken as
a whole will be governed by the provisions of the Indenture described above
under the caption "-- Change of Control" and/or the provisions described above
under the caption "--Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant), and (ii) the issue or sale by the
Company or any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (i) a transfer of assets by the Company to a Wholly Owned
Subsidiary or by a Wholly Owned Subsidiary to the Company or to another Wholly
Owned Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned
Subsidiary to the Company or to another Wholly Owned Subsidiary, and (iii) a
Restricted Payment that is permitted by the covenant described above under
"-- Certain Covenants -- Restricted Payments."
 
     "Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
 
     "Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
 
     "Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the New
Credit Facility or with any domestic commercial bank having capital and surplus
in excess of $500 million and a Thompson Bank Watch Rating of "B" or better,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in
each case maturing within six months after the date of acquisition and (vi)
money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i)-(v) of this definition.
 
     "Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act); (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company; (iii) the consummation of any transaction (including,
 
                                       86
<PAGE>   87
 
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares); (iv) the first
day on which a majority of the members of the Board of Directors of the Company
are not Continuing Directors or; (iv) the Company consolidates with, or merges
with or into, any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which any of
the outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance).
 
     "Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of transaction fees, goodwill
and other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (excluding any such
non-cash expense to the extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a prepaid cash expense
that was paid in a prior period) of such Person and its Subsidiaries for such
period to the extent that such depreciation, amortization and other non-cash
expenses were deducted in computing such Consolidated Net Income, minus (v)
non-cash items increasing such Consolidated Net Income for such period, in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization and other non-cash expenses of, a
Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent that a corresponding amount
would be permitted at the date of determination to be dividended to the Company
by such Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders.
 
     "Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof that is a guarantor, (ii)
the Net Income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded and (iv) the cumulative effect of
a change in accounting principles shall be excluded.
 
                                       87
<PAGE>   88
 
     "Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
 
     "Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
 
     "Credit Facilities" means, with respect to the Company, one or more debt
facilities (including, without limitation, the New Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness under Credit Facilities
outstanding on the date on which Notes are first issued and authenticated under
the Indenture shall be deemed to have been incurred on such date in reliance on
the exception provided by clause (i) or (ii) of the definition of Permitted
Debt.
 
     "Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
 
     "Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under "-- Certain
Covenants -- Restricted Payments."
 
     "Domestic Subsidiary" means any Subsidiary of the Company that either (a)
is organized within any state of the United States of America, or (b) has
guaranteed any Indebtedness of the Company or any other Domestic Subsidiary.
 
     "Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
 
     "Existing Indebtedness" means up to $6.1 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the New Credit Facility) in existence on the date of the
Indenture, until such amounts are repaid.
 
     "Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of
 
                                       88
<PAGE>   89
 
all payments associated with Capital Lease Obligations, commissions, discounts
and other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest of such Person and its
Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by such Person or
one of its Subsidiaries or secured by a Lien on assets of such Person or one of
its Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv)
the product of (a) all dividend payments, whether or not in cash, on any series
of preferred stock of such Person or any of its Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests of the
Company (other than Disqualified Stock) or to the Company or a Subsidiary of the
Company, times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
 
     "Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
referent Person or any of its Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (iii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iv) the Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Subsidiaries following the Calculation Date.
 
     "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
 
     "Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
 
     "Guarantors" means any Subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the Indenture, and their respective successors
and assigns.
 
     "Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
 
     "Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing
 
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<PAGE>   90
 
Capital Lease Obligations or the balance deferred and unpaid of the purchase
price of any property or representing any Hedging Obligations, except any such
balance that constitutes an accrued expense or trade payable, if and to the
extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
 
     "Investment Banking Fee" means $1.35 million paid by the Company to CGW
Southeast Management III, L.L.C. or its designees on the Closing Date.
 
     "Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under "-- Certain Covenants -- Restricted Payments."
 
     "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
 
     "Management Fee" means management and consulting service fees in an amount
not to exceed $680,000 annually payable by the Company to CGW Southeast III,
L.L.C. or its designees.
 
     "Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary gain (but not loss), together with any related provision
for taxes on such extraordinary gain (but not loss).
 
     "Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
 
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<PAGE>   91
 
     "New Credit Facility" means that certain Credit Agreement, by and among the
Company, the lenders named therein and NationsBank, N.A., as Agent, providing
for up to $15.0 million of revolving credit borrowings and letter of credit
issuances, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, renewed, refunded, replaced or refinanced, in whole or in
part, from time to time.
 
     "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Subsidiaries (a) provides credit support of any kind (including
any undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable (as a guarantor or otherwise), or (c)
constitutes the lender; and (ii) no default with respect to which (including any
rights that the holders thereof may have to take enforcement action against a
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Indebtedness of the Company or any of its Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Subsidiaries.
 
     "Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
 
     "Permitted Business" means any business that manufactures and/or sells
silicon metal or microsilica, or any business that is reasonably similar thereto
or a reasonable extension, development or expansion thereof or ancillary
thereto.
 
     "Permitted Investments" means (a) any Investment in the Company or in a
Subsidiary of the Company that is a guarantor (or, if such Subsidiary is a
foreign Subsidiary, 65% of the capital stock of which has been pledged to the
Trustee pursuant to a pledge agreement, in form and substance reasonably
satisfactory to the Trustee, securing the payment in full of all Obligations
with respect to the Notes); (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Subsidiary of the Company in a Person, if as a
result of such Investment (i) such Person becomes a Subsidiary of the Company
and a guarantor or (ii) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Subsidiary of the Company that is a guarantor;
(d) any Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with the covenant
described above under "-- Repurchase at the Option of Holders -- Asset Sales";
(e) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company; and (f) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (f) that are at the time outstanding, not to exceed $5.0 million.
 
     "Permitted Liens" means (i) Liens on assets of the Company or any of its
Subsidiaries securing obligations under any Credit Facility that were permitted
by the terms of the Indenture to be incurred; (ii) Liens in favor of the
Company; (iii) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or any Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company; (iv) Liens on property
existing at the time of acquisition thereof by the Company or any Subsidiary of
the Company, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (v)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clause (iv) of the second paragraph of the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock" covering only the assets acquired
with such Indebtedness; (vi) Liens existing on the date of the Indenture and
replacement, refinancing or renewals thereof, in whole or in part; (vii) Liens
for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor;
 
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<PAGE>   92
 
(viii) Liens to secure Indebtedness permitted by clause (v) or (vii) of the
second paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock;" and (ix) other Liens with respect to obligations
that do not exceed $5.0 million at any one time outstanding.
 
     "Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries (other than intercompany
Indebtedness); provided that: (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus accrued interest
on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
 
     "Restricted Investment" means an Investment other than a Permitted
Investment.
 
     "Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
 
     "Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
 
     "Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
 
     "Trading Day," with respect to a securities exchange or automated quotation
system, means a day on which such exchange or system is open for a full day of
trading.
 
     "Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
 
     "Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
 
     "Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time
 
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<PAGE>   93
 
be owned by such Person or by one or more Wholly Owned Subsidiaries of such
Person and one or more Wholly Owned Subsidiaries of such Person.
 
                       DESCRIPTION OF OTHER INDEBTEDNESS
 
CREDIT FACILITIES
 
     In connection with the Acquisition, the Company replaced the Terminated
Credit Facility and the Terminated Reimbursement Agreement with the New Credit
Facility. The closing of the New Credit Facility was completed simultaneously
with the Acquisition Closing. The New Credit Facility is being provided by
NationsBank, N.A., and provides availability for revolving borrowings and
letters of credit in an aggregate principal amount of up to $15.0 million (the
"Commitment"). The total amount of (i) revolving borrowings, (ii) undrawn
amounts of letters of credit and (iii) reimbursement obligations in respect of
letters of credit, may not exceed the Commitment.
 
     The Commitment will expire in March 2003. In addition, the New Credit
Facility requires that outstanding revolving loans be repaid, and the Commitment
be permanently reduced, upon certain non-ordinary course asset sales by
Holdings, the Company or any future subsidiary of the Company. Revolving loans
bear interest at a variable rate equal, at the option of the Company, to (i)
LIBOR (having interest periods of 1, 2, 3 or 6 months, at the Company's option)
plus a margin of up to 2.25% per annum or (ii) the base rate (defined to mean
the higher of (a) NationsBank's publicly announced "prime rate" and (b) a rate
tied to the rates on overnight Federal funds transactions with members of the
Federal Reserve System) plus a margin of up to 1.25% per annum. Drawings under
letters of credit which are not promptly reimbursed by the Company accrue
interest at a variable rate equal to the base rate plus a margin of up to 3.25%
per annum. Beginning one year after the closing of the New Credit Facility,
these margins may be reduced based on the financial performance of the Company.
 
     The New Credit Facility contains a number of covenants, including, among
others, covenants restricting the Company and its subsidiaries with respect to
the incurrence of indebtedness (including contingent obligations); the creation
of liens; substantially changing the nature of its business; the consummation of
certain transactions such as dispositions of substantial assets, mergers or
consolidations; the making of certain investments and loans; the making of
dividends and other distributions; the prepayment of indebtedness; transactions
with affiliates; agreeing to certain restrictions on its actions (including
agreeing not to grant liens); and limitations on sale leaseback transactions. In
addition, the New Credit Facility contains affirmative covenants including,
among others, requirements regarding compliance with laws; preservation of
corporate existence; maintenance of insurance; payment of taxes and other
obligations; maintenance of properties; environmental compliance; the keeping of
books and records; the maintenance of intellectual property; and the delivery of
financial and other information to the agent and the lenders under the New
Credit Facility.
 
     The Company is also required to comply with certain financial tests and
maintain certain financial ratios. Certain of these financial tests and ratios
include: (i) maintaining a minimum net worth; (ii) maintaining a maximum ratio
of indebtedness (less cash and cash equivalents) to EBITDA; and (iii)
maintaining a minimum ratio of EBITDA to interest expense.
 
     The New Credit Facility contains customary events of default. An event of
default under the New Credit Facility would allow the lenders thereunder to
accelerate or, in certain cases, would automatically cause the acceleration of,
the maturity of the indebtedness under the New Credit Facility and would
restrict the ability of the Company to meet its obligations to the holders of
the Notes.
 
     Credit extended under the New Credit Facility is secured by substantially
all of the Company's assets and the real and personal property used in the
Company's operations which is, as a result of the IRB Financing, owned by the
Montgomery IDB and leased to the Company. In addition, the payment of principal
of, and interest on, indebtedness under the New Credit Facility is guaranteed on
a senior basis by Holdings and each of the Company's future subsidiaries. In
connection with its guarantee, Holdings has agreed that it will not, among other
things, engage in any business, activity or operation other than owning the
capital stock of
 
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<PAGE>   94
 
SIMCALA, and that it will not merge or consolidate with any other person or
entity. In addition, Holdings' guarantee is secured by substantially all of
Holdings' assets, including all of the capital stock of SIMCALA.
 
INDUSTRIAL REVENUE BOND FINANCING
 
  General
 
     In connection with the Company's acquisition of the Facility, the SIDA
issued $6.0 million aggregate principal amount of the IRBs under the Bond
Indenture. Simultaneously with the issuance of the IRBs, the SIDA entered into a
Loan Agreement dated as of January 1, 1995 (the "Bond Loan Agreement") with the
Montgomery IDB and SIMCALA, pursuant to which the SIDA loaned the proceeds from
the sale of the IRBs to SIMCALA and the Montgomery IDB (the "Bond Loan") and
SIMCALA and the Montgomery IDB agreed to pay the principal of, and interest on,
the Bond Loan in an amount sufficient for the SIDA to pay the principal of,
premium, if any, and interest on the IRBs when the same become due and payable,
together with all amounts necessary to pay the holders of the IRBs upon an
Optional or Mandatory Tender (as defined herein). The right of the SIDA to
receive such payments from SIMCALA and the Montgomery IDB in amounts sufficient
to satisfy such obligations of the SIDA has been assigned to the Bond Trustee.
The proceeds of the Bond Loan were used by SIMCALA and the Montgomery IDB to
finance or refinance (i) the acquisition of the Facility, the improvements
thereon and certain equipment used in SIMCALA's operations and (ii) the
acquisition and construction of improvements thereof, including renovating,
expanding and refurbishing the Facility, such improvements and such equipment
(collectively, the "Project").
 
     As required by the Bond Loan Agreement, SIMCALA caused the Terminated Bond
Letter of Credit to be issued pursuant to the Terminated Reimbursement Agreement
to the Bond Trustee to provide credit support for the obligations of the SIDA
under the Bond Indenture to the holders of the IRBs. As part of the
Transactions, SIMCALA replaced the Terminated Bond Letter of Credit with the New
Bond Letter of Credit issued under the New Credit Facility. In addition, as a
consequence of the IRB Financing, substantially all of the real and personal
property used in SIMCALA's operations (including the Facility) is owned by the
Montgomery IDB and leased to SIMCALA under the Consolidated, Amended and
Restated Lease dated as of January 1, 1995 between the Montgomery IDB, as
lessor, and SIMCALA, as lessee (the "Lease Agreement").
 
  IRBs, Bond Indenture and Bond Loan Agreement
 
     The IRBs, which mature on December 1, 2019, currently accrue interest at a
rate which is reset every seven days (a "Seven-Day Rate") as determined by the
Remarketing Agent based on its evaluation of applicable Rate Determination
Factors. Interest on the IRBs is payable monthly. Under certain circumstances
and subject to certain restrictions, SIMCALA may elect to have the IRBs accrue
interest (i) at a fixed rate for a one year period or (ii) at a permanent fixed
rate until the IRBs mature, in both cases determined by the Remarketing Agent
based on the Remarketing Agent's evaluation of the applicable Rate Determination
Factors. However, interest borne by the IRBs cannot exceed the lower of 15% per
annum and the maximum rate per annum specified in any letter of credit which
provides credit support for the IRBs. As of March 31, 1998, interest on the IRBs
accrued at a Seven-Day Rate equal to approximately 5.8% per annum. Whenever the
IRBs accrue interest at a Seven-Day Rate, they are redeemable at par at the
option of the Company at any time upon 30 days' notice.
 
     Upon seven days' notice, each holder of IRBs may, whenever the IRBs accrue
interest at a Seven-Day Rate, tender all or part of the IRBs held by such holder
for purchase at a purchase price equal to 100% of the principal amount thereof,
together with accrued interest thereon to the purchase date (an "Optional
Tender"). In addition, under certain circumstances, each holder of IRBs will be
required to tender such holder's IRBs for a purchase price equal to 100% of the
principal amount thereof, together with accrued interest thereon to the purchase
date (a "Mandatory Tender"). Upon any Optional or Mandatory Tender of the IRBs,
the Remarketing Agent will use its best efforts to remarket the IRBs tendered
for purchase, unless an event of default exists under the Bond Indenture. If the
Remarketing Agent is unable to remarket any of the IRBs so tendered, the Bond
Trustee is required under the Indenture to draw sufficient funds under the
letter of credit
 
                                       94
<PAGE>   95
 
then providing credit support for the IRBs to pay the purchase price of the IRBs
tendered. If the bank issuing such letter of credit fails to pay any such draw,
SIMCALA would be obligated to directly pay such purchase price. The Company's
failure to make such payment would constitute an event of default under the Bond
Loan Agreement and the Bond Indenture.
 
     The Bond Indenture and the Bond Loan Agreement contain customary covenants
and events of default. Upon the occurrence of an event of default under the Bond
Indenture, the Bond Trustee (i) may, and under certain circumstances is required
to, (a) declare the principal of, premium, if any, and interest on, all IRBs to
be immediately due and payable and (b) make a drawing under the letter of credit
which then supports the IRBs to pay such amounts, and (ii) may exercise the
other remedies available to it under the Bond Indenture. Similarly, upon the
occurrence of an event of default under the Bond Loan Agreement, the Bond
Trustee, as assignee of the SIDA's right to receive payments thereunder, may
declare the principal of, premium, if any, and interest on, the Bond Loan to be
immediately due and payable and may exercise the other remedies available to it
under the Bond Indenture. In addition, the New Credit Facility, the Bond
Indenture and the Bond Loan Agreement are cross-defaulted to each other.
Accordingly, an event of default under the Bond Indenture, the Bond Loan
Agreement or the New Credit Facility could result in a drawing on the New Bond
Letter of Credit, thus resulting in a reimbursement obligation of SIMCALA under
the New Credit Facility. Such an obligation would be a secured obligation of
SIMCALA to the extent of the collateral securing the New Credit Facility. Also,
an event of default under either the Bond Indenture or the Bond Loan Agreement
would cause an event of default under the New Credit Facility, thus allowing the
lenders thereunder to accelerate the maturity of the indebtedness thereunder
(including the reimbursement obligation resulting from the drawing under the New
Bond Letter of Credit) and restricting the ability of the Company to meet its
obligations to the holders of the Notes.
 
  Lease Agreement
 
     The Lease Agreement expires on June 1, 2010, unless terminated earlier
pursuant to its terms, and requires rental payments equal to the sum of (i)
amounts necessary to service indebtedness incurred to pay or reimburse costs
related to the Project (including indebtedness incurred under the Bond Loan
Agreement) and (ii) $2,000 per year, together with all costs and expenses of the
Montgomery IDB incurred in connection with the Lease Agreement. The former
amounts are payable directly to the party to whom such amounts are due when they
become due, but nevertheless constitute rental payments to the Montgomery IDB,
while the latter amounts are payable to the Montgomery IDB annually in advance
on June 1 of each year. The Lease Agreement further provides that SIMCALA must,
at its expense, (i) keep the Project in as reasonably safe a condition as its
operations permit; (ii) maintain the Project in good condition, repair and
working order; (iii) make or cause to be made all needful and proper repairs,
renewals and replacements to the Project; (iv) pay all utility and other charges
for the operation, use and upkeep of the Project; and (v) pay all taxes and
governmental charges lawfully assessed or levied against the Project. In
addition, SIMCALA is required to keep the Project insured in an amount equal to
the full replacement cost thereof against customary casualties, is required to
maintain public liability insurance in the minimum amount of $2.0 million
combined single limit coverage and is required to maintain public liability
insurance in such amount with respect to each vehicle used in connection with
the Project.
 
     At all times, SIMCALA has the right to terminate the Lease Agreement and
purchase the Project from the Montgomery IDB upon 30 days' notice for a purchase
price of $2,000 plus the amount necessary to pay in full the principal of,
premium, if any, and interest on, the IRBs. If this purchase option has not been
exercised by the last day of the lease term, it is automatically deemed
exercised.
 
            MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
 
     The following is a summary of material United States federal income tax
considerations relating to the purchase, ownership and disposition of the
Exchange Notes, but does not purport to be a complete analysis of all the
potential tax considerations relating thereto. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), existing, temporary, and
proposed Treasury Regulations, and laws, rulings
 
                                       95
<PAGE>   96
 
and decisions now in effect, all of which are subject to change. This summary
deals only with holders that will hold Exchange Notes as "capital assets"
(within the meaning of Section 1221 of the Code). This summary does not address
tax considerations applicable to investors that may be subject to special tax
rules, such as banks, tax-exempt organizations, insurance companies, dealers in
securities or currencies, or persons that will hold Exchange Notes as a position
in a hedging transaction, "straddle" or "conversion transaction" for tax
purposes.
 
     For the purposes of this discussion, a "U.S. Holder" means any holder of an
Exchange Note that is (a) a citizen or resident of the United States, (b) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any state thereof (except, in the case of a
partnership, to the extent future Treasury Regulations provide otherwise), (c)
an estate the income of which is subject to United States federal income
taxation regardless of its source, or (d) a trust other than a "foreign trust,"
as such term is defined in Section 7701(a)(31) of the Code. A "U.S. Alien
Holder" means any holder of an Exchange Note that is not a U.S. Holder.
 
     THE FOLLOWING DISCUSSION OF MATERIAL FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, INVESTORS
CONSIDERING THE PURCHASE OF EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME AND ESTATE
TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY
APPLICABLE TAX TREATY.
 
UNITED STATES FEDERAL INCOME TAXATION OF U.S. HOLDERS
 
  Payment of Interest
 
     Interest on an Exchange Note generally will be includable in the income of
the U.S. Holder of such Exchange Note as ordinary income at the time such
interest is received or accrued, in accordance with such holder's method of
accounting for United States federal income tax purposes.
 
  Market Discount on Resale of Exchange Notes
 
     A U.S. Holder of an Exchange Note should be aware that the purchase or
resale of an Exchange Note may be affected by the "market discount" provisions
of the Code. The market discount rules generally provide that if a U.S. Holder
of an Exchange Note purchases the Exchange Note at a market discount (i.e., a
discount other than at original issue), any gain recognized upon the disposition
of the Exchange Note by the U.S. Holder will be taxable as ordinary interest
income, rather than as capital gain, to the extent such gain does not exceed the
accrued market discount on such Exchange Note at the time of such disposition.
"Market discount" generally means the excess, if any, of an Exchange Note's
stated redemption price at maturity over the price paid by the holder therefor,
subject to a de minimis exception. A U.S. Holder who acquires an Exchange Note
at a market discount also may be required to defer the deduction of a portion of
the amount of interest that the holder paid or accrued during the taxable year
on indebtedness incurred or maintained to purchase or carry such Exchange Note,
if any.
 
     Any principal payment on an Exchange Note acquired by a U.S. Holder at a
market discount will be included in gross income as ordinary income (generally,
as interest income) to the extent that it does not exceed the accrued market
discount at the time of such payment. The amount of the accrued market discount
for purposes of determining the tax treatment of subsequent payments on, or
dispositions of, an Exchange Note is to be reduced by the amounts so treated as
ordinary income.
 
     A U.S. Holder of an Exchange Note acquired at a market discount may elect
to include market discount in gross income, for federal income tax purposes, as
such market discount accrues, either on a straight-line basis or on a constant
interest rate basis. This current inclusion election, once made, applies to all
market discount obligations acquired on or after the first day of the first
taxable year to which the election applies, and
 
                                       96
<PAGE>   97
 
may not be revoked without the consent of the IRS. If a U.S. Holder of an
Exchange Note makes such an election, the foregoing rules regarding the
recognition of ordinary interest income on sales and other dispositions and the
receipt of principal payments with respect to such Exchange Note, and regarding
the deferral of interest deductions on indebtedness incurred or maintained to
purchase or carry such Exchange Note, will not apply.
 
  Exchange Notes Purchased at a Premium
 
     In general, if a U.S. Holder purchases an Exchange Note for an amount in
excess of its stated redemption price at maturity, then such holder may elect to
treat such excess as "amortizable bond premium," in which case the amount
required to be included in such holder's income each year with respect to
interest on the Exchange Note will be reduced by the amount of amortizable bond
premium allocable to such year. Any such election would apply to all bonds
(other than bonds the interest on which is excludable from gross income) held by
the holder at the beginning of the first taxable year to which the election
applies or which thereafter are acquired by the holder, and such election is
irrevocable without the consent of the IRS. On December 30, 1997, final Treasury
Regulations were published, effective generally for debt instruments acquired on
or after March 2, 1998, relating to the amortization of bond premium. All U.S.
Holders who purchase Exchange Notes at a premium should consult their tax
advisors regarding the election to amortize premium and the method of
amortization to be employed.
 
  Sale, Exchange or Retirement of the Exchange Notes
 
     Upon the sale, exchange or redemption of an Exchange Note, a U.S. Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption (except to the extent such amount
is attributable to either Liquidated Damages, discussed below, or accrued
interest income not previously included in income which is taxable as ordinary
income) and (ii) such holder's adjusted tax basis in the Exchange Note. A
holder's adjusted tax basis in an Exchange Note generally will equal the cost of
the Exchange Note to such holder. Such capital gain or loss will be long-term
capital gain or loss if the holder's holding period in the Exchange Note is more
than one year at the time of sale, exchange or redemption. Under recently
enacted legislation, the net capital gain of an individual derived in respect of
the Exchange Notes generally will be taxed at a maximum rate of 28% if the
holding period for the Exchange Notes was greater than one year but not more
than 18 months, or 20% if the holding period was greater than 18 months.
 
  Exchange of Notes for Exchange Notes
 
     The exchange of Notes for Exchange Notes pursuant to the Exchange Offer
should not be considered a taxable exchange for federal income tax purposes
because the Exchange Notes should not constitute a material modification of the
terms of the Notes. Accordingly, such exchange should have no federal income tax
consequences to U.S. Holders of Notes, and the basis of such a holder in an
Exchange Note will be the same as such holder's adjusted tax basis in the Note
exchanged therefor.
 
  Information Reporting and Backup Withholding
 
     In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on an Exchange Note and payments of the
proceeds of the sale of an Exchange Note to certain noncorporate holders, and a
31% backup withholding tax may apply to such payments if the U.S. Holder (a)
fails to furnish or certify his correct taxpayer identification number to the
payer in the manner required, (b) is notified by the IRS that he has failed to
report payments of interest and dividends properly or (c) under certain
circumstances, fails to certify that he has not been notified by the IRS that he
is subject to backup withholding for failure to report interest and dividend
payments. Any amounts withheld under the backup withholding rules from a payment
to a U.S. Holder will be allowed as a credit against such holder's United States
federal income tax and may entitle the holder to a refund, provided that the
required minimum information is furnished to the IRS.
 
                                       97
<PAGE>   98
 
  Liquidated Damages
 
     The Company believes that Liquidated Damages, if any, described above under
"Description of Senior Notes -- Registration Rights; Liquidated Damages" will be
taxable to the U.S. Holder as ordinary income in accordance with the holder's
method of accounting for federal income tax purposes. The IRS may take a
different position, however, which could affect the timing of a holder's income
with respect to Liquidated Damages, if any.
 
UNITED STATES FEDERAL INCOME TAXATION OF U.S. ALIEN HOLDERS
 
  Payment of Interest
 
     The payment of interest on an Exchange Note generally will not be subject
to United States federal income tax withholding, if (1) the interest is not
effectively connected with the conduct of a trade or business within the United
States, (2) the U.S. Alien Holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the Company
entitled to vote, (3) the U.S. Alien Holder is not a controlled foreign
corporation that is related to the Company actually or constructively through
stock ownership and (4) either (i) the beneficial owner of the Exchange Note
certifies to the Company or its agent, under penalties of perjury, that it is
not a U.S. Holder and provides its name and address on United States Treasury
Form W-8 (or on a suitable substitute form) or (ii) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Exchange Note certifies under penalties of perjury
that such a Form W-8 (or suitable substitute form) has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payer with a copy thereof. Payments to a U.S.
Alien Holder not described in clauses (2) through (4) above will be subject to
withholding at a rate of 30% on the gross amount of such payment, unless the
rate of withholding is reduced or eliminated by an applicable income tax treaty
and the U.S. Alien Holder provides the Company with a properly completed Form
1001 certifying to its exemption from withholding under such treaty. For a U.S.
Alien Holder for which payments on the Exchange Notes constitute income
effectively connected with a United States trade or business of such holder,
such holder may provide a properly executed Form 4224 (or such successor forms
as the IRS designates) in order to avoid imposition of withholding tax at a rate
of 30%. Unless an applicable treaty provides otherwise, U.S. Alien Holders
providing such certification will be subject to United States net income
taxation at regular graduated rates on such effectively connected income (and,
in the case of corporate holders, may in addition be subject to the branch
profits tax).
 
     Recently issued Treasury Regulations (the "Final Withholding Regulations")
modify the currently effective information reporting and backup withholding
procedures and requirements. The Final Withholding Regulations were originally
scheduled to be effective for payments made after December 31, 1998, subject to
certain transition rules. The IRS recently issued a notice, however, announcing
the intent of the Treasury Department and the IRS to amend the Final Withholding
Regulations so that they generally will not apply to payments made before
January 1, 2000. All U.S. Alien Holders should consult their tax advisors
regarding the application of the Final Withholding Regulations.
 
  Sale, Exchange or Retirement of Exchange Notes
 
     A U.S. Alien Holder generally will not be subject to United States federal
income tax on any capital gain realized in connection with the sale, exchange,
retirement, or other disposition of an Exchange Note, provided (i) such gain is
not effectively connected with the conduct by such holder of a trade or business
in the United States, and (ii) in the case of a U.S. Alien Holder that is an
individual, such holder is not present in the United States for 183 days or more
in the taxable year of the disposition.
 
  Information Reporting and Backup Withholding
 
     Payments on the Exchange Notes to U.S. Alien Holders generally should not
be subject to information reporting and backup withholding at the rate of 31% if
the certification described under "--Payment of Interest" above is received and
the payer does not have actual knowledge that the holder is a U.S. Holder.
 
                                       98
<PAGE>   99
 
Payment outside the United States of the proceeds of the sale of an Exchange
Note to or through a foreign office of a "broker" (as defined in applicable
United States Treasury Regulations) should not be subject to information
reporting or backup withholding, except that if the broker is a United States
person, a controlled foreign corporation for United States federal income tax
purposes or a foreign person 50% or more of whose gross income is from a United
States trade or business, information reporting should apply to such payment
unless the broker has documentary evidence in its records that the beneficial
owner is not a U.S. Holder and certain other conditions are met, or the
beneficial owner otherwise establishes an exemption. Payment of proceeds from a
sale of an Exchange Note to or through the United States office of a broker is
subject to information reporting and backup withholding unless the U.S. Alien
Holder certifies as to its U.S. Alien Holder status or otherwise establishes an
exemption from information reporting and backup withholding. All U.S. Alien
Holders are urged to consult their own tax advisors regarding the possible
application of information reporting and backup withholding in light of their
particular circumstances under the Final Withholding Regulations.
 
                                 LEGAL MATTERS
 
     Certain legal matters in connection with the issuance of the Exchange Notes
have been passed upon for the Company by Alston & Bird LLP, Atlanta, Georgia.
 
                                    EXPERTS
 
     The financial statements of SIMCALA, Inc. as of December 31, 1997 and for
the year then ended and SAC Acquisition Corp. as of March 30, 1998 included in
this Prospectus and the related financial statement schedule of SIMCALA, Inc.
included elsewhere in this Registration Statement have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports appearing herein
and elsewhere in the Registration Statement, and have been so included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
 
     The financial statements for SIMCALA, Inc. as of December 31, 1996, and for
the year then ended included in this Prospectus and the related financial
statement schedule included elsewhere in this Registration Statement have been
audited by Crowe, Chizek and Company LLP, independent auditors, as stated in
their reports appearing herein and elsewhere in the Registration Statement, and
have been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
 
     The financial statements of SIMCALA, Inc. appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, to the extent indicated in their report thereon dated March 8, 1996
also appearing elsewhere herein and in the Registration Statement. Such
financial statements have been included herein in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
 
                   RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
 
     In February 1998, the Company dismissed Crowe, Chizek and Company LLP
("Crowe, Chizek") and engaged Deloitte & Touche LLP as its independent
accountants. Crowe, Chizek's report on the Company's financial statements as of
December 31, 1996 and for the year then ended does not contain any adverse
opinion, disclaimer or qualifications as to audit scope or accounting
principles. Prior to dismissing Crowe, Chizek the Company did not have any
disagreement with Crowe, Chizek that would have caused Crowe, Chizek to make
reference to such disagreement in its report.
 
     In June 1996, the Company dismissed Ernst & Young LLP ("E&Y") and engaged
Crowe, Chizek as its independent accountants. E&Y's report on the Company's
financial statements for the period from February 10, 1995 through December 31,
1995 does not contain any adverse opinion, disclaimer or qualification as to
audit scope or accounting principles. Prior to dismissing E&Y the Company did
not have any disagreement with E&Y that would have caused E&Y to make reference
to such disagreement in its report.
 
                                       99
<PAGE>   100
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
SIMCALA, Inc. (The Company):
  Unaudited Interim Balance Sheet
  Balance Sheet as of March 31, 1998........................   F-2
  Notes to Balance Sheet....................................   F-3
SIMCALA, Inc. (The Predecessor):
  Audited Financial Statements
  Independent Auditors' Report..............................   F-8
  Independent Auditors' Report..............................   F-9
  Independent Auditors' Report..............................  F-10
  Balance Sheets as of December 31, 1997 and December 31,
     1996...................................................  F-11
  Statements of Operations for the years ended December 31,
     1997 and December 31, 1996 and for the period from
     February 10, 1995 (date of inception) to December 31,
     1995 and the three-months ended March 31, 1998 and 1997
     (unaudited)............................................  F-12
  Statements of Changes in Stockholders' Equity for the
     years ended December 31, 1997 and December 31, 1996 and
     for the period from February 10, 1995 (date of
     inception) through December 31, 1995...................  F-13
  Statements of Cash Flows for the years ended December 31,
     1997 and December 31, 1996 and for the period from
     February 10, 1995 (date of inception) to December 31,
     1995 and the three-months ended March 31, 1998 and 1997
     (unaudited)............................................  F-14
  Notes to Financial Statements.............................  F-15
SAC Acquisition Corp.:
  Independent Auditors' Report..............................  F-23
  Balance Sheet as of March 30, 1998........................  F-24
</TABLE>
 
                                       F-1
<PAGE>   101
 
                                 SIMCALA, INC.
 
                                 BALANCE SHEET
                              AS OF MARCH 31, 1998
                                  (UNAUDITED)
 
<TABLE>
<S>                                                           <C>
                                  ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 15,796,000
  Accounts receivable.......................................     5,809,000
  Receivables from employees................................     1,800,000
  Taxes receivable..........................................     1,007,000
  Inventories...............................................     2,871,000
  Deferred income taxes.....................................     2,246,000
  Other current assets......................................       355,000
                                                              ------------
          Total current assets..............................    29,884,000
Property, plant and equipment...............................    53,075,000
Intangible assets...........................................    39,708,000
                                                              ------------
          Total assets......................................  $122,667,000
                                                              ============
                   LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses.......................  $  9,348,000
Current maturities of long-term debt........................        90,000
                                                              ------------
          Total current liabilities.........................     9,438,000
Long-term debt, net of current portion......................    81,083,000
Deferred income taxes.......................................    13,339,000
                                                              ------------
          Total liabilities.................................   103,860,000
                                                              ------------
Commitments and Contingencies (Note 6)
Stockholder's equity:
Common stock, par value $.01 per share;
  20,000 shares authorized; 10,889 shares issued and
  outstanding...............................................           109
Additional paid-in capital..................................    18,806,891
Retained earnings...........................................            --
                                                              ------------
          Total stockholder's equity........................    18,807,000
                                                              ------------
          Total liabilities and stockholder's equity........  $122,667,000
                                                              ============
</TABLE>
 
                                       F-2
<PAGE>   102
 
                                 SIMCALA, INC.
                                 (THE COMPANY)
 
                             NOTES TO BALANCE SHEET
 
1. ORGANIZATION AND OPERATIONS
 
     On March 31, 1998, SAC Acquisition Corp. ("SAC"), a subsidiary of Simcala
Holdings, Inc. ("Holdings") purchased all of the outstanding common stock of
SIMCALA, Inc. ("SIMCALA" or the "Company") (the "Acquisition"). On such date,
SAC was merged into SIMCALA. Holdings and SAC conducted no significant business
other than in connection with the Acquisition.
 
     The Company is a producer of silicon metal for sale to the aluminum and
silicone industries. The Company sells to customers in the metal industry who
are located primarily throughout the United States. Credit is extended based on
an evaluation of the customer's financial condition. At March 31, 1998, three
customers accounted for 40.7%, 17.3%, and 9.5% of the outstanding receivables.
The Company maintains credit insurance for all customer accounts receivable.
 
     The Acquisition of the Predecessor for approximately $66.7 million in cash,
including approximately $6 million for fees and other costs directly associated
with the Acquisition, has been accounted for as a purchase. Accordingly, the
purchase price has been allocated to the identifiable assets and liabilities
based on fair values at the acquisition date. The excess of the purchase price
over the fair value of the identifiable net assets in the amount of $35.0
million has been classified as goodwill. Additionally, the effect of the
carryover basis of senior management of $3.2 million has been considered in the
allocation of the purchase price. The carryover basis adjustment results from
the application of EITF No. 88-16, allocated to property, plant and equipment
and goodwill based upon the March 31, 1998 balances.
 
     The Acquisition was financed through the issuance of senior notes in the
amount of $75,000,000 (see Note 4) and equity contributed of $22,000,000. Senior
Management had an 8% ownership interest in the Predecessor, and as a result of
the Acquisition, has a 9% ownership interest in the Company. The sale of the
Predecessor's stock of which 92% was not owned by Senior Management, constitutes
a change in control of the Company.
 
     In connection with the Acquisition, the purchase method of accounting was
used to establish and record a new cost basis for the assets acquired and
liabilities assumed. The allocation of the purchase price and acquisition costs
to the assets acquired and liabilities assumed is preliminary at March 31, 1998,
and is subject to change pending the finalization of appraisals and other
studies of fair value and finalization of management's plans which may result in
the recording of additional liabilities as part of the allocation of the
purchase price. These plans include finalization of purchase price allocations
and the filing of the March 31, 1998 federal and state income tax returns, which
are anticipated to be finalized by September 30, 1998. Management does not
expect such adjustments to be material. The excess of the purchase price over
the preliminary fair market value of assets acquired and liabilities assumed was
recorded as goodwill.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     Unaudited Balance Sheet.  In the opinion of management, the unaudited
balance sheet included herein reflects all normal recurring accruals necessary
for a fair statement of the financial position of the interim period reflected.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted from this balance sheet pursuant to applicable rules and
regulations of the Securities and Exchange Commission.
 
     Use of Estimates.  The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
 
                                       F-3
<PAGE>   103
                                 SIMCALA, INC.
                                 (THE COMPANY)
 
                     NOTES TO BALANCE SHEET -- (CONTINUED)
 
     Cash Equivalents.  The Company considers all highly liquid debt instruments
with a maturity of three months or less when purchased to be cash equivalents.
 
     Inventories.  Inventories are stated using the average cost method which
approximates the first-in, first-out (FIFO) inventory cost method.
 
     Property, Plant, and Equipment.  It is the policy of the Company to
capitalize expenditures for major renewals and betterments and to charge to
operating expenses the cost of current maintenance and repairs. Interest costs
associated with major property additions are capitalized while the projects are
in the process of acquisition and construction. The Company evaluates the
estimated useful lives and the carrying value of assets on a periodic basis to
determine whether events or circumstances warrant revised estimated useful lives
or whether any impairment exists. Management believes no material impairment
existed at March 31, 1998.
 
     The Company provides for depreciation over the estimated useful lives of
plant and equipment by the straight-line method using the following useful lives
(in years):
 
<TABLE>
<CAPTION>
                                                              USEFUL
ASSET CATEGORY                                                 LIFE
- --------------                                                ------
<S>                                                           <C>
Land Improvements...........................................    20
Buildings...................................................    40
Machinery and equipment.....................................    14
Mobile equipment and vehicles...............................     6
Furniture and fixtures......................................    10
Computer equipment..........................................     7
Computer software...........................................     5
</TABLE>
 
     The cost and accumulated depreciation and amortization relating to assets
retired or otherwise disposed of is eliminated from the respective accounts at
the time of disposition. Gains or losses from disposition are included in
current operating results.
 
     Intangible Assets.  Intangible assets include the excess of the cash
consideration over the estimated fair market value of the net assets acquired in
the Acquisition of $35.0 million which are amortized over twenty-five years. In
addition, debt issuance costs of $4.8 million have been recorded which are
amortized over 8 years. The Company evaluates the amortization period and the
carrying value of intangible assets, including goodwill on a periodic basis,
including evaluating the performance of the underlying businesses which gave
rise to such amount to determine whether events or circumstances warrant revised
estimates of useful lives or whether impairment exists. In performing the review
of recoverability, the Company estimates the future undiscounted cash flows
expected to result from the use of the asset and its eventual disposition. If
the sum of the expected undiscounted future cash flows is less than the carrying
amount, an impairment is recognized, based on the difference between the
estimated fair value and the carrying value.
 
     New Accounting Pronouncements.  In June 1997, the Financial Accounting
Standards Board issued Statements of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS 130), and Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). SFAS 130 establishes standards for reporting
and displaying of comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general-purpose financial statements. SFAS
131 establishes standards for the way public business enterprises report
information about operating segments. The Company adopted SFAS 130 at inception.
The adoption of this standard did not have an effect on its financial
statements. The Company will adopt SFAS 131 in its annual financial statements
for 1998. Management does not anticipate that the adoption of this standard will
have a significant effect on the financial statements.
 
                                       F-4
<PAGE>   104
                                 SIMCALA, INC.
                                 (THE COMPANY)
 
                     NOTES TO BALANCE SHEET -- (CONTINUED)
 
     Stock-Based Compensation.  Stock-based compensation is accounted for in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations. The Company has adopted the disclosure-only
provisions of SFAS 123, "Accounting for Stock-Based Compensation."
 
3. INVENTORIES
 
     Inventories consist of the following as of March 31, 1998:
 
<TABLE>
<S>                                                           <C>
Raw Materials...............................................  $1,283,000
Finished Goods..............................................   1,292,000
Supplies....................................................     296,000
                                                              ----------
                                                              $2,871,000
                                                              ==========
</TABLE>
 
4. LONG-TERM DEBT
 
     As of March 31, 1998, long-term debt consists of the following:
 
<TABLE>
<S>                                                           <C>
     Senior Notes which bear interest at 9 5/8% and are due
      April 2006............................................  $75,000,000
     Industrial development bonds which bear interest at a
      variable rate. At March 31, 1998, the interest rate
      was 5.75%. The bonds mature on December 1, 2019. Bonds
      and applicable interest are secured by a letter of
      credit................................................    6,000,000
     Various capital leases payable at interest rate of
      9.91% to 10.0% expiring at various dates through 1999.
      Aggregate monthly payments approximate $6000..........      173,000
                                                              -----------
                                                               81,173,000
     Less current portion...................................      (90,000)
                                                              -----------
     Long-term debt.........................................  $81,083,000
                                                              ===========
</TABLE>
 
     The Senior Notes (the "Notes") mature on April 15, 2006, unless previously
redeemed. Interest on the Notes is payable semiannually on April 15 and October
15, commencing October 15, 1998. The Notes are redeemable at the option of the
Company, in whole or in part, on or after April 15, 2002, at the redemption
price, plus accrued interest and liquidated damages, as defined, if any. At any
time on or before April 15, 2001, the Company may redeem up to 30% of the
original aggregate principal amount of the Notes with the net proceeds of a
public offering of common stock of the Company or Holdings, provided that at
least 70% of the original aggregate principal amount of Notes remains
outstanding immediately after the occurrence of such redemption.
 
     The Notes are generally unsecured obligations of the Company and rank
senior to all existing and future subordinated indebtedness of the Company.
 
     In connection with the Acquisition, the Company entered into a credit
facility which provides availability for revolving borrowings and letters of
credit in an aggregate amount of up to $15,000,000 (the "Commitment"). The
credit facility expires in March 2003. At March 31, 1998, $6.1 million related
to letters of credit was outstanding under the credit facility.
 
     The credit facility requires that the Commitment be permanently reduced,
upon certain non-ordinary course asset sales by Holdings, the Company or any
future subsidiary of the Company. Revolving loans will bear interest at a
variable rate equal, at the option of the Company, to (i) LIBOR (having interest
periods of 1, 2, 3, or 6 months, at the Company's option) plus a margin of up to
2.25% per annum or (ii) the base rate (defined to mean the higher of (i)
publicly announced "prime rate" and (ii) a rate tied to overnight Federal funds
transactions with members of the Federal Reserve System) plus a margin of up to
1.25% per annum.
 
                                       F-5
<PAGE>   105
                                 SIMCALA, INC.
                                 (THE COMPANY)
 
                     NOTES TO BALANCE SHEET -- (CONTINUED)
 
Drawings under letters of credit which are not promptly reimbursed by the
Company are expected to accrue interest at a variable rate equal to the base
rate plus a margin up to 3.25% per annum. Beginning 36 months after the closing
of the credit facility, these margins may be reduced based on the financial
performance of the Company.
 
     The Notes and the credit facility contain a number of covenants, including,
among others, covenants restricting the Company and its subsidiaries with
respect to the incurrence of indebtedness (including contingent obligations);
the creation of liens; substantially changing the nature of its business; the
consummation of certain transactions such as dispositions of substantial assets,
mergers or consolidations; the making of certain investments and loans; the
making of dividends and other distributions; the prepayment of indebtedness;
transactions with affiliates; agreeing to certain restrictions on its actions
(including agreeing not to grant liens); and limitations on sale leaseback
transactions. In addition, the credit facility contains affirmative covenants
including, among others, requirements regarding compliance with laws;
preservation of corporate existence; maintenance of insurance; payment of taxes
and other obligations; maintenance of properties; environmental compliance; the
keeping of the books and records; the maintenance of intellectual property; and
the delivery of financial and other information to the agent and the lenders
under the credit facility.
 
     The Company is required to comply with certain financial tests and maintain
certain financial ratios. Certain of these test and ratios include: (i)
maintaining a minimum net worth; (ii) maintaining a maximum ratio of
indebtedness to EBITDA; and (iii) maintaining a minimum ratio of EBITDA to
interest expense.
 
     Credit extended under the credit facility is secured by substantially all
of the Company's assets and the real and personal property used in the Company's
operations.
 
     The Company is a party to a capital lease for land, buildings and equipment
with a recorded book value of $53.1 million at March 31, 1998 at its
manufacturing facility in Mt. Meigs, Alabama (the "Lease"). The Lease is with
the Industrial Development Board ("IBD") for the city of Montgomery. Rental
payments of $2,000 a year are required and the term of the Lease expires June 1,
2010. The Lease contains a bargain purchase option whereby the property can be
purchased from the IDB for $1.
 
5. INCOME TAXES
 
     The significant component of the Company's deferred tax assets and
liabilities are as follows:
 
<TABLE>
<S>                                                           <C>
Deferred tax liabilities
  Accelerated tax depreciation..............................  $13,238,000
  Other liabilities.........................................      101,000
                                                              -----------
                                                               13,339,000
Deferred tax assets
  AMT credit carryforward...................................    1,090,000
  Net operating loss carryforwards..........................      861,000
  Other assets..............................................      295,000
                                                              -----------
                                                                2,246,000
                                                              -----------
          Net deferred tax liability........................  $11,093,000
                                                              ===========
</TABLE>
 
     The Company has recorded a tax receivable of $1,007,000 at March 31, 1998
related to net operating loss and AMT carrybacks of the Predecessor, which were
not restricted by the change in control. Such amounts are payable to the selling
shareholders and as a result a corresponding payable has been recorded at March
31, 1998, in accordance with the stock purchase agreement.
 
                                       F-6
<PAGE>   106
                                 SIMCALA, INC.
                                 (THE COMPANY)
 
                     NOTES TO BALANCE SHEET -- (CONTINUED)
 
6. COMMITMENTS AND CONTINGENCIES
 
     As of March 31, 1998, the Company had entered into contracts totaling
approximately $1 million for the construction of certain production equipment
and had a commitment to purchase lumber totaling approximately $145,000.
 
     The Company is involved in litigation arising in the normal course of
business. Management believes that the ultimate resolution of such litigation
will not have a material adverse effect on the financial statements.
 
7. STOCK INCENTIVE PLAN OF HOLDINGS
 
     Holdings has adopted a Stock Incentive Plan (the "Plan") pursuant to which
options to purchase up to 8,000 shares of Holdings Stock (the "Option") may be
granted to the Senior Management or other employees (each an "Optionee")
selected for participation in the Plan by the Compensation Committee of the
Company's Board of Directors. At the time of the Acquisition, senior management
collectively was issued Options to acquire 3,070 shares of Holdings stock. The
Options are subject to a five-year vesting period and the Options issued on the
date of the Acquisition are exercisable at an initial price per share of $1,000,
the value at which Holdings issued its stock (fair market value). The period in
which the options may be exercised terminates ten years subsequent to the grant
date, if not earlier terminated due to termination of employment. The Options
will immediately and fully vest in the event of a merger or consolidation of
Holdings with, or the sale of substantially all of the assets or stock of
Holdings to, any person other than Cravey, Green & Wahlen, Inc. ("CGW") or a CGW
affiliate. The Plan also provides for other equity-based forms of incentive
compensation in addition to the Options. The Company will account for its
stock-based compensation plan in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Additionally, the
Company will adopt the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Any
compensation expense related to stock options granted by Holdings will be
recorded by the Company.
 
8. RELATED PARTY TRANSACTIONS
 
     At March 31, 1998, the Company entered into a consulting agreement with CGW
Southeast Management III, L.L.C. ("CGW Management") whereby the Company will pay
a monthly retainer fee of $15,000 for financial and management consulting
services. The consulting agreement expires in 2003. At the Acquisition closing,
the Company paid to CGW Management an investment banking fee of $1.35 million
for its services in assisting the Company in structuring and negotiating the
Acquisition.
 
     In connection with the exercise of stock options by certain members of
management, the Company was owed $1,800,000 by management related to tax
withholdings due on such compensation. Such amount was recorded as a receivable
as of March 31, 1998 and was paid on June 12, 1998.
 
                                       F-7
<PAGE>   107
 
                          INDEPENDENT AUDITORS' REPORT
 
Board of Directors
SIMCALA, Inc.
 
     We have audited the accompanying balance sheet of SIMCALA, Inc. (the
"Company") as of December 31, 1997 and the related statements of operations,
changes in stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
     In our opinion, the 1997 financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1997, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
 
/s/ DELOITTE & TOUCHE LLP
 
February 27, 1998
Atlanta, Georgia
 
                                       F-8
<PAGE>   108
 
                          INDEPENDENT AUDITORS' REPORT
 
Board of Directors
SIMCALA, Inc.
 
     We have audited the accompanying balance sheet of SIMCALA, Inc. (the
"Company") as of December 31, 1996 and the related statements of operations,
changes in stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
     In our opinion, the 1996 financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1996, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
 
                                           /s/ CROWE, CHIZEK AND COMPANY LLP
 
Oak Brook, Illinois
January 17, 1997, except for
Note 4 as to which the date
is January 22, 1997.
 
                                       F-9
<PAGE>   109
 
                         REPORT OF INDEPENDENT AUDITORS
 
Board of Directors
SIMCALA, Inc.
 
     We have audited the accompanying statements of operations, changes in
stockholders' equity and cash flows for the period from February 10, 1995 (date
of inception) through December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of SIMCALA, Inc.'s operations and cash
flows for the period from February 10, 1995 through December 31, 1995, in
conformity with generally accepted accounting principles.
 
                                          /s/ ERNST & YOUNG LLP
 
Cleveland, Ohio
March 8, 1996
 
                                      F-10
<PAGE>   110
 
                                 SIMCALA, INC.
 
                                 BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996
 
<TABLE>
<CAPTION>
                                                                 1997          1996
                                                              -----------   -----------
<S>                                                           <C>           <C>
                                        ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $   634,877   $   186,291
  Accounts receivable (less allowance for doubtful accounts
     of $77,436 and $107,000 in 1997 and 1996,
     respectively)..........................................    5,830,386     5,045,578
  Inventories...............................................    2,663,941     1,961,351
  Prepaid income taxes......................................                    110,000
  Deferred income taxes.....................................    1,288,000       280,000
  Other current assets......................................      127,628       118,435
                                                              -----------   -----------
          Total current assets..............................   10,544,832     7,701,655
PROPERTY, PLANT, AND EQUIPMENT:
  Land, building, and improvements..........................    1,294,032       899,731
  Machinery and equipment, furniture and fixtures...........   24,917,520    23,109,362
  Construction in-progress..................................      281,876       373,131
                                                              -----------   -----------
                                                               26,493,428    24,382,224
  Accumulated depreciation..................................   (4,045,499)   (2,242,439)
                                                              -----------   -----------
          Property, plant, and equipment, net...............   22,447,929    22,139,785
INTANGIBLE ASSETS (net of accumulated amortization of
  $540,297 and $293,853 in 1997 and 1996, respectively).....      669,778       739,281
                                                              -----------   -----------
                                                              $33,662,539   $30,580,721
                                                              ===========   ===========
 
                         LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable and accrued expenses.....................  $ 6,124,945   $ 6,178,977
  Revolving line of credit..................................                  3,243,692
  Current maturities of interest-bearing long-term debt.....    2,340,752       577,853
  Current maturities of noninterest-bearing debt due to
     related party..........................................                  1,048,500
  Income taxes payable......................................    1,194,000
                                                              -----------   -----------
          Total current liabilities.........................    9,659,697    11,049,022
INTEREST-BEARING, LONG-TERM DEBT -- Net of current
  portion...................................................   12,763,170     8,748,009
NONINTEREST-BEARING DEBT DUE TO RELATED PARTY -- Net of
  current portion...........................................                  4,459,348
DEFERRED INCOME TAXES.......................................    2,964,000       689,000
                                                              -----------   -----------
          Total liabilities.................................   25,386,867    24,945,379
COMMITMENTS AND CONTINGENCIES (Notes 4 and 13)
STOCKHOLDERS' EQUITY:
  Preferred stock (Series B preferred stock, 3,000 shares
     authorized -- 1,500 shares issued and outstanding at
     December 31, 1996, par value $1.00 per share)..........                  1,500,000
  Common stock, 20,000 shares authorized -- 10,000 shares
     issued and 10,000 outstanding, respectively, par value
     $.01 per share)........................................          100           100
  Additional paid-in capital................................    2,250,189     1,903,466
  Retained earnings.........................................    6,025,383     2,231,776
                                                              -----------   -----------
          Total stockholders' equity........................    8,275,672     5,635,342
                                                              -----------   -----------
                                                              $33,662,539   $30,580,721
                                                              ===========   ===========
</TABLE>
 
                       See notes to financial statements.
                                      F-11
<PAGE>   111
 
                                 SIMCALA, INC.
 
                            STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                                             PERIOD FROM
                                                                                            FEBRUARY 10,
                                                                      YEAR ENDED                1995
                                     THREE MONTHS ENDED       ---------------------------     (DATE OF
                                          MARCH 31,                                         INCEPTION) TO
                                  -------------------------   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                     1998          1997           1997           1996           1995
                                  -----------   -----------   ------------   ------------   -------------
                                         (UNAUDITED)
<S>                               <C>           <C>           <C>            <C>            <C>
Net sales.......................  $14,854,000   $15,655,000   $62,184,345    $52,407,269     $31,523,036
Cost of goods sold..............   11,679,000    12,225,000    47,972,065     42,797,540      32,391,263
                                  -----------   -----------   -----------    -----------     -----------
          Gross profit..........    3,175,000     3,430,000    14,212,280      9,609,729        (868,227)
Selling and administrative
  expense.......................    3,824,000       682,000     2,845,842      1,923,466       1,598,577
                                  -----------   -----------   -----------    -----------     -----------
Operating income (loss).........     (649,000)    2,748,000    11,366,438      7,686,263      (2,466,804)
Interest expense................      314,000       415,000     1,709,586      1,511,596       1,110,592
Other income, net...............      282,000        30,000       228,461        444,451         359,054
                                  -----------   -----------   -----------    -----------     -----------
Income (loss) before income
  taxes.........................     (681,000)    2,363,000     9,885,313      6,619,118      (3,218,342)
Income tax provision
  (benefit).....................     (100,000)      793,000     3,514,000      1,169,000
                                  -----------   -----------   -----------    -----------     -----------
Net income (loss)...............  $  (581,000)  $ 1,570,000   $ 6,371,313    $ 5,450,118     $(3,218,342)
                                  ===========   ===========   ===========    ===========     ===========
</TABLE>
 
                       See notes to financial statements.
 
                                      F-12
<PAGE>   112
 
                                 SIMCALA, INC.
 
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
                      AND FOR THE PERIOD FEBRUARY 10, 1995
                 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1995
 
<TABLE>
<CAPTION>
                                        SERIES B              ADDITIONAL    RETAINED
                                        PREFERRED    COMMON    PAID-IN      EARNINGS
                                          STOCK      STOCK     CAPITAL      (DEFICIT)       TOTAL
                                       -----------   ------   ----------   -----------   -----------
<S>                                    <C>           <C>      <C>          <C>           <C>
BALANCE -- February 10, 1995.........  $ 1,500,000    $100    $  999,900   $             $ 2,500,000
          Net loss...................                                      $(3,218,342)   (3,218,342)
                                       -----------    ----    ----------   -----------   -----------
BALANCE -- January 1, 1996...........    1,500,000     100       999,900    (3,218,342)     (718,342)
  Conversion of preferred stock......                            903,566                     903,566
          Net income.................                                        5,450,118     5,450,118
                                       -----------    ----    ----------   -----------   -----------
BALANCE -- December 31, 1996.........    1,500,000     100     1,903,466     2,231,776     5,635,342
  Redemption of preferred stock......   (1,500,000)                                       (1,500,000)
  Preferred stock dividend...........                                         (270,000)     (270,000)
  Payment to stockholders in
     conjunction with extinguishment
     of debt
     (Note 7)........................                                       (2,307,706)   (2,307,706)
  Compensation expense stock
     options.........................                            346,723                     346,723
          Net income.................                                        6,371,313     6,371,313
                                       -----------    ----    ----------   -----------   -----------
BALANCE -- December 31, 1997.........  $        --    $100    $2,250,189   $ 6,025,383   $ 8,275,672
                                       ===========    ====    ==========   ===========   ===========
</TABLE>
 
                       See notes to financial statements.
 
                                      F-13
<PAGE>   113
 
                                 SIMCALA, INC.
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                                              PERIOD FROM
                                                                                                             FEBRUARY 10,
                                                                                                                 1995
                                                      THREE MONTHS ENDED                                       (DATE OF
                                                           MARCH 31,             YEAR ENDED DECEMBER 31,     INCEPTION) TO
                                                   -------------------------   ---------------------------   DECEMBER 31,
                                                      1998          1997           1997           1996           1995
                                                   -----------   -----------   ------------   ------------   -------------
                                                          (UNAUDITED)
<S>                                                <C>           <C>           <C>            <C>            <C>
OPERATING ACTIVITIES:
  Net income (loss)..............................  $  (581,000)  $ 1,570,000   $ 6,371,313    $ 5,450,118     $(3,218,342)
  Adjustments to reconcile net income (loss) to
    net cash provided by (used in) operating
    activities:
    Depreciation.................................      448,000       360,000     1,766,377      1,350,782       1,069,857
    Amortization of intangible assets............        9,000         9,000       401,200        242,519              --
    Debt discount................................       14,000        55,000        89,349        332,396         206,876
    Provision for doubtful accounts..............           --            --            --         91,644           1,644
    Deferred income taxes........................      800,000       702,000     1,267,000        409,000              --
    Noncash stock option compensation............      904,000        87,000       346,723             --              --
    Change in assets and liabilities:
      Increase (decrease) in accounts
        receivable...............................       21,000      (990,000)     (784,808)      (758,012)     (1,028,259)
      Increase in taxes receivable...............   (1,007,000)           --            --             --              --
      Increase in receivables from employees.....   (1,800,000)           --            --             --              --
      Decrease (increase) in inventory...........     (207,000)      134,000      (702,590)       524,124      (1,402,245)
      Decrease (increase) in prepaid income
        taxes....................................           --       110,000       110,000       (110,000)             --
      Decrease (increase) in other assets........      202,000      (191,000)       (9,193)      (183,550)        521,465
      Increase in accounts payable and other
        accrued expenses.........................    2,365,000      (854,000)    1,139,968      1,885,802       2,440,736
                                                   -----------   -----------   -----------    -----------     -----------
        Net cash provided by (used in) operating
          activities.............................    1,168,000       992,000     9,995,339      9,234,823      (1,408,268)
INVESTING ACTIVITIES --
  Purchase of property, plant, and equipment.....   (1,184,000)     (438,000)   (2,074,521)    (6,913,146)     (4,153,831)
FINANCING ACTIVITIES:
  Payments on non-interest-bearing debt..........           --    (3,276,000)   (5,597,197)            --              --
  Borrowings (repayments) under line of credit,
    net..........................................           --        62,000    (3,243,692)    (1,816,196)      2,579,856
  Repayments of long-term debt...................       39,000     3,095,000    (7,221,940)      (341,941)             --
  Additional long-term borrowings................           --            --    13,000,000         14,392         485,609
  Redemption of preferred stock..................           --            --    (1,500,000)            --              --
  Preferred stock dividend.......................           --            --      (270,000)            --              --
  Payment to stockholders........................           --            --    (2,307,706)            --              --
  Debt issuance cost.............................           --            --      (331,697)            --        (280,000)
                                                   -----------   -----------   -----------    -----------     -----------
        Net cash provided by (used in) financing
          activities.............................       39,000      (119,000)   (7,472,232)    (2,143,745)      2,785,465
                                                   -----------   -----------   -----------    -----------     -----------
INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS....................................       23,000       435,000       448,586        177,932      (2,776,634)
CASH AND CASH EQUIVALENTS:
  Beginning of period............................      635,000       186,000       186,291          8,359       2,784,993
                                                   -----------   -----------   -----------    -----------     -----------
  End of period..................................  $   658,000   $   621,000   $   634,877    $   186,291     $     8,359
                                                   ===========   ===========   ===========    ===========     ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION:
  Cash paid for:
    Interest.....................................  $   161,000   $   421,000   $ 1,559,742    $ 1,237,845     $   928,553
                                                   ===========   ===========   ===========    ===========     ===========
    Income taxes.................................      112,000   $        --   $   770,000    $   870,000     $        --
                                                   ===========   ===========   ===========    ===========     ===========
  Noncash transactions:
    Conversion of preferred stock into debt......  $        --   $        --   $        --    $ 3,000,000     $        --
                                                   ===========   ===========   ===========    ===========     ===========
    Equipment acquired under capital lease.......  $        --   $        --   $    70,000    $   150,250     $        --
                                                   ===========   ===========   ===========    ===========     ===========
</TABLE>
 
                       See notes to financial statements.
 
                                      F-14
<PAGE>   114
 
                                 SIMCALA, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
 
1. ORGANIZATION AND OPERATIONS
 
     Organization.  SIMCALA, Inc. (the "Company") commenced operations on
February 10, 1995 and purchased certain net assets from SiMETCO, Inc. (the
"Seller"), which had been operating under Chapter 11 of the Federal Bankruptcy
Code since September 1993.
 
     The purchase price for this transaction was approximately $20 million and
included the assumption of approximately $2.9 million of debt from the estate of
the trustee (the "Estate"); the assumption of approximately $3.0 million of
third-party debt; the issuance of $6.0 million of third-party debt; the issuance
of $3.0 million of preferred stock to the Estate; the cash payment of
approximately $2.75 million to the Estate; and the assumption of approximately
$2.0 million of vendor debt and accrued expenses.
 
     The acquisition was accounted for as a purchase, and accordingly, the
purchase price was allocated to assets acquired and liabilities assumed in
accordance with Accounting Principles Board ("APB") Opinion 16, "Business
Combinations." As a result, as of February 10, 1995, inventories were stated at
fair value and property, plant, and equipment were stated at allocated
acquisition cost.
 
     Nature of Operations and Customer Concentration.  The Company is a producer
of silicon metal for sale to the aluminum and silicone industries. The Company
sells to customers in the metals industry who are located primarily throughout
the United States. Credit is extended based on an evaluation of the customer's
financial condition. During 1997, three customers accounted for 29%, 24%, and
16% of net sales. During 1996, three customers accounted for 27%, 24%, and 12%
of net sales. During the period ended December 31, 1995, two customers accounted
for 42% and 19% of net sales, respectively. At December 31, 1997, three
customers accounted for 31%, 26%, and 12% of outstanding receivables. At
December 31, 1996, three customers accounted for 20%, 15%, and 14% of
outstanding receivables. The Company maintains credit insurance for all customer
accounts receivable.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     Use of Estimates.  The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
 
     Interim Financial Statements.  In the opinion of management, the unaudited
condensed statements of operations and cash flows included herein reflect all
normal recurring accruals necessary for a fair statement of the results of the
interim periods reflected. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted from the condensed financial statements
pursuant to applicable rules and regulations of the Securities and Exchange
Commission.
 
     Cash Equivalents.  The Company considers all highly liquid debt instruments
with a maturity of three months or less when purchased to be cash equivalents.
 
     Inventories.  Inventories are stated using the average cost method which
approximates the first-in, first-out (FIFO) inventory cost method.
 
     Property, Plant, and Equipment.  It is the policy of the Company to
capitalize expenditures for major renewals and betterments and to charge to
operating expenses the cost of current maintenance and repairs. Interest costs
associated with major property additions are capitalized while the projects are
in the process of acquisition and construction. The Company evaluates the
estimated useful lives and the carrying value of assets on a periodic basis to
determine whether events or circumstances warrant revised estimated useful lives
 
                                      F-15
<PAGE>   115
                                 SIMCALA, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
or whether any impairment exists. Management believes no material impairment
existed at December 31, 1997.
 
     The Company provides for depreciation over the estimated useful lives of
plant and equipment by the straight-line method using the following useful lives
(in years):
 
<TABLE>
<CAPTION>
                                                              USEFUL
ASSET CATEGORY                                                 LIFE
- --------------                                                ------
<S>                                                           <C>
Land improvements...........................................    20
Buildings...................................................    40
Machinery and equipment.....................................    14
Mobile equipment and vehicles...............................     6
Furniture and fixtures......................................    10
Computer equipment..........................................     7
Computer software...........................................     5
</TABLE>
 
     The cost and the accumulated depreciation and amortization relating to
assets retired or otherwise disposed of is eliminated from the respective
accounts at the time of disposition. Gains or losses from disposition are
included in current operating results.
 
     Intangible Assets.  Intangible assets represent the costs of organizing and
forming the Company and the costs of issuing and assuming various debt
instruments. These costs are amortized over five years. The Company evaluates
the amortization period and the carrying value of intangible assets on a
periodic basis to determine whether events or circumstances warrant revised
estimates of useful lives or whether impairment exists. Management believes that
no material impairment of intangible assets existed at December 31, 1997.
 
     New Accounting Standards.  In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") 130,
"Reporting Comprehensive Income," and SFAS 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS 130 establishes standards for the
reporting and displaying of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in financial reports issued to stockholders. The Company
adopted SFAS 130 and 131 on January 1, 1998. The adoption of these statements
did not have an effect on its financial statements. Comprehensive income equals
net income for the three months ended March 31, 1998 and 1997, the years ended
December 31, 1997 and 1996, and the period from February 10, 1995 (date of
inception) to December 31, 1995.
 
     Stock-Based Compensation.  Stock-based compensation is accounted for in
accordance with APB 25, "Accounting for Stock Issued to Employees," and related
interpretations. Effective January 1, 1996, the Company adopted the
disclosure-only provisions of SFAS 123, "Accounting for Stock-Based
Compensation." See Note 9 to the financial statements.
 
                                      F-16
<PAGE>   116
                                 SIMCALA, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
3. INVENTORIES
 
     Inventories at December 31, 1997 and 1996 consisted of the following:
 
<TABLE>
<CAPTION>
                                                                 1997         1996
                                                              ----------   ----------
<S>                                                           <C>          <C>
Raw materials...............................................  $  948,627   $  630,262
Finished goods..............................................   1,419,668      981,508
Supplies....................................................     295,646      349,581
                                                              ----------   ----------
                                                              $2,663,941   $1,961,351
                                                              ==========   ==========
</TABLE>
 
4. REVOLVING LINE OF CREDIT AND CREDIT AGREEMENT
 
     On April 10,1997, the Company entered into a new credit agreement that
includes a $5,000,000 revolving line of credit (the "Revolving Line") through
June 1998, a $13,000,000 term loan payable through 2002, and a letter of credit
supporting the industrial development bonds. The borrowings under the Revolving
Line are limited to 85% of eligible accounts receivable and up to 60% of
eligible inventory, as defined. At December 31, 1997, the interest rate was
determined as the lower of prime (8.50% at December 31, 1997) plus .50% or the
advance rate on Eurodollars (5.90% at December 31, 1997) plus 2.50%. At December
31, 1997, the Company has not utilized any portion of the revolving line. To
maintain the Revolving Line, the Company must pay a fee of 1/2 of 1% of the
unused balance of the Revolving Line and to maintain the letter of credit the
Company must pay a fee of 2.50% of the letter of credit balance.
 
     The credit agreement contains certain financial covenants requiring
limitations on capital expenditures, maintenance of the required fixed charge
coverage ratio, cash flow coverage ratio, and net worth requirements, as
defined. In addition, the Company is obligated to pay additional principal equal
to 50% of excess cash flows, as defined, at the end of the year. Due to a
prepayment of principal in December 1997, the Company was not obligated to pay
this amount. The Company was not in compliance with the debt agreement due to a
capital expenditure covenant violation at December 31, 1997; however, as of
January 9, 1998, the Company had obtained the appropriate waivers. The Company
was also not in compliance with the debt agreement at December 31, 1996,
however, as of January 22, 1997 the Company had obtained the appropriate
waivers.
 
                                      F-17
<PAGE>   117
                                 SIMCALA, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
5. INTEREST-BEARING, LONG-TERM DEBT
 
     The following is a summary of interest-bearing, long-term debt:
 
<TABLE>
<CAPTION>
                                                                 1997          1996
                                                              -----------   ----------
<S>                                                           <C>           <C>
Industrial development bonds which bear interest at a
  variable rate. At December 31, 1997 and 1996, the interest
  rate was 5.90%. The bonds mature on December 1, 2019.
  Bonds and applicable interest secured by a letter of
  credit....................................................  $ 6,000,000   $6,000,000
Note payable to the state of Alabama which bears interest at
  8% and is secured by certain machinery and equipment.
  Interest only payments of $3,333 payable monthly through
  September 1997. Paid in full during 1997..................                   500,000
Various notes payable to former creditors of the Seller,
  with interest rates ranging from prime plus 2% to prime
  plus 3%, with a maximum of 14% on approximately $2,100,000
  of this debt. Paid in full during 1997....................                 2,698,487
Term loan with a bank which bears interest at the current
  Eurodollar advance rate plus a variable rate dictated by
  the Company's cash flow leverage ratio (2.50% at December
  31, 1997). Principal payments are due quarterly in varying
  amounts through March 31, 2002. (See Note 4)..............    9,000,000
Various capital leases payable with interest rates of 9.91%
  to 10.00% expiring at various dates through 1999.
  Aggregate monthly payments approximate $6,000.............      103,922      127,375
                                                              -----------   ----------
                                                               15,103,922    9,325,862
Less current portion........................................    2,340,752      577,853
                                                              -----------   ----------
          Long-term debt....................................  $12,763,170   $8,748,009
                                                              ===========   ==========
</TABLE>
 
     The future maturities of interest-bearing, long-term debt are as follows:
 
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S>                                                           <C>
1998........................................................  $ 2,340,752
1999........................................................    2,794,420
2000........................................................    2,875,000
2001........................................................    1,093,750
2002........................................................
Thereafter..................................................    6,000,000
                                                              -----------
                                                              $15,103,922
                                                              ===========
</TABLE>
 
     The Company established an irrevocable letter of credit for $6,148,000
expiring on the earliest of December 31, 1999 or the cancellation date. This
letter of credit fully supports the industrial development bonds plus applicable
interest.
 
     The Company is a party to a capital lease for land, buildings and equipment
with a net book value of $22.4 million and $22.1 million, at December 31, 1997
and 1996, respectively, at its manufacturing facility in Mt. Meigs, Alabama (the
"Lease"). The Lease is with the Industrial Development Board ("IDB") for the
city of Montgomery. Rental payments of $2,000 a year are required and the term
of the Lease expires June 1, 2010. The Lease contains a bargain purchase option
whereby the property can be purchased from the IDB for $1.
 
     The Company capitalized $66,000 and $102,000 of interest expense in 1996
and 1995, respectively.
 
                                      F-18
<PAGE>   118
                                 SIMCALA, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
6. NONINTEREST BEARING DEBT DUE TO RELATED PARTY
 
     The following is a summary of noninterest-bearing, long-term debt due to
related party as of December 31, 1996:
 
<TABLE>
<S>                                                           <C>
Series A noninterest-bearing note payable with face value of
  $3,210,000. Face value discounted at approximately 8% to
  reflect the net present value of future payments at the
  market rate of interest at the date of acquisition........  $2,215,272
Series B noninterest-bearing note payable with face value of
  $1,465,000. Face value discounted at approximately 8% to
  reflect the net present value of future payments at the
  market rate of interest at the date of acquisition........   1,104,376
Noninterest-bearing subordinated note payable with face
  value of $3,000,000. Face value discounted at
  approximately 8% to reflect the net present value of
  future payments at the market rate of interest at the date
  of conversion.............................................   2,188,200
                                                              ----------
                                                               5,507,848
Less current portion........................................   1,048,500
                                                              ----------
                                                              $4,459,348
                                                              ==========
</TABLE>
 
     See Note 7 to the financial statements regarding repayment of these notes.
 
7. RELATED PARTY TRANSACTIONS
 
     During October 1996, a partnership formed primarily by the stockholders of
the Company purchased from the Estate the Series A and Series B notes payable
and the noninterest-bearing subordinated note with face amounts aggregating
$7,675,000 for $3,130,000. The discounted value of the associated debt was
$5,436,000. The partnership purchased the notes from the Estate to eliminate an
adversarial relationship between the Company and the Estate and to renegotiate
more favorable terms which would eliminate covenant defaults. Additionally, the
structure of the transaction resulted in favorable tax treatment for the
Company's shareholders. With the proceeds from the refinancing discussed in Note
4, the Company paid the face amount of the obligations due under these note
arrangements. Prepayment penalties and other fees of $464,000 were also paid to
the partnership in 1997. The stockholders' portion of the payment amount greater
than the recorded carrying value of the notes of $2,307,706 has been recorded as
a reduction of stockholders' equity.
 
     In connection with the commencement of operations, the Company entered into
a Management Agreement (the "Agreement") with its majority stockholder to
provide management services to the Company. The Agreement is for five years
expiring in 2000, with one-year renewal options thereafter. The Company incurred
stockholder management fees of $250,000, $250,000 and $50,000 during the years
ended December 31, 1997 and 1996 and the period ended December 31, 1995,
respectively. At December 31, 1997 and 1996, the Company has a liability of
$31,250 and $93,750, respectively, payable to this stockholder for these
management services.
 
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The Company has estimated the fair value of its financial instruments, the
carrying value of which differed from fair value, using available market
information and appropriate valuation methodologies. Considerable judgment is
required in developing the estimates of fair value presented herein and,
therefore, the values are not necessarily indicative of the amounts that could
be realized in a current market exchange.
 
                                      F-19
<PAGE>   119
                                 SIMCALA, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     The carrying amount and the estimated fair value of such financial
instruments as of December 31, 1997 and 1996 is as follows:
 
<TABLE>
<CAPTION>
                                                               CARRYING      ESTIMATED
                                                                AMOUNT      FAIR VALUE
                                                              -----------   -----------
<S>                                                           <C>           <C>
December 31, 1997:
  Long-term debt, including current portion.................  $15,103,922   $15,097,497
                                                              ===========   ===========
December 31, 1996:
  Long-term debt, including current portion.................  $14,833,710   $14,017,686
                                                              ===========   ===========
</TABLE>
 
     The estimated fair value of the long-term debt is based upon interest rates
that currently are available for issuance of debt with similar terms and
remaining maturities.
 
9. STOCKHOLDERS' EQUITY AND STOCK OPTIONS
 
     In 1995, the Company established the Simcala, Inc. 1995 Stock Option Plan
(the "Plan") under which stock options for 889 shares of common stock could be
granted. In connection with this Plan, in 1995 the Company granted options to
purchase 671 shares at an exercise price of $100 per share. In 1996, the Company
granted additional options to acquire 109 shares at $100 per share. The exercise
price per share of the options granted in 1995 and 1996 was equal to
management's estimate of the underlying value of the shares on the date of
grant. Of the total options, 211 options vest based on performance criteria of
which 51 shares, 51 shares, 27 shares and 82 shares vested in 1995, 1996, 1997
and the three months ended March 31, 1998, respectively. Compensation expense of
$346,723 and $904,000 associated with such options was recognized in 1997 and
the first three months of 1998, respectively. As of December 31, 1997 and 1996,
415 and 296 options, respectively, were exercisable; however, none had been
exercised. All options immediately vested and were exercised upon the change in
control on March 31, 1998.
 
     The Company applies APB 25 in accounting for its stock-based compensation
plans. Effective January 1, 1996, the Company adopted the disclosure-only
provisions of SFAS 123. Had compensation costs for the Company's stock-based
compensation plans been determined based on the fair value at the grant date
consistent with the method set forth in SFAS 123, the Company's net income
(loss) for the years ended December 31, 1997 and 1996 and the period ended
December 31, 1995 would have been $6,366,324, $5,445,220, and $(3,224,097),
respectively.
 
     The fair value of the options granted under the Plan during 1995 was
estimated at $19,957 using the Black-Scholes Option Pricing Model and the
following weighted average assumptions: risk-free interest rate of 7.1%;
dividend yield, expected volatility, and assumed forfeiture rate of 0%; and an
expected life of five years. The fair value of options granted under the Plan
during 1996 was estimated at $3,064 using the Black-Scholes Option Pricing Model
and the following weighted average assumptions: risk-free interest rate of 6.6%;
dividend yield, expected volatility, and assumed forfeiture rate of 0%; and an
expected life of five years.
 
10. RETIREMENT PLAN
 
     The Company sponsors a qualified 401(k) savings plan covering all employees
who have completed six months of employment. If a participating employee decides
to contribute, a portion of the contribution is matched by the Company. Total
retirement plan expense for the years ended December 31, 1997 and 1996 and the
period ended December 31, 1995 was $97,217, $81,846 and $38,836, respectively.
 
                                      F-20
<PAGE>   120
                                 SIMCALA, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
11. INCOME TAXES
 
     The provision for income taxes for the years ended December 31, 1997 and
1996 and the period ended December 31, 1995 consisted of the following:
 
<TABLE>
<CAPTION>
                                                      1997         1996          1995
                                                   ----------   -----------   -----------
<S>                                                <C>          <C>           <C>
Current..........................................  $2,247,000   $   760,000
Deferred.........................................   1,267,000     1,490,753   $(1,081,753)
Change in valuation allowance....................                (1,081,753)    1,081,753
                                                   ----------   -----------   -----------
          Provision for income taxes.............  $3,514,000   $ 1,169,000   $        --
                                                   ==========   ===========   ===========
</TABLE>
 
     The difference between the effective tax rate and the statutory rate is
reconciled below (amounts in thousands):
 
<TABLE>
<CAPTION>
                                     1997                    1996                    1995
                             --------------------    --------------------    --------------------
                             DOLLARS   PERCENTAGE    DOLLARS   PERCENTAGE    DOLLARS   PERCENTAGE
                             -------   ----------    -------   ----------    -------   ----------
<S>                          <C>       <C>           <C>       <C>           <C>       <C>
Statutory rate.............  $3,361       34.0%      $ 2,250       34.0%     $(1,094)    (34.0)%
Permanent items............     153        1.5             1                      12        0.4
Valuation allowance........                           (1,082)     (16.3)       1,082       33.6
                             ------      -----       -------     ------      -------     ------
          Recorded tax
            expense........  $3,514       35.5%      $ 1,169       17.7%     $    --         --%
                             ======      =====       =======     ======      =======     ======
</TABLE>
 
     The Company paid no Alabama state income taxes the years ended December 31,
1997 and 1996 and the period ended December 31, 1995 due to benefits granted by
the State of Alabama under the Mercedes Act.
 
     Significant components of the Company's deferred tax assets and liabilities
at December 31, 1997 and 1996 are as follows:
 
<TABLE>
<CAPTION>
                                                                 1997          1996
                                                              -----------   ----------
<S>                                                           <C>           <C>
Deferred tax liabilities:
  Accelerated tax depreciation..............................  $ 2,918,000   $1,443,000
  Other liabilities.........................................        8,000       37,000
                                                              -----------   ----------
                                                                2,926,000    1,480,000
Deferred tax assets:
  AMT credit carryforwards..................................    1,090,000      760,000
  Net operating loss carryforwards..........................                   118,000
  Other assets..............................................      160,000      193,000
                                                              -----------   ----------
                                                                1,250,000    1,071,000
                                                              -----------   ----------
          Net deferred tax liability........................  $(1,676,000)  $ (409,000)
                                                              ===========   ==========
</TABLE>
 
12. PREFERRED STOCKS
 
     In connection with the acquisition of the Company from the Estate, the
Company issued 1,500 shares of mandatory redeemable Series A preferred stock
with a par value of $2,000 per share to the Estate. The stock, which has no
dividend requirement and a liquidation preference of $2,000 per share, was
redeemable at a redemption price of $2,000 per share at various dates through
2005.
 
     During June 1996, the mandatorily redeemable preferred stock was converted
to a noninterest bearing note, payable in nine installments beginning February
1997. The note was recorded at the net present value of the future payments
assuming interest at the Company's market rate of 8.0%. The difference between
the discounted and face amount upon conversion was considered an addition to
paid-in capital of the Company.
 
                                      F-21
<PAGE>   121
                                 SIMCALA, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     In connection with the acquisition of the Company in 1995, 1,500 shares of
cumulative 8% preferred stock were issued. In 1997, the preferred stock was
redeemed at the redemption value of $1,000 per share plus $270,000 of accrued
dividends.
 
13. COMMITMENTS AND CONTINGENCIES
 
     At December 31, 1997, the Company had approximately 170 employees,
approximately 100 of which are covered by provisions of a collective bargaining
agreement. The collective bargaining agreement expires in 2000.
 
     Total rental expense for property and equipment was $219,087 and, $229,273
for the years ended December 31, 1997 and 1996 respectively and $110,104 for the
period from February 10, 1995 to December 31, 1995. Minimum annual rentals under
noncancelable operating leases are $93,000 and $22,000 for the years ended 1998
and 1999, respectively.
 
     As of December 31, 1997, the Company has entered into contracts totaling
approximately $2 million for the construction of certain production equipment.
 
     The Company is involved in litigation arising in the normal course of
business. Management believes that the ultimate resolution of such litigation
will not have a material adverse effect on the financial statements.
 
14. SUBSEQUENT EVENT
 
     On February 10, 1998, the Company's stockholders entered into an agreement
to sell the outstanding capital stock of the Company (the "Acquisition"). The
purchase price of the Acquisition is $82 million less indebtedness at the
acquisition closing date, less certain legal and investment banking fees
incurred by the stockholders and less an approximate $1 million price
adjustment. It is expected that the Acquisition will close on or about March 31,
1998. A majority of the Company's long-term debt is expected to be refinanced in
connection with the Acquisition. The Company granted an additional 109 shares of
options on March 31, 1998 with an exercise price of $100 per share. All options
were exercised in conjunction with the Acquisition and the Company recognized
$904,000 of compensation expense in the three months ended March 31, 1998. In
addition on March 31, 1998, a bonus of $1.5 million was paid to certain
management in connection with the exercise of stock options.
 
15. UNAUDITED PRO FORMA FINANCIAL INFORMATION
 
     In connection with the Acquisition, the purchase method of accounting was
used to establish and record a new cost basis for the assets acquired and
liabilities assumed. The allocation of the purchase price and acquisition costs
to the assets acquired and liabilities assumed is preliminary at March 31, 1998,
and is subject to change pending the finalization of appraisals and other
studies of fair value and finalization of management's plans which may result in
the recording of additional liabilities. The excess of the purchase price over
the preliminary fair market value of assets acquired and liabilities assumed was
recorded as goodwill.
 
                                      F-22
<PAGE>   122
                                 SIMCALA, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following unaudited pro forma financial data for the three months ended
March 31, 1997 and 1998 and twelve months ended December 31, 1997 has been
prepared assuming that the Acquisition was consummated on January 1, 1997 and
pro forma financial data for the twelve months ended December 31, 1996 has been
prepared assuming that the Acquisition was consummated on January 1, 1996. This
pro forma financial data is presented for informational purposes and is not
necessarily indicative of the operating results that would have occurred had the
Acquisition been consummated on January 1, 1997 or 1996, nor is it necessarily
indicative of future operations.
 
<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED           TWELVE MONTHS ENDED
                                              -------------------------   ---------------------------
                                               MARCH 31,     MARCH 31,    DECEMBER 31,   DECEMBER 31,
                                                 1998          1997           1997           1996
                                              -----------   -----------   ------------   ------------
<S>                                           <C>           <C>           <C>            <C>
Net Sales...................................  $14,854,000   $15,655,000   $62,184,000    $52,407,000
Net Loss....................................  $(2,378,000)  $  (302,000)  $  (890,000)   $(3,176,000)
</TABLE>
 
                                      F-23
<PAGE>   123
 
                          INDEPENDENT AUDITORS' REPORT
 
Board of Directors
SAC Acquisition Corp.
 
     We have audited the accompanying balance sheet of SAC Acquisition Corp.
("SAC") as of March 30, 1998. This financial statement is the responsibility of
the SAC management. Our responsibility is to express an opinion on this
financial statement based on our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the overall balance sheet presentation. We believe that our audit of
the balance sheet provides a reasonable basis for our opinion.
 
     In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of SAC as of March 30, 1998 in conformity with
generally accepted accounting principles.
 
Deloitte & Touche LLP
 
Atlanta, Georgia
March 31, 1998
 
                                      F-24
<PAGE>   124
 
                             SAC ACQUISITION CORP.
 
                                 BALANCE SHEET
                                 MARCH 30, 1998
 
<TABLE>
<S>                                                           <C>
ASSETS -- Cash..............................................  $500,000
                                                              ========
STOCKHOLDER'S EQUITY -- Common Stock Subscribed.............  $500,000
                                                              ========
</TABLE>
 
NOTES:
 
1. ORGANIZATION AND BASIS OF PRESENTATION
 
     SAC Acquisition Corp. ("SAC") was incorporated in Georgia on January 26,
1998 for the sole purpose of acquiring the outstanding stock of SIMCALA, Inc.
(the "Company") and repaying certain indebtedness of the Company. On March 31,
1998, SAC purchased all of the outstanding common stock of the Company and
merged into the Company.
 
2. STOCKHOLDER'S EQUITY
 
     SAC is authorized to issue 1,000,000 shares, no par value. On February 10,
1998, SAC entered into a subscription agreement with SIMCALA Holdings, Inc., a
wholly-owned subsidiary of CGW Southeast Partners III, L.L.C., to purchase 1,000
shares of common stock of SAC for $500 per share.
 
                                      F-25
<PAGE>   125
 
             ------------------------------------------------------
             ------------------------------------------------------
 
     NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL
PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
 
                             ---------------------
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Explanatory Note......................    2
Available Information.................    3
Cautionary Notice Regarding Forward-
  Looking Statements..................    3
Certain Market and Industry Data......    4
Prospectus Summary....................    5
Risk Factors..........................   18
The Exchange Offer....................   22
Plan of Distribution..................   34
The Transactions......................   34
Use of Proceeds.......................   36
Capitalization........................   37
Unaudited Condensed Pro Forma
  Financial Information...............   38
Selected Historical Financial
  Information.........................   41
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................   44
Business..............................   53
Management............................   64
Certain Transactions..................   67
Beneficial Ownership..................   69
Description of the Notes..............   70
Description of Other Indebtedness.....   93
Material United States Federal Income
  Tax Considerations..................   95
Legal Matters.........................   99
Experts...............................   99
Relationship with Independent
  Accountants.........................   99
Index to Financial Statements.........  F-1
</TABLE>
 
   
UNTIL OCTOBER 27, 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS OR AS REQUIRED BY THE TERMS OF THE EXCHANGE OFFER.
    
             ------------------------------------------------------
             ------------------------------------------------------
             ------------------------------------------------------
             ------------------------------------------------------
 
                                 (LOGO SIMCALA)
 
                               OFFER TO EXCHANGE
                       $75,000,000 IN AGGREGATE PRINCIPAL
                                   AMOUNT OF
                              9 5/8% SENIOR NOTES
                               DUE 2006, SERIES B
                             FOR ALL $75,000,000 IN
                             AGGREGATE OUTSTANDING
                                PRINCIPAL AMOUNT
                                       OF
                              9 5/8% SENIOR NOTES
                               DUE 2006, SERIES A
                              --------------------
                                   PROSPECTUS
                              --------------------
   
                                 JULY 29, 1998
    
             ------------------------------------------------------
             ------------------------------------------------------


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