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parsed_sections/prospectus_summary/1994/CIK0000066895_mississipp_prospectus_summary.txt

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. Except as otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. Fiscal year references refer to years ending June 30. THE COMPANY Mississippi Chemical Corporation (the "Company") is a major producer and supplier of nitrogen fertilizers in the southern United States, and believes it is one of the nation's lowest-cost nitrogen fertilizer producers. The Company also manufactures phosphate and potash fertilizers, making it a full product line fertilizer supplier. The Company sells its nitrogen and potash fertilizer products to farmers, fertilizer dealers and distributors for ultimate use primarily in the southern farming regions of the United States and areas served by the Mississippi River system. The Company's phosphate fertilizers are sold primarily in international markets. Nitrogen, phosphorous (contained in phosphate fertilizer) and potassium (contained in potash fertilizer) constitute the three major nutrients required for plant growth. Nitrogen is an essential nutrient for most plants. Phosphorous aids in the photosynthesis process, and potassium is an important regulator of the physiological functions of plants. These elements are all naturally present in soil but need to be replaced through the use of fertilizers as crops exhaust them. There are no viable substitutes for nitrogen, phosphate or potash fertilizers in the development and maintenance of high-yield crops. Nitrogen Fertilizer. The Company produces nitrogen fertilizers at facilities located in Yazoo City, Mississippi, and Donaldsonville, Louisiana. In fiscal 1994, the Company sold over 1.6 million tons of nitrogen fertilizers to farmers, fertilizer dealers and distributors located primarily in the southern United States. Sales of nitrogen products by the Company in fiscal 1994 were $199.9 million, which represented approximately 65% of net sales. Nitrogen products manufactured by the Company include anhydrous ammonia, fertilizer- grade ammonium nitrate, urea/ammonium nitrate ("UAN") solutions and urea. The Company is the largest U.S. manufacturer of ammonium nitrate fertilizer, which is marketed under the trade name Amtrate(R). Amtrate(R) has established significant brand name recognition and a reputation as a high-quality product. Phosphate Fertilizer. The Company produces diammonium phosphate fertilizer ("DAP") at its facility in Pascagoula, Mississippi. In fiscal 1994, the Company sold approximately 638,000 tons of DAP, which is the most widely used phosphate fertilizer. Sales of DAP by the Company in fiscal 1994 were $83.4 million, which represented approximately 27% of net sales. Substantially all of the Company's phosphate fertilizer sales are made through Atlantic Fertilizer & Chemical Corporation ("Atlantic"), which was appointed the Company's exclusive distributor of DAP when the Company started production of DAP in December 1991. In fiscal 1994, approximately two-thirds of the Company's DAP production was sold into international markets, primarily to customers in India, China and Mexico. Phosphate rock, the primary raw material for the production of phosphate fertilizer, is provided under a long-term contract with Office Cherifien des Phosphates ("OCP"), the national phosphate company of Morocco, which is the world's largest producer of phosphate rock. The continued viability and competitiveness of the Company's phosphate operations are dependent on this strategic alliance with OCP. See "Business--Raw Materials." Potash Fertilizer. The Company produces potash fertilizer at its facility located near Carlsbad, New Mexico. In fiscal 1994, the Company sold approximately 330,000 tons of granular 60% K/2/O muriate of potash. Sales of potash fertilizer by the Company in fiscal 1994 were $24.1 million, which represented approximately 8% of net sales. In May 1994, the Company completed an expansion of its Carlsbad facility, which has increased granular potash production capacity from approximately 300,000 tons to approximately 420,000 tons per year. The Company controls the single largest reserve of potash in the U.S., with an estimated remaining life, at current production rates, of approximately 140 years. Business Strategy. The Company's products are global commodities which are available from multiple sources; therefore, the Company competes primarily on the basis of price. As a result, the Company stresses low cost and high efficiency in every aspect of its operations. Unlike many of its competitors, the Company maintains a large and experienced field sales force strategically located throughout its trade area. Through its sales force, the Company provides extensive, cost-effective services to its customers to differentiate its products, enhance competitiveness and establish the Company as a preferred supplier. The Company's marketing efforts are focused on geographically proximate markets where lower transportation and distribution costs increase "net backs" (sales less distribution and delivery expenses) and result in improved margins. The Company's recent change in corporate status from a cooperative to a regular business corporation should present additional opportunities to improve net backs and enhance profit margins. Finally, the Company continuously monitors opportunities to expand its operations through capacity additions, acquisitions, joint ventures and strategic alliances in the fertilizer business. THE REORGANIZATION The Company is the successor by merger, effective July 1, 1994, to a business which was formed in 1948 as the first fertilizer cooperative in the United States (the "Cooperative"). The principal business of the Cooperative was to provide fertilizer products to its shareholders pursuant to preferred patronage rights which gave the shareholders the right to purchase fertilizer products and receive a patronage refund on fertilizer purchases. On June 28, 1994, the shareholders of the Cooperative approved a plan of reorganization (the "Reorganization"), pursuant to which the Cooperative was merged into the Company. Pursuant to the Reorganization, the capital stock of the Cooperative was converted into Common Stock and/or cash. In addition, holders of Capital Equity Credits and Allocated Surplus Accounts of the Cooperative (the "Special Accounts") were offered the right to exchange the Special Accounts for Common Stock. Since July 1, 1994, the Company has operated as a regular business corporation. References in this Prospectus to the Company's operations prior to July 1, 1994, refer to the Cooperative's operations. The Board of Directors of the Cooperative decided to implement the Reorganization because it believed that the Company needed greater flexibility in marketing its products than was possible under its cooperative structure. Following the Reorganization, the Company believes that it will be able to be more responsive to its customers' needs and be better able to promote its position as a preferred supplier of fertilizer products in its core markets in the southern U.S. The Company also believes that its new corporate structure will increase opportunities for market expansion and growth of operations. The Company expects to retain the majority of the Cooperative's customer base and expects that its sales and profitability will not be adversely affected by the Reorganization. In addition, following the Reorganization, the Company expects to have enhanced access to capital markets and increased options in connection with potential business combinations. See "The Reorganization." THE OFFERING <TABLE> <S> <C> Common Stock offered by the 3,200,000 shares Company........................... Common Stock offered by the Selling 1,880,000 shares Shareholders...................... Common Stock to be outstanding 22,654,354 shares (1) after the Offering................ Use of proceeds.................... To retire indebtedness and for general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market MISS symbol............................ Dividend policy.................... The Company expects to pay a quarterly cash dividend of $0.08 per share, commencing with a payment in February 1995 with respect to the quarter ending December 31, 1994. See "Dividend Policy." </TABLE> - -------- (1)Assumes conversion of all Special Accounts into shares of Common Stock. Up to an additional 128,880 shares may be issued if certain small shareholders of the Cooperative elect not to receive cash in the Reorganization. SUMMARY FINANCIAL DATA For the periods presented, the Company operated as a cooperative. The following table, which sets forth certain financial information, in summary form, with respect to the Cooperative, including certain assumptions to show the effect on results if the Company had operated as a regular business corporation, is qualified in its entirety by, and should be read in conjunction with, the consolidated financial statements and related notes appearing elsewhere herein. <TABLE> <CAPTION> FISCAL YEAR ENDED JUNE 30, ------------------------------------------------ 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net sales.................... $309,360 $289,125 $239,657 $214,990 $180,316 Operating expenses: Cost of products sold...... 217,809 213,715 152,324 112,622 110,832 Provision for closure of gypsum disposal area (1).................. 6,055 -- -- -- -- Selling, general and administrative............ 47,591 46,230 46,529 47,395 38,536 -------- -------- -------- -------- -------- 271,455 259,945 198,853 160,017 149,368 -------- -------- -------- -------- -------- Operating income............. 37,905 29,180 40,804 54,973 30,948 Other (expense) income: Interest, net.............. (3,991) (3,569) (3,930) (4,307) (4,246) Restructuring (2).......... (1,402) -- -- -- -- Other...................... 421 767 (531) 777 2,062 -------- -------- -------- -------- -------- Margins from continuing operations before income taxes....................... 32,933 26,378 36,343 51,443 28,764 Income tax expense (credit).. 6,021 3,697 4,994 3,406 (294) -------- -------- -------- -------- -------- Margins from continuing operations.................. $ 26,912 $ 22,681 $ 31,349 $ 48,037 $ 29,058 ======== ======== ======== ======== ======== Income from continuing operations assuming conversion from a cooperative to a regular business corporation as of July 1, 1989 (3)............ $ 21,415 $ 17,533 $ 22,821 $ 33,999 $ 20,826 ======== ======== ======== ======== ======== Earnings per share (4)....... $ 1.10 $ 0.92 $ 1.23 $ 1.90 $ 1.18 ======== ======== ======== ======== ======== </TABLE> <TABLE> <CAPTION> FISCAL YEAR ENDED JUNE 30, 1994 ------------- <S> <C> PRO FORMA INCOME STATEMENT DATA: Operating income.................................................. $ 37,905 Interest expense, net (5)......................................... (460) Other income...................................................... 421 -------- Income from continuing operations before income taxes............. 37,866 Income tax expense (6)............................................ 13,056 -------- Income from continuing operations................................. $ 24,810 ======== Earnings per share (7)............................................ $ 1.10 ======== </TABLE> <TABLE> <CAPTION> FISCAL YEAR ENDED JUNE 30, -------------------------- 1994 1993 1992 -------- -------- -------- (IN THOUSANDS) <S> <C> <C> <C> OPERATING DATA: Net sales: Nitrogen........................................ $199,918 $189,127 $176,835 DAP............................................. 83,367 78,906 36,034(8) Potash.......................................... 24,084 20,149 25,482 Other........................................... 1,991 943 1,306 -------- -------- -------- Net sales..................................... $309,360 $289,125 $239,657 ======== ======== ======== <CAPTION> FISCAL YEAR ENDED JUNE 30, -------------------------- 1994 1993 1992 -------- -------- -------- (IN THOUSANDS) <S> <C> <C> <C> Tons sold: Nitrogen........................................ 1,643 1,602 1,544 DAP............................................. 638 692 262(8) Potash.......................................... 330 283 339 </TABLE> <TABLE> <CAPTION> JUNE 30, 1994 ---------------------- ACTUAL PRO FORMA (9) -------- ------------- (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Working capital......................................... $ 34,931 $ 28,695 Total assets............................................ 298,430 298,430 Long-term debt, excluding long-term debt due within one year................................................... 57,217 15,965 Shareholders' equity.................................... 142,956 177,972 </TABLE> - -------- (1) During fiscal 1994, the Company recorded a non-cash charge of approximately $6.1 million relating to the estimated cost of the closure of the gypsum disposal facility located at its Pascagoula facility. This charge relates to the portion of the disposal facility utilized to date and it is estimated that future charges aggregating approximately $3.0 million will be accrued over the six-year estimated remaining life of the disposal facility. (2) Reflects expenses of the Reorganization. (3) For the periods presented, the Company operated as a cooperative and realized deductions for income taxes for amounts paid in cash as patronage refunds to its shareholder-members. If the conversion from a cooperative to a regular business corporation had occurred as of July 1, 1989, income taxes would have been increased by the following approximate amounts: $5.5 million, $5.1 million, $8.5 million, $14.0 million and $8.2 million for fiscal 1994, 1993, 1992, 1991 and 1990, respectively. (4) Earnings per share reflect the Reorganization as if it had occurred July 1, 1989. Weighted average shares outstanding would have been 19,454,354, 19,035,276, 18,521,287, 17,885,416 and 17,723,107 for fiscal 1994, 1993, 1992, 1991 and 1990, respectively. (5) Interest expense, net, reflects a reduction in interest expense of $3.5 million related to the reduction in long-term debt from the net proceeds of the Offering. (6) Reflects taxation as a C corporation as a result of the Reorganization, as well as the reduction in interest expense from the application of the net proceeds from the Offering. (7) Earnings per share is calculated based on the weighted average shares outstanding assuming the Reorganization had occurred prior to the periods presented (see Note 4 above), plus the estimated number of shares to be sold by the Company in the Offering. (8) The Company began production of DAP in December 1991. (9) Reflects the Reorganization and the sale by the Company of 3,200,000 shares of Common Stock in the Offering, assuming a public offering price of $14.50 per share, and the application of the net proceeds thereof. See "The Reorganization," "Use of Proceeds" and "Pro Forma Balance Sheet," including the notes thereto.

parsed_sections/prospectus_summary/1994/CIK0000083394_kerzner_prospectus_summary.txt

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the detailed information and financial statements and related notes appearing elsewhere in this Prospectus. THE REGISTRANTS RII is a holding company which, through its subsidiary, RIH, is principally engaged in the ownership and operation of the Resorts Casino Hotel in Atlantic City, New Jersey. In addition, RII owns land in Atlantic City at various sites, including approximately 10 acres of Boardwalk property that the Company leases to Atlantic City Showboat, Inc. ("ACS") under a 99-year net lease (the "Showboat Lease") and approximately 90 acres which are available for development. RII was incorporated in 1958 and is a Delaware corporation. RIHF was incorporated in Delaware in 1993 for the limited purpose of issuing the Mortgage Notes and the Junior Mortgage Notes, and receiving certain corresponding promissory notes of RIH. RIHF also entered into the Senior Facility. See "Restructuring of Series Notes." RIHF is a wholly owned subsidiary of RII. RIH owns and operates all the property and improvements of the Resorts Casino Hotel. The Resorts Casino Hotel is located on the Boardwalk in Atlantic City, New Jersey, and has approximately 670 guest rooms, a 60,000-square-foot casino and related facilities. RIH was incorporated in 1903 and is a New Jersey corporation. RIH has issued certain promissory notes and guarantees relating to the Mortgage Notes and Junior Mortgage Notes.

parsed_sections/prospectus_summary/1994/CIK0000094610_smurfit_prospectus_summary.txt

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+PROSPECTUS SUMMARY THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH HEREIN UNDER THE CAPTION "RISK FACTORS." CERTAIN CAPITALIZED TERMS USED HEREIN ARE DEFINED ELSEWHERE IN THIS PROSPECTUS. AS USED HEREIN, THE TERM "COMPANY" INCLUDES STONE CONTAINER CORPORATION, ITS SUBSIDIARIES AND ITS AFFILIATES, EXCEPT AS THE CONTEXT OTHERWISE MAY REQUIRE. THE COMPANY The Company is a major international pulp and paper company engaged principally in the production and sale of paper, packaging products, and market pulp. The Company believes that it is the world's largest producer of unbleached containerboard and kraft paper and the world's largest converter of those products into corrugated containers and paper sacks and bags. The Company also believes that it is one of the world's largest paper companies in terms of annual tonnage, having produced approximately 7.5 million total tons of paper and pulp in each of 1993 and 1992. The Company produced approximately 4.9 million and 5.0 million tons of unbleached containerboard and kraft paper in 1993 and 1992, respectively, which accounted for approximately 66% of its total tonnage produced for both 1993 and 1992. The Company had net sales of approximately $5.1 billion and $5.5 billion in 1993 and 1992, respectively. The Company owns or has an interest in 135 manufacturing facilities in the United States, 26 in Canada, 15 in Germany, six in France, two in Belgium and one in each of the United Kingdom and the Netherlands. The facilities include 23 mills. The Company also maintains sales offices in the United States, Canada, the United Kingdom, Germany, Belgium, France, Mexico, China and Japan, has a forestry operation in Costa Rica and has a joint venture relationship in Venezuela. PAPERBOARD AND PAPER PACKAGING The Company believes that its integrated unbleached paperboard and paper packaging system is the largest in the world with 16 mills and 136 converting plants located throughout the United States and Canada and in Europe. The major products in this business are containerboard and corrugated containers, which are primarily sold to a broad range of manufacturers of consumable and durable goods; kraft paper and paper bags and sacks, which are primarily sold to supermarket chains, retailers of consumer products and, in the case of multiwall shipping sacks, to the agricultural, chemical and cement industries; and boxboard and folding cartons, which are sold to manufacturers of consumable goods and other box manufacturers. The unbleached packaging business of the Company has an annual capacity of approximately 5.3 million tons and is more than 80% integrated. In 1993, total sales for the paperboard and paper packaging business of the Company were approximately $3.8 billion, or approximately 75% of total consolidated sales. WHITE PAPER AND PULP The Company believes that, together with its 75% owned consolidated subsidiary, Stone-Consolidated Corporation ("Stone-Consolidated"), it is the largest producer of uncoated groundwood paper in North America and the fourth largest producer of newsprint in North America. Stone-Consolidated, a Canadian corporation, owns all of the Canadian and United Kingdom newsprint and uncoated groundwood paper assets of the Company. Stone-Consolidated owns three newsprint mills (two in Canada and one in the United Kingdom) and two uncoated groundwood paper mills in Canada. The newsprint production of the Company's linerboard and newsprint mill in Snowflake, Arizona is marketed by Stone-Consolidated on a commission basis. The Company and Stone-Consolidated have the capacity to produce 1.4 million tons of newsprint and 500,000 tons of uncoated groundwood paper annually. Newsprint is marketed to newspaper publishers and commercial printers. Uncoated groundwood paper is sold for use primarily in newspaper inserts, retail store advertising fliers, magazines, telephone directories and as computer paper. The Company believes it is a major market producer in the production of market pulp in North America. The Company owns and operates five market pulp mills in North America, including the Castlegar, British Columbia mill in which the Company has a 25% interest (the "Celgar mill"). These mills have the capacity to produce 1.5 million tons of market pulp annually. The geographic diversity of the Company's mills enables the Company to offer its customers a product mix of bleached northern and southern hardwood and bleached northern softwood pulp. Market pulp is sold to manufacturers of paper products, including fine papers, photographic papers, tissue and newsprint. In 1993, total sales for the white paper and pulp business of the Company (which includes Stone-Consolidated sales) were approximately $965 million, or approximately 19% of total consolidated sales. PRODUCT PRICING AND INDUSTRY TRENDS The markets for products sold by the Company are highly competitive and are also sensitive to changes in industry capacity and cyclical changes in the economy, both of which can significantly impact selling prices and thereby the Company's profitability. From 1990 through the third quarter of 1993, the Company experienced substantial declines in the pricing of most of its products. Market conditions have improved since October 1993, which have allowed the Company to increase prices for most of its products. While prices for most of the Company's products are approaching the historical high prices achieved during the peak of the last industry cycle, the Company's production costs (including labor, fiber and energy), as well as its interest expense, have also significantly increased since the last pricing peak in the industry, increasing pressure on the Company's net margins for its products. The Company's containerboard and corrugated container product lines, which represent a substantial portion of the Company's net sales, generally experienced declining product prices from 1990 through the third quarter of 1993. Since October 1, 1993, the Company has increased the price of linerboard in the fourth quarter of 1993 and the first quarter and third quarter of 1994 by $25 per ton, $30 per ton and $40 per ton, respectively. Prices for corrugating medium also increased by $25 per ton, $40 per ton and $50 per ton in the corresponding periods. In addition, in the first half of 1994, the Company implemented corrugated container price increases and began implementing on July 25, 1994, a 9.5% price increase for corrugated containers. Historically, suppliers, including the Company, have taken up to 90 days to pass increased linerboard and corrugating medium prices through to corrugated container customers. The Company converts more than 80% of its linerboard and corrugating medium products into corrugated containers, making the achievement of price increases for corrugated containers essential for the Company to realize substantial financial benefit from linerboard and corrugating medium price increases. On August 5, 1994, the Company announced to its customers an additional price increase of $40 per ton for linerboard and $50 per ton for corrugating medium effective for the fourth quarter of 1994. While there can be no assurance that these price increases will be implemented or that prices will continue to increase or even be maintained at present levels, the Company believes that the supply/ demand characteristics for linerboard, corrugating medium and corrugated containers have improved which could allow for further price increases for these product lines. According to industry publications, immediately preceding the price increase effective October 1, 1993, the reported transaction price for 42 lb. kraft linerboard, the base grade of linerboard, was $300 per ton and as of August 1, 1994, the reported transaction price for this base grade was $385-$395 per ton. According to industry publications, the reported transaction price for corrugating medium immediately preceding October 1, 1993 was $280 per ton and $375-$385 per ton as of August 1, 1994. The Company has also implemented price increases in kraft paper and kraft paper converted products. The Company increased prices for retail bags and sacks by 8% on each of April 1, May 1, and July 1, 1994 and announced and began implementing a further price increase of 10% effective September 1, 1994. In addition, the Company has announced and began implementing on August 1, 1994 a $50 per ton (approximately 8.6%) price increase for kraft paper. Pricing for market pulp has improved substantially in 1994. The Company has increased prices for various grades of market pulp by up to $260 per metric tonne since November 1993. According to industry publications, the reported transaction price for southern bleached hardwood kraft ("SBHK") was $370 per metric tonne as of the third quarter of 1993 and $500-570 per metric tonne as of the second quarter of 1994. On July 1, 1994 the Company implemented a further price increase of $70 per metric tonne (approximately 12.2%). The Company has announced a further price increase of $70 per metric tonne to be implemented in the fourth quarter. After further declines in the first quarter of 1994, pricing for newsprint has also recently improved. The Company increased newsprint prices in the second quarter of 1994 by $48 per metric tonne in the eastern markets of North America and $41 per metric tonne in the western markets of North America and $41 per metric tonne in the eastern markets of North America and $48 per metric tonne in the western markets of North America in the third quarter of 1994. According to industry publications, the reported transaction price for newsprint in the eastern markets of North America was $411 per metric tonne as of March 1, 1993 and $470 per metric tonne as of August 1, 1994. To date, uncoated groundwood papers have not achieved significant price increases. However, a further price increase of approximately $48 per metric tonne has been announced for the fourth quarter of 1994. Although supply/demand balances appear favorable for most of the Company's products, there can be no assurance that announced price increases will be achieved or that prices can be maintained at present levels. The price of recycled fiber, one of the principal raw materials in the manufacture of certain of the Company's products, has increased substantially in 1994. The historically cyclical markets for wood fiber and recycled fiber are highly competitive, and as the demand for the Company's products rises, the demand for and cost of fiber, particularly recycled fiber, may further increase. See "Risk Factors -- Cyclicality and Pricing; Fiber Supply and Pricing." FINANCIAL STRATEGY In 1993, the Company adopted a financial plan designed to increase the Company's liquidity and improve its financial flexibility, by prepaying the near term scheduled amortizations under its bank credit agreements (the "1989 Credit Agreement"). The financial plan was implemented in response to continuing net losses resulting from depressed sales prices for the Company's products and the Company's highly leveraged capital structure and related interest expense associated with indebtedness incurred to finance the acquisition of Consolidated-Bathurst Inc. (a Canadian corporation, renamed Stone Container (Canada) Inc. ("Stone Canada")). In 1993, as part of the financial plan, the Company satisfied its remaining 1993 and 1994 scheduled amortization obligations under the 1989 Credit Agreement and repaid outstanding borrowings (a portion of which could subsequently be reborrowed) under the revolving credit facility portion of the 1989 Credit Agreement with the proceeds from (i) the sale of $400 million aggregate principal amount of additional Company indebtedness, (ii) the public offering in Canada of approximately 25% of the common stock (Cdn. $231 million) of Stone-Consolidated and the contemporaneous sale by Stone-Consolidated of Cdn. $231 million principal amount of convertible subordinated debentures in Canada and $225 million principal amount of senior secured notes in the U.S., and (iii) the sale of approximately $125 million of assets. In February 1994, the Company sold $710 million principal amount of 9 7/8% Senior Notes due 2001 and approximately 19 million shares of its common stock for gross proceeds of approximately $289 million from the sale of such common stock (the "February 1994 Offerings"). The Company used the $962 million of net proceeds from the February 1994 Offerings to (i) prepay scheduled amortizations under the 1989 Credit Agreement for all of 1995 and a portion of 1996 and 1997, (ii) fully redeem the principal amount of the Company's 13 5/8% Subordinated Notes due 1995, and (iii) repay outstanding borrowings under the revolving credit facility portion of the 1989 Credit Agreement, a portion of which remained available for reborrowing thereunder. The Company, as part of its financial plan, is evaluating certain alternatives for the disposition and monetization of its non-core assets including the U.S. wood products business. As an initial step in achieving this objective, the Company on September 27, 1994, announced the closure of three facilities of the wood products business in the Pacific Northwest. The operations of the closed facilities will be consolidated with other wood product operations of the Company in the Northwest, while the Company will dispose of excess assets including inventory as soon as practicable in an orderly liquidation. The impact of such closure and sale of assets on the Company's 3rd Quarter results has not yet been fully determined but is not expected to have a material effect on the Company. The Company is continuing to pursue its financial strategy of increasing the Company's liquidity and improving its financial flexibility. Concurrently with the closing of this Offering, the Company will (i) repay all of the outstanding indebtedness and commitments under and terminate the 1989 Credit Agreement, (ii) enter into the Credit Agreement and (iii) repay the outstanding borrowings under the credit agreement of Stone Savannah River Pulp & Paper Corporation ("Savannah River") and, on or prior to December 30, 1994, redeem the outstanding senior subordinated notes and Series A preferred stock of Savannah River, each of which (other than the redemptions) is conditioned upon the successful completion of the other transactions (collectively, the "Related Transactions"). The Credit Agreement will consist of a $400 million secured term loan and a $450 million secured revolving credit facility. The revolving credit facility borrowing availability will be reduced by any letter of credit commitments, of which approximately $61 million will be outstanding at closing, and approximately $ million which the Company will borrow at closing. Savannah River is currently a 93% owned subsidiary of the Company. On or prior to the closing of the Offering, the Company will (i) repay all of the indebtedness outstanding under and terminate Savannah River's bank credit agreement (the "Savannah River Credit Agreement"), (ii) give notice of redemption to, and deposit the redemption price with, the trustee of the $130 million principal amount of Savannah River's 14 1/8% Senior Subordinated Notes due 2000 (the "Savannah River Notes"), which shall be redeemed on or prior to December 30, 1994, and (iii) purchase the 72,346 outstanding shares of common stock of Savannah River not owned by the Company pursuant to a merger of a wholly owned subsidiary of the Company and Savannah River. On or before December 30, 1994, the Company will also cause the 425,243 outstanding shares of Series A Cumulative Redeemable Exchangeable Preferred Stock of Savannah River (the "Savannah River Preferred") not owned by the Company to be redeemed. The completion of this Offering, together with the Related Transactions, will extend the scheduled amortization obligations and final maturities of more than $1 billion of the Company's indebtedness, improve the Company's liquidity by replacing its current $166 million revolving credit facility commitments with $450 million of revolving credit commitments (of which borrowing availability will be reduced by any letter of credit commitments, of which approximately $61 million will be outstanding at closing, and approximately $ million of borrowings thereunder which will be borrowed at closing) and improve the Company's financial flexibility through entering into the Credit Agreement. The Company will incur a charge for the write-off of previously unamortized debt issuance costs, related to the debt being repaid (approximately $45 million, net of income tax benefit) upon the completion of the Offering and Related Transactions. This non-cash charge will be recorded as an extraordinary loss from the early extinguishment of debt in the Company's Consolidated Statements of Operations and Retained Earnings (Accumulated Deficit). The sources and uses of funds in connection with the Offering and the Related Transactions are estimated to be as follows: <TABLE> <CAPTION> (IN MILLIONS) <S> <C> Sources: $ First Mortgage Notes......................................................... Senior Notes................................................................. Credit Agreement Term Loan.................................................................. Revolving Credit Facility(1)............................................... Other(2)..................................................................... ------------- Total:......................................................................... $ ------------- ------------- Uses: Repayment of 1989 Credit Agreement borrowings................................ $ Repayment of Savannah River Credit Agreement borrowings...................... Redemption of Savannah River Notes........................................... Redemption of Savannah River Preferred....................................... Repurchase of Savannah River Common Stock.................................... General corporate purposes(3)................................................ ------------- Total:......................................................................... $ ------------- ------------- <FN> - ------------------------ (1) Commitment of $450 million (of which borrowing availability will be reduced by any letter of credit commitments, of which approximately $61 million will be outstanding at closing and approximately $ million of borrowings thereunder which will be borrowed at closing). (2) Cash escrow relating to letters of credit released due to the repayment of the 1989 Credit Agreement. (3) Includes payment of fees and expenses relating to the Credit Agreement, which are estimated to total $29 million and expenses relating to the Offering (other than the Underwriters' discount) estimated to total $2 million. </TABLE> THE OFFERING OF NOTES <TABLE> <S> <C> Securities Offered................ $500 million principal amount of % First Mortgage Notes due 2002 (the "First Mortgage Notes"). $200 million principal amount of % Senior Notes due 2004 (the "Senior Notes") (the Senior Notes and the First Mortgage Notes being collectively referred to as the "Notes"). The First Mortgage Notes will be issued pursuant to an indenture dated as of , 1994 (the "First Mortgage Note Indenture") between the Company and Norwest Bank Minnesota, N.A., as trustee (the "First Mortgage Note Trustee"), and the Senior Notes will be issued pursuant to an indenture dated as of , 1994 (the "Senior Note Indenture") between the Company and The Bank of New York, as trustee (the "Senior Note Trustee"). The First Mortgage Note Indenture and the Senior Note Indenture will be substantially identical, except for provisions, including certain covenants, with respect to the Collateral (as defined) securing the First Mortgage Notes, and are collectively referred to herein as the "Indentures." Interest Payment Dates............ Interest on the First Mortgage Notes will be payable semi-annually on and , commencing , 1995. Interest on the Senior Notes will be payable semi-annually on and , commencing , 1995. Optional Redemption............... The First Mortgage Notes are redeemable at the option of the Company, in whole or from time to time in part, on and after , 1999, at the redemption prices set forth herein, together with accrued and unpaid interest. See "Description of Notes -- Optional Redemption." The Senior Notes are redeemable at the option of the Company, in whole or from time to time in part, on and after , 1999, at the redemption prices set forth herein, together with accrued and unpaid interest. See "Description of Notes -- Optional Redemption." Change of Control................. Upon the occurrence of a Change of Control (as defined) the Company is required to offer to repurchase each holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. If such repurchase would constitute an event of default under Specified Bank Debt (as defined), then, prior to making such repurchase offer, the Company is required to (i) repay in full in cash such Specified Bank Debt or (ii) obtain the requisite consent of lenders of such Specified Bank Debt to permit the repurchase of Notes without giving rise to an event of default under such Specified Bank Debt. Such Change of Control provisions in and of themselves may not afford holders of the Notes protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company that may adversely affect such holders if such transaction is not the type </TABLE> <TABLE> <S> <C> of transaction included within the definition of Change of Control. A transaction involving specified Stone family members or their affiliates will result in a Change of Control only if it is the type of transaction specified by such definition. See "Description of Notes -- Change of Control." There can be no assurance that the Company would have sufficient funds to pay the required purchase price for all Notes tendered by the holders thereof in the event of a Change of Control. Neither the Board of Directors of the Company nor the respective trustees under the Indentures relating to the Notes may waive the Change of Control provisions. Ranking........................... The Notes will rank PARI PASSU in right of payment with all existing and future Senior Indebtedness (as defined) of the Company and senior in right of payment and in rights upon liquidation to all existing and future Subordinated Indebtedness (as defined) of the Company. Obligations of the Company's subsidiaries, however, will represent prior claims with respect to the assets and earnings of such subsidiaries. Borrowings under the Credit Agreement will constitute Senior Indebtedness and will be secured by a significant portion of the Company's assets. The First Mortgage Notes will be secured by certain other assets of the Company as described herein. See "Description of Notes -- Ranking." Limitation on Future Liens........ FIRST MORTGAGE NOTES AND SENIOR NOTES. If the Company or any Subsidiary (as defined) shall create or permit the existence of any Lien (as defined) other than Permitted Liens (as defined) upon any of its respective assets as security for (i) any Indebtedness (as defined) or other obligation of the Company that ranks PARI PASSU with the Notes or any Indebtedness or other obligation of a Subsidiary of the Company, the Company will secure or will cause such Subsidiary to guarantee and secure the outstanding Notes equally and ratably with such Indebtedness or other obligation or (ii) any Subordinated Indebtedness (as defined), the Company will secure the outstanding Notes prior to such Subordinated Indebtedness; PROVIDED, HOWEVER, that the foregoing shall not apply to certain specified Liens, including Liens to secure any Indebtedness under the Credit Agreement which Indebtedness will be secured by Liens on a significant portion of the assets of the Company and Liens in favor of the First Mortgage Notes described herein. FIRST MORTGAGE NOTES. Under the terms of the First Mortgage Note Indenture, the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, (i) incur or suffer to exist any Lien upon any of the Collateral other than Permitted Collateral Liens (as defined), (ii) take any action or omit to take any action with respect to the Collateral that might or would have the result of adversely affecting, impairing or failing to maintain without interruption the security interests in the Collateral under the First Mortgage Note Indenture or the Security Documents (as defined), or (iii) grant any interest whatsoever (other than </TABLE> <TABLE> <S> <C> Permitted Collateral Liens) in any of the Collateral to any other Person (other than the Company or the First Mortgage Note Trustee) or suffer to exist any such interest. Limitation on Future Guaranties... The Company will not guarantee the Indebtedness of any Subsidiary and will not permit any Subsidiary or Seminole Kraft Corporation ("Seminole") to guarantee (i) any Indebtedness of the Company that ranks PARI PASSU with the Notes, (ii) any Indebtedness of a Subsidiary of the Company or (iii) any Subordinated Indebtedness; PROVIDED, HOWEVER, that the foregoing shall not apply to certain specified guaranties, including guaranties in a principal amount up to the principal amount outstanding or committed under the 1989 Credit Agreement as of November 1, 1991, plus $250 million, less the proceeds from the sale of Indebtedness under the 1991 Indenture (as defined) issued from time to time that are applied to repay Indebtedness under the Credit Agreements (as defined) as refinanced or extended from time to time (which would include Indebtedness under the new Credit Agreement). For further information on ranking, limitations on Liens and limitations on guaranties, see "Description of Notes -- Certain Covenants -- Limitation on Future Liens and Guaranties." For further information on the collateral securing the borrowings under the Credit Agreement, see "Credit Agreement -- Security." Collateral Asset Disposition...... FIRST MORTGAGE NOTES. Pursuant to the First Mortgage Note Indenture, within 360 days following the consummation of a Collateral Asset Disposition (as defined) or the receipt of proceeds from a Collateral Loss Event (as defined), the Company will apply the net proceeds therefrom (i) to an investment in specified replacement Collateral; (ii) in the case of a Collateral Loss Event, to Restore (as defined) the relevant Collateral and/or (iii) subject to the receipt of certain minimum proceeds, to make an offer to repurchase First Mortgage Notes at 100% of the principal amount thereof plus accrued interest thereon to the date of purchase. See "Description of Notes -- Additional First Mortgage Note Covenants -- Limitation on Collateral As- set Dispositions." Certain Other Covenants........... Each of the Indentures, among other things, (i) proscribes the use of certain proceeds of certain Asset Dispositions (as defined) by the Company or its Restricted Subsidiaries (as defined), (ii) restricts the ability of the Company and its Subsidiaries, subject to certain exceptions, to pay dividends or make distributions with respect to shares of the Company's Capital Stock (as defined) or acquire or retire Capital Stock of the Company, (iii) subject to certain significant exceptions, restricts the ability of the Company and its Restricted Subsidiaries to create, incur or guarantee Indebtedness and (iv) requires the Company to make certain offers to repurchase Debt Securities (as defined) in the event that the Company's Subordinated Capital Base (as defined) is less than a specified level. See "Description of Notes -- Certain Covenants." </TABLE> <TABLE> <S> <C> Use of Proceeds................... The net proceeds of this Offering, together with borrowings under the Credit Agreement, will be used to (i) repay all of the outstanding indebtedness under and terminate the 1989 Credit Agreement, (ii) repay all of the outstanding indebtedness under and terminate the Savannah River Credit Agreement and redeem the Savannah River Notes, (iii) purchase the 72,346 outstanding shares of Savannah River common stock not owned by the Company and (iv) redeem or otherwise acquire the 425,243 outstanding shares of Savannah River Preferred not owned by the Company. See "Use of Proceeds." </TABLE> COLLATERAL FOR THE FIRST MORTGAGE NOTES The First Mortgage Notes will be initially secured by a first ranking lien on four mills owned by the Company described below. <TABLE> <CAPTION> NUMBER OF ANNUAL PRODUCTION PAPER MILL LOCATION CAPACITY IN 1993 MACHINES TYPE OF MILL - ---------------------------------------------------------------- -------- ---------- ------------ (IN THOUSANDS) <S> <C> <C> <C> <C> Missoula, Montana....................................... 702.9 654.3 3 Linerboard Ontonagon, Michigan..................................... 262.8 248.4 2 Medium Uncasville, Connecticut................................. 165.1 158.5 1 Medium York, Pennsylvania...................................... 110.2 110.0 2 Medium </TABLE> See "The Collateral Under the First Mortgage Note Indenture."

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+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCES IN THIS PROSPECTUS TO A PARTICULAR FISCAL YEAR REFER TO THE 12-MONTH PERIOD ENDED ON JUNE 30 IN THAT YEAR. UNLESS THE CONTEXT OTHERWISE INDICATES, ALL REFERENCES TO THE "COMPANY" ARE TO THE CONTINUING OPERATIONS OF WAXMAN INDUSTRIES, INC. AND ITS SUBSIDIARIES AND DIVISIONS AND TO THE BUSINESS CONDUCTED THROUGH SUCH SUBSIDIARIES AND DIVISIONS. THE COMPANY The Company believes it is one of the leading suppliers of plumbing products to the home repair and remodeling market in the United States. The Company conducts its business in the United States primarily through its wholly-owned subsidiaries, Barnett Inc. ("Barnett") and Waxman Consumer Products Group Inc. ("Consumer Products"). The Company distributes plumbing, electrical and hardware products, in both packaged and bulk form, to over 47,000 customers in the United States, including do-it-yourself ("D-I-Y") retailers, mass merchandisers, smaller independent retailers and plumbing and electrical repair and remodeling contractors. The Company's consolidated net sales (excluding sales from discontinued operations) were $215.1 million in fiscal 1994. The Company's domestic business is conducted primarily through Barnett and Consumer Products. Through their nationwide network of warehouses and distribution centers, Barnett and Consumer Products provide their customers with a single source for an extensive line of competitively priced quality products. The Company's strategy of being a low-cost supplier is facilitated by its purchase of a significant portion of its products from low-cost foreign sources. Barnett's marketing strategy is directed predominantly to repair and remodeling contractors and independent retailers, as compared to Consumer Products' strategy of focusing on mass merchandisers and larger D-I-Y retailers. Based on management's experience and knowledge of the industry, the Company believes that Barnett is the only national mail order and telemarketing operation distributing plumbing, electrical and hardware products in the United States. Barnett's marketing strategy is comprised of frequent catalog and promotional mailings, supported by 24-hour telemarketing operations. Barnett has averaged 15% net sales growth per annum during the period from fiscal 1992 to fiscal 1994 through (i) the expansion of its warehouse network to increase its market penetration, (ii) the introduction of new product offerings and (iii) the introduction of an additional catalog targeted at a new customer base. Barnett's net sales were $95.2 million in fiscal 1994. Consumer Products markets and distributes its products to a wide variety of retailers, primarily national and regional warehouse home centers, home improvement centers and mass merchandisers. An integral element of Consumer Products' marketing strategy of serving as a single source supplier is offering mass merchandisers and D-I-Y retailers innovative comprehensive marketing and merchandising programs designed to improve their profitability, efficiently manage shelf space, reduce inventory levels and maximize floor stock turnover. Consumer Products' customers currently include national retailers such as Kmart, Builders Square, Home Depot and Wal-Mart, as well as large regional D-I-Y retailers. According to the most recent rankings of the largest D-I-Y retailers published by National Home Center News, an industry trade publication, Consumer Products' customers include 16 of the 25 largest D-I-Y retailers in the United States. Management believes that Consumer Products is the only supplier to the D-I-Y market that carries a complete line of plumbing, electrical and floor protective hardware products, in both package and bulk form. Consumer Products' net sales were $70.7 million in fiscal 1994 and have remained generally consistent since fiscal 1992. The Company, through its smaller domestic operations, also distributes a full line of security hardware products and copper tubing, brass fittings and other related products. Net sales from these other operations were $47.7 million in fiscal 1994. - 4 - <PAGE> 7 The Company's business strategy is designed to capitalize on the growth prospects for Barnett and Consumer Products. The Company's current strategy includes the following elements: - EXPANSION OF BARNETT. Since its acquisition in 1984, Barnett's revenues and operating income have grown at compound annual rates of 11.7% and 13.2% respectively, as a result of (i) the expansion of its warehouse network, (ii) the introduction of new product offerings and (iii) the introduction in January 1992 of an additional catalog targeted at a new customer base. The Company intends to continue to expand Barnett's national warehouse network and expects to open as many as four new warehouses during each of the next several fiscal years. Barnett expects to fund this expansion using cash flow from operations and/or available borrowings under the Debt Financing. Barnett also intends to continue expanding its product offerings, allowing its customers to utilize its catalogs as a means of one-stop shopping for many of their needs. In an effort to further increase profitability, Barnett is also increasing the number of higher margin product offerings bearing its proprietary trade names and trademarks. - ENHANCE COMPETITIVE POSITION OF CONSUMER PRODUCTS. During the past 24 months, Consumer Products has restructured its sales and marketing functions in order to better serve the needs of its existing and potential customers. Consumer Products restructured its sales department by defining formal regions of the country for which regional sales managers would have responsibility. Prior to the restructuring, sales managers had responsibility for specific customers without regard to location. In addition, as part of the restructuring, in fiscal 1993 a marketing department was established separate and apart from the sales department. The marketing department is staffed with product managers who have the responsibility of identifying new product programs. The restructuring of the sales and marketing departments is complete at this time. Consumer Products' strategy is to achieve consistent growth by expanding its business with existing customers and by developing new products and new customers. In order to increase business with existing customers, Consumer Products is focusing on developing strategic alliances with its customers. Consumer Products seeks to (i) introduce new products within existing categories, as well as new product categories, (ii) improve customer service, (iii) introduce full service marketing programs and (iv) achieve higher profitability for both the retailer and Consumer Products. Management believes that Consumer Products is well positioned to benefit from the trend among many large retailers to consolidate their purchases among fewer vendors. The Reorganization described below was an important element of this strategy because it lowered the Company's cash interest expense, permitting the Company to reinvest a greater portion of its cash flow in its domestic businesses; stabilized the Company's capital structure by, among other things, eliminating the impact of the adverse operating results of the Company's discontinued Canadian operations on the Company's domestic operations; and generally provided the Company with greater operating and financial flexibility. DISCONTINUED OPERATIONS Effective March 31, 1994, the Company adopted a plan to dispose of its Canadian subsidiary, Ideal Plumbing Group, Inc. ("Ideal"). Unlike the Company's United States operations which supply products to customers in the home repair and remodeling market through mass retailers, Ideal primarily served customers in the Canadian new construction market through independent contractors. Accordingly, Ideal is reported as a discontinued operation and the consolidated financial statements and financial information contained herein have been reclassified to report separately Ideal's net assets and results of operations. Prior period consolidated financial statements and financial information have been reclassified to conform to the current period presentation. Ideal determined in April 1994 that, as of March 31, 1994, it was in violation of several financial covenants included in its Canadian bank credit agreements, including those related to the maintenance of a specified working capital ratio, interest coverage ratio and borrowing base formulas. In addition, on April 15, 1994, Ideal failed to make a Cdn. $150,000 payment on the term loan portion of such agreements. - 5 - <PAGE> 8 At the time the plan of disposition was adopted, the Company expected that the disposition would be accomplished through a sale of the business to a group of investors which included members of Ideal's management. Such transaction would have required the consent of the lenders under Ideal's Canadian bank credit agreements as borrowings under such credit agreements were collateralized by all of the assets and capital stock of Ideal. The bank considered the management group's acquisition proposal; however, the proposal was subsequently rejected. On May 5, 1994, without advance notice, the bank filed an involuntary bankruptcy petition against Ideal citing defaults under the bank credit agreements (borrowings under these agreements are non-recourse to Waxman Industries, Inc.). The Company has not contested the bank's efforts to effect the orderly disposition of Ideal. On May 30, 1994, Ideal was declared bankrupt by the Canadian courts and, as a result, the Company's ownership and control of Ideal effectively ceased on such date. Upon the petition of Ideal's Canadian lenders, Coopers & Lybrand Ltd. was appointed as trustee to liquidate the assets of Ideal. As of the date of this Prospectus, the Company has been advised that Ideal is no longer operating and that certain of Ideal's branch operations have been sold but that the trustee has not yet liquidated the remaining inventory, accounts receivable and fixed assets of Ideal. Ideal's defaults under its Canadian bank credit agreements and subsequent bankruptcy do not trigger a "cross-default" under, or result in any violation of the debt covenants contained in, the Company's or its subsidiaries' outstanding debt obligations other than under the Company's $155,000 principal amount outstanding of Convertible Debentures. In addition, neither the Company nor any of its subsidiaries has any liability to creditors of Ideal as a result of Ideal's bankruptcy. The Company's principal executive offices are located at 24460 Aurora Road, Bedford Heights, Ohio 44146, Telephone (216) 439-1830. BACKGROUND OF EXCHANGE OFFER; RECENT SECURITIES OFFERING AND RELATED MATTERS On May 20, 1994, the Company issued Series A 12 3/4% Senior Secured Deferred Coupon Notes Due 2004 having an initial accreted value of $50,000,000 (the "Notes") together with the Warrants to purchase 2,950,000 shares of Common Stock in exchange for $50,000,000 aggregate principal amount of the Company's outstanding 13 3/4% Senior Subordinated Notes due June 1, 1999 (the "Senior Subordinated Notes") pursuant to a private exchange offer (the "Private Exchange Offer") which was a part of a series of interrelated transactions (the "Reorganization"). In addition to the Private Exchange Offer, the components of the Reorganization included (i) the solicitation of the consents of the holders of the Company's Senior Subordinated Notes to certain waivers of and the adoption of certain amendments to the indenture governing the Senior Subordinated Notes (the "Senior Subordinated Consent Solicitation"), (ii) the establishment of a $55 million revolving credit facility (the "Domestic Credit Facility") and a $15 million term loan (the "Domestic Term Loan"; and together with the Domestic Credit Facility, the "Debt Financing"), (iii) the solicitation of the consents of the holders of the Company's 12.25% Fixed Rate Senior Secured Notes due September 1, 1998 and Floating Rate Senior Secured Notes due September 1, 1998 (together, the "Senior Secured Notes") to certain waivers of and the adoption of certain amendments to the indenture governing the Senior Secured Notes (the "12 1/4% Consent Solicitation") and (iv) the repayment of the borrowings under the Company's then existing domestic revolving credit facilities (including $27.6 under the Company's then existing working capital credit facility and $1.2 million under the $5.0 million revolving credit facility of Barnett (the "Barnett Financing")). See "Recent Securities Offering and Related Matters -- The Reorganization." In connection with the Reorganization, the Company restructured (the "Corporate Restructuring") its domestic operations such that after giving effect thereto the Company became a holding company whose only material assets are the capital stock of its subsidiaries. As part of the Corporate Restructuring, the Company formed (a) Waxman USA Inc. ("Waxman USA"), as a holding company for the subsidiaries that comprise and support the Company's domestic operations, (b) Waxman Consumer Products Group Inc., a wholly owned subsidiary of Waxman USA, to own and operate Waxman Industries' Consumer Products Group Division (the "Consumer Products Division"; all references herein to "Consumer Products" shall include the Consumer Products Division and Waxman Consumer Products Group Inc., unless the context otherwise requires), and (c) WOC Inc. ("WOC"), a wholly owned - 6 - <PAGE> 9 subsidiary of Waxman USA, to own and operate Waxman USA's domestic subsidiaries, other than Barnett and Consumer Products. On May 20, 1994, the Company effected the Corporate Restructuring by (i) contributing the capital stock of Barnett to Waxman USA, (ii) contributing the assets and liabilities of the Consumer Products Division to Consumer Products, (iii) contributing the assets and liabilities of its Madison Equipment Division to WOC, (iv) contributing the assets and liabilities of its Medal Distributing Division to WOC, (v) merging U.S. Lock Corporation ("U.S. Lock") and LeRan Copper & Brass, Inc. ("LeRan"), each a wholly owned subsidiary of the Company, into WOC, (vi) contributing the capital stock of TWI, International, Inc. ("TWI") to Waxman USA and (vii) contributing the capital stock of Western American Manufacturing, Inc. ("WAMI") to TWI. As a result of the Corporate Restructuring, the corporate structure of the Company and its subsidiaries is as follows: ----------------------- WAXMAN INDUSTRIES, INC. ----------------------- | ---------------------------------------------------------- | | --------------- ---------------------------- WAXMAN USA INC. IDEAL HOLDING GROUP, INC.(1) --------------- ---------------------------- | | --------------------------------------------------- | | | | | | - ------- --------- -------- ------------------ ----------- WAXMAN BARNETT, CONSUMER WOC INC. TWI, INTERNATIONAL IDEAL INC. PRODUCTS INC. PLUMBING GROUP INC. GROUP,INC(1) - ------- --------- -------- ------------------ ------------ | ---------------------------------------------------------- | | - ----------------- ------------------- TWI INTERNATIONAL WESTERN AMERICAN TAIWAN, INC. MANUFACTURING, INC. - ----------------- ------------------- | | - ----------------- ------------------- CWI INTERNATIONAL COHART DE CHINA, LTD. MEXICO SA DE CV - ----------------- ------------------- - ---------------------- Each subsidiary depicted above is a wholly owned subsidiary, except for TWI International Taiwan, Inc. and Cohart de Mexico SA de CV, which are 99% owned. (1) Ideal Holding Group, Inc.'s sole asset, Ideal Plumbing Group, Inc., is currently being liquidated pursuant to Canadian bankruptcy laws. The Warrants were issued pursuant to exemptions from, or transactions not subject to, the registration requirements of the Act and applicable state securities laws. The Company structured the offering of the Warrants and Notes as a private placement in order to consummate such offering on a more expeditious basis than would have been possible had the offering and sale been registered under the Act. The original purchasers of the Warrants, as a condition to their purchase of the Warrants and Notes, required the Company to enter into the Equity Registration Rights Agreement pursuant to which the Company agreed, among other things, to file promptly a registration statement - 7 - <PAGE> 10 under the Act to permit such original purchasers to offer and sell under the Act the Warrants and shares of Common Stock issuable upon exercise of the Warrants. The Company has prepared and filed the Registration Statement of which this Prospectus forms a part with the Commission pursuant to the Equity Registration Rights Agreement. The original purchasers of the Notes, as a condition to their purchase of the Notes and Warrants, also required the Company to enter into a registration rights agreement pursuant to which the Company agreed, among other things, to promptly commence the Exchange Offer (as defined herein) following the offering of the Notes. The Company has prepared and filed a Registration Statement with the Commission pursuant to such registration rights agreement. See "Recent Securities Offering and Related Matters -- Registration Rights Agreements." See "Selling Security Holders" and "Recent Securities Offering and Related Matters" for a discussion of the offering of the Warrants, the agreements referred to above and additional related agreements. See "Description of the Warrants" for a discussion of the terms of the Warrants. THE OFFERING <TABLE> <S> <C> Securities Offered . . . . . . . . . . . . . . . . . . 2,950,000 Warrants to purchase shares of Common Stock. In addition, this Prospectus relates to the 2,950,000 shares of Common Stock issuable upon exercise of the Warrants, subject to adjustment in the event of any recapitalization, reclassification, stock dividend, stock split, reverse stock split, stock issuance below fair market value or other similar transaction. Warrants Underlying Common Stock . . . . . . . . . . . Each Warrant is exercisable to purchase one share of Common Stock subject to adjustment under certain circumstances. See "Description of Warrants." Exercise Price . . . . . . . . . . . . . . . . $2.45 per share, subject to adjustment in certain circumstances. See "Description of Warrants." Exercise Period . . . . . . . . . . . . . . . The Warrants are currently exercisable. See "Description of Warrants." Expiration Date . . . . . . . . . . . . . . . The Warrants expire at 5:00 p.m. New York City time on June 1, 2004. Warrant Agent . . . . . . . . . . . . . . . . The Huntington National Bank is serving as Warrant Agent under the Warrant Agreement. Common Stock Number of Shares . . . . . . . . . . . . . . . 2,950,000 shares, subject to adjustment in certain circumstances, of Common Stock issuable upon the exercise of the Warrants. </TABLE> - 8 - <PAGE> 11 <TABLE> <S> <C> Common Stock Outstanding . . . . . . . . . . . 9,491,457 shares as of September 12, 1994. NYSE symbol for the Common Stock . . . . . . . . . . . . . . . WAX Proceeds of the Offering . . . . . . . . . . . . . . . All of the proceeds from the sale of Securities offered hereby will be received by the Selling Security Holders. The Company will not receive any of the proceeds from this offering. If all of the 2,950,000 Warrants offered hereby are exercised at the initial exercise price of $2.45 per share, the Company would receive $7,227,500, which would be added to the Company's working capital and used for general corporate purposes. </TABLE> For more complete information regarding the Warrants, see "Description of Warrants."

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the detailed information and consolidated financial statements contained elsewhere in this Prospectus. The Company operates on a 52-53 week fiscal year ending on the Sunday closest to December 31 each year. The Company's fiscal years ended January 3, 1993, December 29, 1991 and December 30, 1990 are sometimes hereinafter referred to as "fiscal 1992," "fiscal 1991" and "fiscal 1990," respectively. The Company's fiscal year ending January 2, 1994 is sometimes hereinafter referred to as "fiscal 1993." THE COMPANY The Company is a nation-wide specialty retailer of floor covering products, principally serving the do-it-yourself, buy- it-yourself residential remodeling market and, to a lesser extent, the small contractor or commercial customer. Management believes that the Company is the largest specialty retailer of floor-covering products in the United States based on sales. At October 3, 1993, Color Tile sold its line of products through 794 domestic company-owned or franchised retail stores (collectively, the "Color Tile Stores"). The Company offers a broad selection of quality floor covering, wall covering and related products and accessories accompanied by a high level of customer service and support at prices competitive with other floor and wall covering retailers. The Company's product lines include glazed ceramic tile for floor and wall covering, resilient flooring (consisting of vinyl tile and sheet vinyl), carpeting, hardwood flooring (consisting of strip and plank flooring and parquet tile), window treatments and wall coverings. The Company also sells a full line of installation and maintenance materials (including adhesives, grouts, caulks, waxes, polishes and sealers) and tools for use in installing or maintaining the Company's principal products, and arranges professional installation for its products through local independent contractors. Net sales for the Company were $580.4 million for the fiscal year ended January 3, 1993 and $401.6 million for the nine months ended October 3, 1993. Management believes that the Company's most important competitive advantages are its national store network, nationally recognized "Color Tile" and "ColorCarpet" trademarks, strong vendor relationships and significant operating leverage resulting from the Company's reduction in operating and administrative costs as a percentage of net sales over the past two years. The Company's strategy is to increase sales by expanding its product offerings, opening new Color Tile Stores and adding new channels of distribution, including direct- response retailing. The Company has expanded its special-order programs in order to offer the consumer a wider selection of products in each of the principal product categories sold in its stores. The special-order programs generally do not require significant additional investment in inventory. Management believes that retail sales of floor-covering products in the United States during 1992 totaled approximately $10 billion. Sales of carpeting and hard-surface flooring products were approximately $7.5 billion and $2.5 billion, respectively, during that period. Since its founding in 1953, the Company has sold a broad selection of hard-surface flooring products. Ceramic tile, the Company's highest-margin floor- covering product line, is offered in a variety of sizes, colors, textures and finishes. Resilient flooring, including sheet vinyl and vinyl tile, represents the Company's other principal hard-surface floor-covering product line. Vinyl tile, the traditional "do it yourself" floor covering product, typically costs less per square foot and is easier to install than other types and styles of floor covering. In addition, the Company also sells a broad selection of wood-flooring products. The Company sells its hard-surface flooring products primarily from in-stock supplies, supplemented by special-order programs. Total Company sales of hard-surface flooring products in 1992 were approximately $300 million. The Company began exploring the possibility of marketing carpet on a nationwide basis in 1987. In 1989, the Company introduced a full line of carpeting on a nation-wide basis using the trade name "ColorCarpet" as an addition to its traditional hard-surface flooring product line. The two principal features of the Company's carpet program are the marketing of carpet by color, rather than by style, and marketing on a cut-to-order basis, rather than from in-stock inventory. Domestic carpet sales and related installation revenues have grown to approximately $115 million in 1992, representing approximately 22% of total domestic retail sales. In response to successful introduction of carpeting, the Company has developed additional retail formats to increase further its penetration of the carpeting segment of the floor covering market. In 1992, the Company began developing two new retailing formats: Floors A Plenty and ColorCarpet. Floors A Plenty is a free-standing "super-store" that targets customers who tend to be more value-conscious than Color Tile's existing customers and who perceive the super-store format as offering increased value. This format also targets small contractors and other commercial customers. To capitalize on the success of the ColorCarpet trade name, the Company also developed a format of smaller, principally franchised specialty carpet stores operating under the "ColorCarpet" name. The Company has recently acquired the assets of American Blind Factory, Inc. ("ABF") and assumed certain liabilities in connection therewith with a portion of the net proceeds of a public offering of $200 million of the Company's Senior Notes due 2001 (the "Senior Notes") completed on December 17, 1993. ABF is a direct-response marketing company engaged in the sale, on a special-order basis, of name-brand and private-label window treatments (blinds and similar products), and wall coverings at significant discounts from average retail prices. ABF is a leader in the rapidly growing direct-response distribution channel of window treatments and wall coverings. Management believes that the acquisition of the assets of ABF (the "ABF Assets") will afford the Company an opportunity to realize certain synergies between ABF and Color Tile, including the possibility of selling Color Tile's floor covering products to the ABF customer base. The Company's research has shown that one-third of purchasers of wall-covering or window-treatment products are likely to purchase floor-covering products within six months. In addition, the Company believes that the acquisition of the ABF Assets will enable Color Tile to enjoy certain economies of scale in purchasing window treatments and wall coverings. Net sales for ABF have grown from approximately $5.9 million for the twelve months ended December 31, 1988 to approximately $12.6 million for the twelve months ended December 31, 1989 (representing an annual growth rate of 113.6%), approximately $24.7 million for the fiscal year ended December 31, 1990 (representing an annual growth rate of 96.0%), approximately $44.3 million for the fiscal year ended December 31, 1991 (representing an annual growth rate of 79.4%) and approximately $64.1 million for the fiscal year ended December 31, 1992 (representing an annual growth rate of 44.7%). Over the past four years, net sales have grown at a compound annual growth rate of 82% (i.e., representing the percentage change in net sales of ABF compounded each year). Net sales for ABF were approximately $46.6 million for the nine months ended September 30, 1992 and approximately $61.8 million for the nine months ended September 30, 1993, representing an increase of 32.6%. Over the past five years, earnings before interest, taxes, depreciation and amortization of ABF, adjusted for compensation paid to certain members of management, grew to approximately $7.2 million for the fiscal year ended December 31, 1992, or 11.2% of net sales. Earnings before interest, taxes, depreciation and amortization of ABF (calculated on the same basis) were approximately $4.7 million for the nine months ended September 30, 1992, or 10.1% of net sales, and approximately $6.3 million for the nine months ended September 30, 1993, or 10.2% of net sales. While management believes that sales generated by the ABF Assets will continue to grow in the future, no assurance can be given that such growth will continue or that any future growth will occur at rates comparable to those experienced over the past four years. Management believes that the Company is well positioned to take advantage of a recovery in the residential remodeling market. Over the past two years, the Company has substantially reduced its operating costs as a percentage of sales, which has resulted in increased operating leverage. Management believes that the Company's operating leverage has helped enable the Company to withstand the current difficult economic environment and should enhance the Company's operating results in the event of an increase in the Company's sales. In addition, management believes that the Company's operating leverage has enabled it to expand its channels of distribution by implementing the ColorCarpet and Floors A Plenty formats and acquire the ABF Assets with only a modest increase in the Company's general and administrative expenses. Recently, the Company's operating results have been adversely affected by the difficult retail environment. For fiscal 1992, the Company experienced a pre-tax loss of approximately $20.2 million (after certain special charges of $30.0 million and the gain of approximately $4.0 million on the sale of the Company's wood-flooring manufacturing plant (the "Wood Plant")). If the special charges and the gain on the sale of the Wood Plant recorded in fiscal 1992 were excluded, pre-tax income would have been approximately $5.8 million. For fiscal 1991, the Company's pre-tax loss was approximately $30.6 million. The improvement in fiscal 1992 as compared to fiscal 1991 was primarily the result of a reduction in interest expense and an improvement in operating results. For the nine months ended October 3, 1993, pre-tax loss was approximately $1.3 million (after a loss of $9.5 million relating to the disposal of Color Tile's Canadian operations) compared to pre-tax income of approximately $7.0 million (after a gain of approximately $4.0 million on the sale of the Company's Wood Plant) for the nine months ended September 27, 1992. Excluding the loss on disposal of a line of business in 1993 and the gain on the sale of assets in 1992, pre-tax income would have been approximately $8.2 million for the nine months ended October 3, 1993 and approximately $3.0 million for the nine months ended September 27, 1992. See "Management's Discussion and Analysis of Results of Operations and Financial Condition." Of the 794 domestic Color Tile Stores, 785 are operated under the name "Color Tile" (77 of which are owned and operated by franchisees), one is operated under the name "Floors A Plenty," two are operated under the name "ColorCarpet" and six are operated under the name "Peerless." The Color Tile Stores operated by the Company are referred to collectively herein as "Company Stores." The Color Tile Stores operated by franchisees are referred to collectively herein as "Franchised Stores." In addition, the Company currently operates 37 stores in Canada under the name "Factory Carpet" (eight of which are owned and operated by franchisees). The Company was acquired in December 1989 (the "1989 Merger") by Color Tile Holdings, Inc., a Delaware corporation ("CT Holdings"). CT Holdings was formed to acquire the Company by affiliates of INVESTCORP S.A., a company organized under the laws of Luxembourg ("Investcorp"), other international investors and members of the Company's management. The Company's principal executive offices are located at 515 Houston Street, Fort Worth, Texas 76102 and its telephone number at that location is (817) 870-9400. Nine Months Ended(b) -------------------------------- Pro Forma 9/27/92 10/3/93 10/3/93 -------- -------- -------- Result of Operations: Net sales .............................. $436,829 $401,563 $463,328 Operating income before depreciation and amortization and special charges ................... 44,461 40,673 46,975 Depreciation and amortization .......... 20,758 18,034 20,112 Special charges(c) ..................... -- -- -- Gain (loss) on disposal of a line of business(d), (e) ................... 4,007 (9,500) (9,500) Interest expense, net ................. 20,666 14,413 24,787 Income (loss) before income taxes, extraordinary items and cumulative effect of changes in accounting methods(f), (g) ...................... 7,044 (1,274) (7,424) Net income (loss) ..................... 5,434 (1,898) (7,771) Preferred dividends ................... (3,162) (9,162) (9,162) Net income (loss) applicable to common stockholders .................. 2,272 (11,060) (16,933) Selected Data: EBITDA(h) ............................. $ 44,461 $ 40,673 $ 46,975 EBITDA as a percent of sales .......... 10.2% 10.1% 10.1% Cash preferred stock dividends ........ $ 894 $ 5,630 $ 5,630 Capital expenditures .................. $ 10,578 $ 9,357 $ 9,608 Ratio of EBITDA to interest expense, net .......................... 2.2x 2.8x 1.9x Ratio of EBITDA to interest expense, net and cash dividends ....... 2.1x 2.0x 1.5x Ratio of earnings to fixed charges ..... 1.27x (i) (i) Ratio of earnings to fixed charges and preferred stock dividends ............. 1.14x (j) (j) Same store sales- % change ............. 6.7% (6.2%) (6.2%) Number of Color Tile Stores ............ 799 794 794 Balance Sheet Data (at period end): Current assets ......................... $ 96,067 $ 99,725 $101,179 Current liabilities .................... 90,461 98,630 105,252 Total assets ........................... 499,684 453,936 554,193 Long-term debt, net of current portion ............................... 231,364 225,624 324,682 Redeemable preferred stock ............. 80,631 86,008 85,758 Common stockholder's equity ............ 80,071 37,729 32,556 NOTES TO SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA (a) The year end of both the Predecessor Company and the Company is the Sunday closest to December 31. (b) The results for interim periods may not be indicative of results for the full year. Net sales for the nine months ended October 3, 1993 have been reduced to eliminate retail sales of $18,343 generated by the Canadian retail operations, which the Company elected to dispose of effective for the quarter ended October 3, 1993. Net sales for the nine months ended September 27, 1992 include retail sales of the Canadian operations, which were $22,287 during this period. (c) The special charges for the year ended January 3, 1993 relate to a provision for restructuring, store closures and conversion of certain Company Stores to Franchised Stores and the write-down of certain property, plant and equipment and intangible assets (see Note 11 of the Notes to Consolidated Financial Statements). (d) The gain on disposal of a line of business for the year ended January 1, 1989 relates to the sale of the Company's wholly-owned Canadian subsidiary, Color Your World, Inc. on December 30, 1988. Effective for the quarter ended October 3, 1993, the Company elected to dispose of its Canadian retail operations resulting in a $9,500 charge based on expected losses from those operations prior to disposal and the estimated loss on disposal of the related assets and the business (see Note 5 of the Notes to Condensed Consolidated Financial Statements). (e) The gain on disposal of a line of business for the year ended January 3, 1993 relates to the sale of the Wood Plant located in Melbourne, Arkansas (see Note 12 of the Notes to Consolidated Financial Statements). (f) The extraordinary items for the years ended December 29, 1991 and January 3, 1993 relate to the gains (losses) on the early extinguishment of certain long-term debt (see Note 6 of the Notes to Consolidated Financial Statements). (g) The cumulative effect of changes in accounting methods for the year ended December 31, 1989 relates to the Company's change in method of accounting for layaways and deposits. The Company also changed its method for accounting for deferred income taxes to conform to new interpretations of Statement of Financial Accounting Standards No. 96 related to the deferred income tax effects of amortization of certain intangibles (see (Note (e) of the Notes to Selected Consolidated Financial Information). (h) EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service and incur debt. EBITDA has been calculated pursuant to the terms of the Indenture pursuant to which the Senior Notes were issued, except that special charges have been added back. EBITDA does not represent net income or cash flows from operations as those terms are defined by generally accepted accounting principles and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. EBITDA is calculated as follows: <TABLE> <CAPTION> Fiscal Year Ended(a) Nine Months Ended(b) -------------------------------------------------------- ---------------------------- Predecessor Pro Pro Company Forma Forma ----------------- 1/1/89 12/31/89 12/30/90 12/29/91 1/3/93 1/3/93 9/27/92 10/3/93 10/3/93 ------- -------- -------- -------- ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Operating Income . . . . $15,083 $12,720 $28,296 $21,359 $ 1,538 $ 6,042 $23,703 $22,639 $26,863 Depreciation and amortization. 25,550 23,133 27,781 29,202 28,683 31,427 20,758 18,034 20,112 Special charges . . . . . - - - - 30,000 30,000 - - - ------- ------- ------- ------- ------- ------- ------- ------- ------- EBITDA $40,633 $35,853 $56,077 $50,561 $60,221 $67,469 $44,461 $40,673 $46,975 ======= ======= ======= ======= ======= ======= ======= ======= ======= </TABLE> (i) For purposes of the ratio of earnings to fixed charges, (i) earnings include earnings before income taxes and fixed charges (excluding capitalized interest) and (ii) fixed charges consist of interest (including capitalized interest) on all indebtedness, amortization of deferred financing costs and that portion of rental expense that the Company believes to be representative of interest. The Company's earnings were insufficient to cover fixed charges by $24,489, $21,804, $30,627 and $20,152 for the years ended December 31, 1989, December 30, 1990, December 29, 1991, January 3, 1993 and $1,274 for the nine months ended October 3, 1993, respectively and $28,717 and $7,424 for the pro forma year ended January 3, 1993 and for the pro forma nine months ended October 3, 1993, respectively. The ratio of earnings to fixed charges before the 1992 special charges of $30,000 was 1.29x for the fiscal year ended January 3, 1993. The ratio of earnings to fixed charges before the 1993 loss on the disposition of Canadian operations of $9,500 was 1.36x for the nine months ended October 3, 1993. When adjusted to eliminate non-cash charges (depreciation and amortization expense), the deficiency of earnings to cover fixed charges would have been $1,356 and $1,425 for the years ended December 31, 1989 and December 31, 1991, respectively, and earnings would have exceeded fixed charges by $28,063, $5,977, $8,531 and $2,710 for the years ended January 1, 1989, December 30, 1990, January 3, 1993, and for the pro forma year ended January 3, 1993 and $27,802, $16,760 and $12,688, respectively, for the nine months ended September 27, 1992, October 3, 1993 and the pro forma nine months ended October 3, 1993, respectively. (j) Ratio of earnings to fixed charges and preferred dividends: For purposes of the ratio of earnings to fixed charges and preferred stock dividends, (i) earnings include earnings before income taxes and fixed charges (excluding capitalized interest), (ii) fixed charges consist of interest (including capitalized interest) on all indebtedness, amortization of deferred financing costs and that portion of rental expense that the Company believes to be representative of interest and (iii) preferred stock dividends includes all dividends whether payable in cash or in kind adjusted to an amount representing the pre-tax earnings which would be required to cover stock dividends. The Company's earnings were insufficient to cover fixed charges and preferred stock dividends by $2,387, $29,389, $24,704, $33,527, $25,849 and $34,414 for the years ended January 1, 1989, December 31, 1989, December 30, 1990, December 29, 1991, January 3, 1993 and the pro forma year ended January 3, 1993 and $9,079 and $15,229 for the nine months ended October 3, 1993 and the pro forma nine months ended October 3, 1993, respectively. The ratio of earnings to fixed charges and preferred dividends before the 1992 special charges of $30,000 was 1.11x for the fiscal year ended January 3, 1993. When adjusted to eliminate non-cash charges (depreciation and amortization expense) and non-cash preferred stock dividends, the deficiency of earnings to cover fixed charges and preferred stock dividends would have been $4,256, $1,425 and $87 for the years ended December 31, 1989, December 29, 1991, and the pro forma year ended January 3, 1993, respectively, and earnings would have exceeded fixed charges and preferred stock dividends by $25,163, $5,977, $5,734, $26,908 and $11,130 for the years ended January 1, 1989, December 30, 1990 and January 3, 1993 and the nine months ended September 27, 1992 and October 3, 1993 and $7,058 for the pro forma nine month period ended October 3, 1993, respectively. THE SERIES A SHARES TITLE AND AMOUNT 2,200,000 shares of Series A Senior OF SECURITIES: Increasing Rate Preferred Stock, $1.00 par value per share, $25.00 liquidation preference per share. DIVIDENDS: The Series A Holders as of each applicable dividend record date are entitled to receive cash dividends quarterly in arrears on each January 15, April 15, July 15 and October 15, in an amount equal to the then-prevailing dividend rate. When and as declared by the Company's Board of Directors, dividends are paid out of funds legally available therefor subject to the satisfaction of certain covenants restricting the Company's ability to pay dividends thereon contained in the Senior Credit Agreement and the Indenture pursuant to which the Senior Notes were issued (the "Indenture"). See "Capital Structure -- Credit Facilities -- Senior Credit Agreement" and "-- Senior Notes." The Company also will be prevented from paying cash dividends on the Series A Shares from and after January 15, 1995 unless on, or before that date, it shall have issued certain pay-in-kind dividends accrued on the Company's outstanding Senior Cumulative Preferred Stock, par value $1.00 per share (the "Redeemable Senior Preferred Stock"), and thereafter pays cash dividends on such shares in subsequent quarters. See "Capital Structure -- Redeemable Senior Preferred Stock." After January 15, 1995, if all cumulative dividends are not paid in full upon the Redeemable Senior Preferred Stock, the Company may only declare dividends on the Series A Shares, the Redeemable Senior Preferred Stock and any other stock ranking in parity with the Redeemable Senior Preferred Stock and the Series A Shares as to dividends on a pro rata basis. The current quarterly dividend, which will apply to the quarters commencing on January 15, 1994 and April 15, 1994, will be equal to $.90625 per Series A Share. The quarterly dividend payable thereafter will increase by $.03125 per Series A Share over the previously prevailing quarterly dividend on each July 15 and January 15 commencing July 15, 1994 up to a maximum quarterly dividend of $1.0625 per Series A Share, provided that any quarterly dividends payable in excess of $.9375 per Series A Share may, at the option of the Company, be paid to Series A Holders in whole or in part by the issuance of additional Series A Shares at the rate of one additional Series A Share for each $25.00 of such dividends not paid in cash. Each quarterly dividend will be fully cumulative and will accrue (whether or not declared) without accruing interest or additional dividends. An amount equal to any accrued but unpaid dividends must be paid upon (i) the mandatory or optional redemption of the Series A Shares or (ii) any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. In the event that retained earnings or other surplus capital of the Company is insufficient for the payment of the entire amount of dividends payable in any quarterly dividend period with respect to the Redeemable Senior Preferred Stock, the Series A Shares and any other preferred stock ranking in parity as to dividends with the Series A Shares, or the Company is otherwise restricted from paying such dividend, the amount of any available surplus will be allocated for the payment of dividends with respect to the Series A Shares, the Redeemable Senior Preferred Stock and any other preferred stock ranking in parity with the Series A Shares as to dividends pro rata based upon the accrued cash dividends per share payable on the Series A Shares, the Redeemable Senior Preferred Stock and any other preferred stock ranking in parity with the Series A Shares as to dividends. However, the Company may pay dividends in the form of additional shares of the same series or class of stock on which dividends are declared; provided that such dividends are not included in any calculation of accrued or pro rata dividends. VOTING RIGHTS: Except to the extent otherwise required by the Delaware General Corporation Law ("DGCL"), Series A Holders will not have voting rights except in the event that (i) all or any portion of the dividends payable on the Series A Shares shall have been in arrears and unpaid in each quarter during any six consecutive quarterly periods or (ii) the Company fails to meet its mandatory redemption obligations described herein to redeem the Series A Shares on January 15, 2003. In either event, Series A Holders will thereafter have the right to elect two additional directors to the Company's Board of Directors and will retain such right until all accrued but unpaid dividends on the Series A Shares shall have been paid in full or until the Series A Shares are redeemed in full. LIQUIDATION PREFERENCE: In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, the Series A Holders will be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount in cash equal to $25.00 for each Series A Share outstanding, plus an amount in cash equal to all accrued and unpaid dividends thereon to the date fixed for liquidation, dissolution or winding up, before any payment may be made or any assets distributed to the holders of the Company's equity securities ranking junior to the Series A Shares, including the Company's common stock, with respect to dividend rights or rights upon liquidation, winding up or dissolution (collectively, the "Junior Securities"). If the assets of the Company are insufficient to pay in full the liquidation payments payable to the holders of the Series A Shares, the Redeemable Senior Preferred Stock and any other preferred stock in parity with the Series A Shares as to liquidation, dissolution and winding up, the holders of all such shares will share ratably in the distribution of assets in proportion to the amount that would have been payable to such holders if sufficient funds were available. OPTIONAL REDEMPTION: The Series A Shares may be redeemed at any time at the option of the Company in whole or in part, on a pro rata basis, out of funds legally available therefor under the DGCL, at the following price per Series A Share for each designated period, plus in each case any accrued and unpaid dividends to the redemption date: Period Price ------ ----- July 15, 1993 - July 14, 1994 25.50 July 15, 1994 - July 14, 1995 25.75 July 15, 1995 - July 14, 1996 26.00 July 15, 1996 - July 14, 1997 25.75 July 15, 1997 - July 14, 1998 25.50 July 15, 1998 and thereafter 25.00 provided, that, the Company makes provision to redeem, on a pro rata basis, any Redeemable Senior Preferred Stock or any other preferred stock ranking in parity as to liquidation with the Series A Shares based upon the aggregate liquidation preferences of such shares outstanding. Under certain circumstances, the Indenture restricts the Company's ability to redeem the Series A Shares. See "Description of the Securities." MANDATORY To the extent not earlier redeemed and REDEMPTION: provided that the Company is not in default with respect to dividends payable on, or any obligation to redeem or repurchase, shares of Redeemable Senior Preferred Stock, the Company will be obligated to redeem, out of funds legally available therefor under the DGCL all Series A Shares then outstanding on January 15, 2003, at $25.00 per Series A Share, plus accrued and unpaid dividends through the redemption date. RANKING: The Series A Shares will, with respect to dividend rights and rights of liquidation, winding up and dissolution, rank senior to all Junior Securities, in parity with the Redeemable Senior Preferred Stock, and in parity with any other senior preferred stock of the Company having a maturity date on or after the maturity date of the Series A Shares, the proceeds of which are used to refinance in whole or in part the Redeemable Senior Preferred Stock, but only to the extent of the Redeemable Senior Preferred Stock refinanced plus the fees and expenses of such refinancing. MARKET FOR THE Prior to the registration of the Series A SERIES A SHARES: Shares under the Securities Act, such Shares were eligible to trade in the PORTAL Market, subject to the rules and regulations governing such market. However, upon the registration of the Series A Shares under the Securities Act, the Series A Shares were no longer qualified to trade on the PORTAL Market. Other than the PORTAL Market, there has been no active trading market for any of the Company's capital stock, including the Series A Shares. The Series A Shares will not be qualified for listing on any exchange or authorized to be quoted on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"). There can be no assurance that an active trading market will develop for the Series A Shares nor is it expected that such an active trading market will develop. OTHER RIGHTS AND Pursuant to the Securities Purchase RESTRICTIONS: Agreement, dated August 13, 1992 (the "Purchase Agreement"), pursuant to which the Series A Shares were issued, the Company has agreed to repurchase the Series A Shares at a purchase price of $25.25 per share plus all accrued and unpaid dividends at the option of the holders thereof, upon the occurrence of a "Change of Control", as defined in the Purchase Agreement. See "Description of the Securities -- Series A Shares." The Purchase Agreement also obligates the Company to repurchase the Series A Shares, the Redeemable Senior Preferred Stock and any other preferred stock ranking in parity with the Series A Shares as to liquidation, with the net proceeds of any future public offering of common stock of the Company. If the net proceeds of a public offering are insufficient to permit the Company to repurchase all of the Series A Shares, the Redeemable Senior Preferred Stock and any other preferred stock ranking in parity with the Series A Shares as to liquidation, the Company will be obligated to repurchase the Series A Shares, the Redeemable Senior Preferred Stock and any other preferred stock ranking in parity with the Series A Shares as to liquidation on a pro rata basis. See "Description of the Securities -- Series A Shares." Under certain circumstances, the Company's ability to repurchase the Series A Shares pursuant to the Purchase Agreement will be restricted under the terms of its Certificate of Incorporation and the DGCL and, in the event of a repurchase following a Change of Control, by the terms of the Senior Credit Agreement and the Indenture. See "Capital Structure -- Credit Facilities -- Senior Credit Agreement" and "-- Senior Notes." The Purchase Agreement also provides that the purchasers that originally acquired Series A Shares pursuant to the Purchase Agreement (the "Original Purchasers") have a right of first offer to purchase promptly a pro rata portion of any preferred stock ("New Preferred Stock") issued in the future by the Company ranking in parity with the Series A Shares as to dividend rights and rights of liquidation, winding up and dissolution, the proceeds of which will be used to redeem outstanding shares of Redeemable Senior Preferred Stock. The terms of the Purchase Agreement provide that this right of first offer is limited to the Original Purchasers who acquired Series A Shares in the original private placement of Series A Shares who continue to hold Series A Shares at the time the Company issues additional preferred stock subject to such right. See "Description of the Securities -- Series A Shares." Accordingly, an Original Purchaser that holds Series A Shares will continue to be entitled to such rights. However, a subsequent purchaser of the Series A Shares that is not also an Original Purchaser will not be entitled to any right of first offer upon the future issuance of New Preferred Stock. The Purchase Agreement also restricts the Company from making any advance, loan, extension of credit or capital contribution to, or purchasing any stock, bonds, notes, debentures or other securities of, or making any other investment in any Affiliate (as defined in the Purchase Agreement) of the Company, other than (i) certain payments to CT Holdings and other Affiliates of the Company specifically permitted by the terms of the Company's Certificate of Incorporation (See "Description of the Securities -- Series A Shares") and (ii) investments in any Affiliates of the Company that the Company controls, directly or indirectly, through the ownership of 100% of the outstanding common stock of such Affiliate. See "Description of the Securities -- Series A Shares."

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus. Prospective purchasers of the Notes should carefully read the entire Prospectus and should consider, among other things, the matters set forth under "Investment Considerations." Bally's Park Place Casino Hotel opened in 1979 under the ownership of the Operating Company, a wholly owned subsidiary of Bally's Park Place. The Issuer is also a wholly owned subsidiary of Bally's Park Place. Bally's Park Place was a direct wholly owned subsidiary of Bally until June 16, 1993, when Bally contributed all of the capital stock of Bally's Park Place to Casino Holdings. Casino Holdings was formed as a wholly owned subsidiary of Bally in April 1993. As used in this Prospectus, unless the context otherwise requires, "Bally's Park Place" refers to Bally's Park Place and its subsidiaries and "Bally" refers to Bally and its subsidiaries, including Bally's Park Place. The Notes will be issued by the Issuer and are fully and unconditionally guaranteed on a senior basis by Bally's Park Place. THE COMPANY Bally's Park Place, through the Operating Company, owns and operates the Bally's Park Place Casino Hotel, which is situated on an eight-acre site with ocean frontage at the well-known intersection of Park Place and the Boardwalk in Atlantic City, New Jersey. The casino hotel complex is centrally located among the nine other casino hotels adjacent to the Boardwalk and is within four blocks of Atlantic City's Convention Hall and the new convention corridor, currently under development, which will include a new convention facility. Bally's Park Place Casino Hotel's central location on the Boardwalk contributes to its success in attracting significant walk-in casino business, including strong crossover business from competing casinos located nearby. Equipped with two multi-story parking garages and surface valet parking lots, management believes that Bally's Park Place Casino Hotel is also strongly positioned to attract the desirable drive-in business. Bally's Park Place Casino Hotel is one of the largest casino hotel facilities in Atlantic City, currently encompassing approximately 2.2 million square feet of space, including approximately 68,000 square feet of casino floor space, a 30-story hotel tower, a 12-story hotel facility and two multi-story parking garages providing over 2,000 parking spaces. The casino features approximately 2,000 slot machines and 115 table games. Bally's Park Place Casino Hotel employs the latest slot machine technology and places particular emphasis on the location, design and lighting of its slot machine areas in its efforts to further develop, expand and compete for slot machine play, which generates higher margins than table game play. In addition, Bally's Park Place Casino Hotel offers a full selection of table games, including baccarat, blackjack, craps, roulette and poker, among others. Bally's Park Place Casino Hotel offers more than 1,250 rooms (including 77 suites), making it the largest four-star hotel in New Jersey, approximately 50,000 square feet of meeting and exhibition space and a 38,000-square foot health spa facility. Dining areas include three specialty restaurants, a cocktail lounge, a coffee shop, a buffet, a delicatessen, two fast food facilities and a bar and lounge in the spa. Bally's Park Place Casino Hotel offers a variety of other facilities and amenities to its patrons. Bally's Parking Place, a self-park garage located across the street from the casino hotel, offers over 1,500 parking spaces and is connected to Bally's Park Place Casino Hotel by a people-mover and glass-enclosed, climate-controlled skywalk. Bally's Park Place Casino Hotel's operating strategy capitalizes on its central location and quality facilities and promotes the diversity of Bally's Park Place Casino Hotel's casino games and courteous approach to guests. Historically believed to be a leader in Atlantic City's middle to upper middle tier slot player segments, Bally's Park Place devotes significant managerial and promotional resources to the maintenance and expansion of slot machine play, including higher denomination slot business. Bally's Park Place Casino Hotel also targets middle-market table game players. The marketing strategy of Bally's Park Place Casino Hotel is to generate a high volume of play from casino customers from New York, Philadelphia and other northeastern metropolitan areas, as well as to develop its position in all segments of the Atlantic City hotel and convention market. To foster casino patron loyalty, Bally's Park Place Casino Hotel developed its "MVP Program," which rewards players with a variety of complimentary services based on frequency of play and amounts wagered. Bally's Park Place Casino Hotel is also increasing its utilization of complimentary rooms in an effort to attract rated players from its target markets and to encourage longer visits. In the latter part of 1993, Bally's Park Place instituted a more aggressive marketing program including additional promotional events and expanded media advertising. Bally's Park Place expects this marketing strategy to continue in 1994 and to include additional staff for hosts to support and service its casino patrons. Bally's Park Place enjoys a share of total Atlantic City casino revenues in excess of its proportionate share of total Atlantic City casino floor space due to its emphasis on higher margin slot machine play. Slot revenues represented 70% of Bally's Park Place's casino revenues for the nine months ended September 30, 1993 as compared to 67% of total gaming revenues in the Atlantic City market for this period, up from 69% for Bally's Park Place and 66% for the Atlantic City market in 1992. The Issuer was formed in June 1983 to serve solely as a financing corporation to raise funds through the issuance of debt securities for the benefit of the Operating Company. The Issuer is not authorized to conduct any other business operations. OWNERSHIP OF BALLY'S PARK PLACE AND THE ISSUER The following chart illustrates the ownership of Bally's Park Place, the Operating Company and the Issuer. The Notes offered hereby are securities of the Issuer and are fully and unconditionally guaranteed on a senior basis by Bally's Park Place. ------------------------------------------------------ Bally Manufacturing Corporation ("Bally") ------------------------------------------------------ ------------------------------------------------------ Bally's Casino Holdings, Inc.* ("Casino Holdings") ------------------------------------------------------ ------------------------------------------------------ Bally's Park Place, Inc. (a Delaware corporation) ("Bally's Park Place") ------------------------------------------------------ ------------------------------------------------------------- ------------------------------------------------------ Bally's Park Place, Inc. (a New Jersey corporation) (the "Operating Company") ------------------------------------------------------ ------------------------------------------------------ Bally's Park Place Funding, Inc. (the "Issuer") ------------------------------------------------------ *Bally's Casino Holdings, Inc. is wholly owned by Bally Manufacturing Corporation through wholly owned subsidiaries of Bally Manufacturing Corporation. THE OFFERING <TABLE> <S> <C> Securities Offered................... $425,000,000 principal amount of % First Mortgage Notes due 2004 issued by the Issuer and fully and unconditionally guaranteed on a senior basis by Bally's Park Place. Maturity Date........................ , 2004. Interest Payment Dates............... and of each year commencing , 1994. Optional Redemption.................. On or after , 1999, the Notes may be redeemed at the option of the Issuer, in whole or in part, at any time, at the redemption prices set forth herein together with accrued and unpaid interest to the redemption date. See "Description of the Notes -- Optional Redemption." Optional Redemption upon Public Equity Offerings.......................... On or before , 1997, up to 33 1/3% of the principal amount of the Notes originally issued may be redeemed at the option of the Issuer, at % of the principal amount thereof together with accrued and unpaid interest to the redemption date, out of the net proceeds of one or more Public Equity Offerings (as defined), provided that immediately following such redemptions at least $100 million principal amount of the Notes remains outstanding. See "Description of the Notes -- Optional Redemption." Change in Control.................... In the event of a Change in Control (as defined), each holder of Notes may require the Issuer to repurchase such holder's Notes at 101% of the principal amount thereof together with accrued and unpaid interest to the repurchase date. See "Description of the Notes -- Change in Control." Guaranty............................. The Notes will be fully and unconditionally guaranteed by Bally's Park Place on a senior basis. Security............................. The Notes will be secured by a first mortgage on certain fee and leasehold interests comprising the Bally's Park Place Casino Hotel and by a security interest in certain property located at the Bally's Park Place Casino Hotel. In addition, the Notes will be secured by the assignment of a $425 million promissory note issued by the Operating Company to the Issuer. See "Description of the Notes -- Security." Ranking Principal and Interest............. The Notes will rank pari passu with all existing and future Senior Debt (as defined) of the Issuer. The Guaranty will rank pari passu with all existing and future senior debt of Bally's Park Place, including the guarantee of bank indebtedness under a new credit facility (the "New Credit Facility") of the Operating Company which will replace the existing credit facility. Security Interest in the The mortgage and security interests securing the Notes Collateral...................... will rank pari passu with the mortgage and security interests securing the New Credit Facility. See "Description of the Notes -- Security." </TABLE> <TABLE> <S> <C> Certain Covenants.................... The Indenture contains certain covenants, including, but not limited to, covenants with respect to the following matters: (i) limitation on indebtedness; (ii) limitation on restricted payments; (iii) limitation on transactions with affiliates; (iv) limitation on encumbrances; (v) restriction on preferred stock of subsidiaries; (vi) limitation on dividends and other payment restrictions affecting subsidiaries; (vii) limitations on issuance of guarantees by subsidiaries; (viii) limitations on business activities other than the ownership of casino hotels; and (ix) restrictions on merger and sale of assets. See "Description of the Notes -- Certain Covenants." Use of Proceeds...................... The net proceeds to the Issuer from the sale of the Notes are estimated to be approximately $412.5 million. The net proceeds will be immediately loaned by the Issuer to the Operating Company. Thereafter, the Operating Company will immediately use approximately $380.1 million of the proceeds to repay a promissory note issued by the Operating Company to the Issuer in connection with the Issuer's 11 7/8% First Mortgage Notes due 1999 (the "Existing Notes") and will declare and pay a dividend of approximately $32.4 million to Bally's Park Place. The Issuer will thereafter use approximately $380.1 million of the proceeds to purchase and retire certain Existing Notes at the Closing and redeem the remaining Existing Notes in connection with a defeasance with respect to the Existing Notes. Bally's Park Place will then pay a dividend of approximately $32.4 million to Casino Holdings. See "Use of Proceeds" and "Underwriting." </TABLE> FOR MORE DETAILED INFORMATION REGARDING THE TERMS OF THE NOTES AND FOR DEFINITIONS OF CAPITALIZED TERMS NOT OTHERWISE DEFINED, SEE "DESCRIPTION OF THE NOTES." SUMMARY FINANCIAL DATA The following table sets forth summary historical and pro forma consolidated financial and other data of Bally's Park Place for and at the periods reflected. Bally's Park Place's business is seasonal, with casino and other revenues peaking during the summer months. Therefore, the summary financial data for the nine-month periods presented is not necessarily indicative of the results of operations for the full year. The summary historical financial data for the nine months ended September 30, 1993 and 1992 and for the years ended December 31, 1992, 1991 and 1990 should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of Bally's Park Place and related notes thereto included elsewhere in this Prospectus. <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31, ------------------- ------------------------------------------------------------ 1993 1992 1992 1991 1990 1989 1988 ------ ------ ------ ------ ------ ------ ------ (DOLLARS IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues(a)........................ $267.1 $253.5 $331.1 $322.8 $324.6 $329.5 $305.5 Operating costs and expenses....... 195.7(b)(c) 203.1(b)(c) 268.4(b)(c) 268.4(b)(c)(d) 264.0(c) 258.9(c) 231.9(e) Operating income................... 71.4 50.4 62.7 54.4 60.6 70.6 73.6 Interest expense(f)................ 33.9 36.2 48.0 48.9 46.3 22.3(g) 8.4 Income before income taxes......... 37.5 14.2 14.7 5.5 14.3 48.3 65.2 Income before extraordinary item and cumulative effect on prior years of change in accounting for income taxes-- Historical..................... 21.4(h) 7.3 7.9 1.8 8.1 28.6 38.4 Pro forma(i)................... 23.4 10.7 Net income......................... 10.0(h) 7.3 7.9 1.8 8.1 20.2(g) 38.4 Ratio of earnings to fixed charges(j)-- Historical..................... 2.1x 1.4x 1.3x 1.1x 1.3x 2.4x 4.1x Pro forma(i)................... 2.4x 1.5x OTHER DATA: Depreciation and amortization...... $ 19.9 $ 20.7 $ 27.4 $ 28.1 $ 25.9 $ 25.0 $ 22.0 Cash provided by operating activities............. 30.5 19.1 35.4 47.9 34.2 62.7 73.0 Capital expenditures............... 8.3 9.1 10.3 10.9 55.6(k) 71.1(k) 70.1(k) Cash used in investing activities....................... 9.2 11.4 12.6 13.0 55.6(k) 70.0(k) 73.5(k) Cash provided by (used in) financing activities............. (24.0)(l) (12.0) (23.0) (33.5) 17.0(l) 13.0(g)(l) (0.2)(l) EBITDA(m).......................... 91.3 71.1 90.1 82.5 86.5 95.6 95.6 Ratio of EBITDA to historical interest expense(m).............. 2.7x 2.0x 1.9x 1.7x 1.9x 4.3x 11.4x Ratio of EBITDA to pro forma interest expense(i)(m)........... 3.0x 2.1x EBITDA margin(m)................... 34.2% 28.0% 27.2% 25.6% 26.6% 29.0% 31.3% </TABLE> (See following page for notes) <TABLE> <CAPTION> SEPTEMBER 30, 1993 --------------------- PRO HISTORICAL FORMA(I) ---------- -------- <S> <C> <C> BALANCE SHEET DATA: Cash and equivalents................................................... $ 9.6 $ 9.6 Property and equipment, net............................................ 487.3 487.3 Total assets........................................................... 531.7 545.2 Advances from affiliate payable on demand.............................. 7.0 7.0 Long-term debt, less current maturities................................ 352.7 427.7 Stockholder's equity................................................... 89.8 36.5 </TABLE> <TABLE> <S> <C> (a) Includes interest income of $0.7 million and $1.6 million for the nine months ended September 30, 1993 and 1992, respectively, and $1.9 million, $5.7 million, $5.1 million, $1.8 million and $1.1 million for the years ended December 31, 1992, 1991, 1990, 1989 and 1988, respectively. (b) Includes charges allocated by Bally of $3.0 million and $2.9 million for the nine months ended September 30, 1993 and 1992, respectively, and $3.7 million and $1.0 million for the years ended December 31, 1992 and 1991, respectively. Bally is a holding company without significant operations of its own. During 1992 Bally completed a major restructuring effort which began in late 1990 and which included the divestiture of several of its non-core businesses including the businesses directly operated by Bally. The businesses directly operated by Bally had previously supported Bally's overhead costs and made measurement of costs associated with oversight of subsidiary operations impractical and unnecessary. During 1991 Bally allocated costs to Bally's Park Place consisting of Bally's Park Place's allocable share of Bally's director's and officer's insurance and other Bally stockholder-related expenses primarily attributable to the restructuring. During 1992 and 1993 Bally allocated costs to Bally's Park Place consisting of Bally's Park Place's allocable share of Bally's corporate overhead including executive salaries and benefits, public company reporting costs and other corporate headquarters costs. While Bally's Park Place does not obtain a measurable direct benefit from these allocated costs, management believes that Bally's Park Place receives an indirect benefit from Bally's oversight. Bally's method for allocating costs to its subsidiaries is designed to apportion its costs to its subsidiaries based upon many subjective factors including size of operations and extent of Bally's oversight requirements. Management of Bally and Bally's Park Place believe that the methods used to allocate these costs are reasonable and expect similar allocations in future years. Because of Bally's controlling relationship with Bally's Park Place and the allocation of certain Bally costs, the operating results of Bally's Park Place could be significantly different from those that would have been obtained if Bally's Park Place operated autonomously. (c) Commencing in 1989, certain administrative and support operations of Bally's Park Place and a wholly owned subsidiary of Bally which owns and operates the casino hotel in Atlantic City known as "The Grand" ("Bally's Grand") were consolidated. These shared operations presently include legal services, purchasing, limousine services, and certain aspects of human resources and management information systems. Costs of these operations are allocated to or from Bally's Park Place either directly or using various formulas based on utilization estimates of such services and, on a net basis, totaled $1.0 million and $1.9 million for the nine months ended September 30, 1993 and 1992, respectively, and $2.6 million, $2.5 million, $1.8 million and $1.0 million for the years ended December 31, 1992, 1991, 1990 and 1989, respectively, all of which management believes were reasonable. (d) Includes charges of $3.5 million related to the closing and demolition of an ancillary motel operated by Bally's Park Place and $2.0 million for the estimated cost of settling certain non-recurring liabilities. (e) Net of costs totaling $6.4 million allocated to other casinos owned by Bally, which management believes was reasonable. The allocation of such costs ceased after 1988 since these Bally casino hotel subsidiaries, by the start of 1989, had established separate management teams and implemented management information, budgeting and accounting systems. (f) Includes amortization of debt issuance costs and discounts. (g) In September 1989, Bally's Park Place issued $350.0 million principal amount of the Existing Notes and used a portion of the proceeds to retire $100.0 million principal amount of its 13 7/8% Mortgage-Backed Bonds, which resulted in an extraordinary loss of $8.4 million, net of income taxes of $5.6 million. </TABLE> <TABLE> <S> <C> (h) Effective January 1, 1993, Bally's Park Place changed its method of accounting for income taxes as required by Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." The cumulative effect on prior years of this change in accounting for income taxes was a charge of $11.4 million. In addition, the income tax provision for the nine months ended September 30, 1993 was increased by $0.4 million as a result of applying the change in the U.S. statutory tax rate from 34% to 35% to deferred tax balances as of January 1, 1993. (i) Assumes issuance of the Notes and application of net proceeds as described in "Use of Proceeds", as if each had occurred at January 1, 1993 and 1992 for Statement of Operations Data and for Other Data and at September 30, 1993 for Balance Sheet Data. (j) The ratio of earnings to fixed charges has been computed by dividing (i) income before income taxes, extraordinary item and cumulative effect on prior years of change in accounting for income taxes plus amortization of capitalized interest and fixed charges (excluding capitalized interest) by (ii) fixed charges. Fixed charges consist of interest incurred (expensed or capitalized), including amortization of debt issuance costs and discount. (k) Includes capital expenditures for the construction of an 800-room hotel tower, a parking garage and public area improvements during the three years ended December 31, 1990. (l) In September 1993, an $11.0 million dividend was paid to Casino Holdings. During 1990, Bally's Park Place borrowed $72.5 million through its revolving line of credit facility and advanced $50.0 million to Bally, which receivable was subsequently cancelled and declared a dividend in 1992. In addition, dividends of $3.9 million, $159.0 million and $17.0 million were paid to Bally in the years ended December 31, 1990, 1989 and 1988, respectively. (m) EBITDA represents earnings before interest, taxes, depreciation and amortization and is intended to facilitate a more complete analysis of Bally's Park Place's financial condition. The ratio of EBITDA to interest expense represents the number of times EBITDA exceeds interest expense and is intended to illustrate the ability of Bally's Park Place to pay interest. The EBITDA margin represents EBITDA divided by revenues and is intended to indicate the operating efficiency of Bally's Park Place. This data should not be considered as an alternative to any measure of performance or liquidity as promulgated under generally accepted accounting principles (such as net income or cash provided by (used in) operating, investing and financing activities) nor should it be considered as an indicator of Bally's Park Place's overall financial performance. </TABLE>

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+PROSPECTUS SUMMARY The following summary information is qualified in its entirety by the detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus, which should be read in its entirety. Prospective investors should carefully consider matters discussed under the caption "Investment Considerations." THE COMPANY America West Airlines, Inc. ("America West" or the "Company") is a major United States air carrier providing passenger, cargo and mail service with its primary markets in the western and southwestern regions of the United States. The Company operates its route system through two principal hubs, Phoenix, Arizona and Las Vegas, Nevada, and a mini-hub in Columbus, Ohio. As of July 31, 1994, America West operated a fleet of 85 jet aircraft and provided service to 45 destinations. Through alliance agreements with Mesa Airlines, Inc. ("Mesa"), the Company provides connecting service to an additional 18 destinations. The Company also has formed an alliance with Continental Airlines, Inc. ("Continental") to serve additional destinations. The Company filed a voluntary petition for protection under Chapter 11 of the federal bankruptcy code on June 27, 1991. The Company's plan of reorganization (the "Plan") was confirmed by the United States Bankruptcy Court for the District of Arizona (the "Bankruptcy Court") on August 10, 1994 and the Plan became effective on August 25, 1994 (the "Effective Date"). In connection with its reorganization in bankruptcy and related operational restructuring (the "Reorganization"), the Company took significant steps to improve its operations, including (i) reducing its fleet size from 123 aircraft in July 1991 to 85 at July 31, 1994, facilitating a better matching of capacity to demand through elimination of nonproductive routes; (ii) reducing the aircraft types operated from five to three, resulting in reduced operating costs; (iii) implementing certain enhancements to its revenue management system to optimize the level of passenger revenues generated on each flight; (iv) eliminating Company operated commuter service and introducing code sharing agreements to expand the scope of service and attract a broader passenger base; and (v) implementing numerous cost reduction programs, including a Company-wide pay reduction in August 1991 and the reduction of aircraft lease rentals to fair market rates in the fall of 1992. As a result of these measures as well as a gradually improving economic climate and a more stable environment relative to fare competition within the airline industry, America West was one of only two major airlines to report a profit in each quarter of 1993, realizing net income for 1993 of $37.2 million and operating income of $121.1 million on revenues of $1.33 billion. America West currently operates with one of the lowest cost structures among major U.S. airlines, based on reported 1993 results. America West's operating cost per available seat mile for 1993 was 7.01 cents, which was approximately 25% lower than the average operating cost per available seat mile of the nine largest other domestic airlines and was comparable to the costs incurred by Southwest Airlines, Inc. ("Southwest Airlines"). The Company's business strategy is to continue to offer competitive fares while maintaining an incrementally higher level of service relative to low cost carriers generally. These services include assigned seating, participation in computerized reservation systems, interline ticketing, first class cabins on certain flights, baggage transfer and various other services. Management believes that its principal hub locations in Phoenix and Las Vegas not only provide a low cost environment for a substantial portion of the Company's operations, but also position the Company to benefit from an expanding market for leisure travel. As a part of the Reorganization, the Company entered into certain agreements (the "Alliance Agreements") with Continental and Mesa. With Continental, the Company is implementing certain code-sharing arrangements and is undertaking to coordinate certain flight schedules, share ticket counter space, link frequent flyer programs, and coordinate ground handling operations. With Mesa, America West modified and extended two code-sharing agreements that establish Mesa as a feeder carrier for the Company at its hubs in Phoenix and Columbus. The code-sharing agreements provide for coordinated flight schedules, passenger handling and computer reservations under the America West flight designator code, thereby allowing passengers to purchase one air fare for their entire trip. Mesa connects 13 cities to the Company's Phoenix hub, operates under the name "America West Express" and has begun to incorporate the color scheme and commercial logo of America West on certain aircraft utilized on these routes. Mesa serves five destinations from the Company's Columbus mini-hub operations. Management believes the Alliance Agreements will contribute significantly to the Company's passenger revenue and operating results. Pursuant to the Reorganization, the Company substantially reduced its outstanding debt and increased its liquidity through the infusion of new capital. In addition, the Company reached agreements with certain key suppliers of aircraft. At June 30, 1994, prior to the Reorganization, the Company's long-term debt including current maturities and estimated liabilities subject to Chapter 11 proceedings aggregated approximately $880 million. Such liabilities at June 30, 1994, adjusted to give pro forma effect to the consummation of the Plan, would aggregate approximately $571.9 million. Pursuant to the Reorganization, pre-existing equity interests of the Company were cancelled, the Company's obligations to other prepetition creditors were restructured and general unsecured nonpriority prepetition creditors ("Prepetition Creditors") received, in full satisfaction of their claims, approximately 26,053,185 shares of Class B Common Stock and $6,416,214 cash. Holders of the Company's pre-existing common equity interests received, on a pro rata basis, 2,250,000 shares of Class B Common Stock and Warrants to purchase 6,230,769 shares of Class B Common Stock. In addition, pursuant to the exercise of subscription rights, holders of pre-existing equity interests received 1,615,179 shares of Class B Common Stock for an aggregate purchase price of $14,357,326 ($8.889 per share), including holders of pre-existing preferred equity interests who received 250,000 shares of Class B Common Stock for an aggregate purchase price of $2,222,250. As part of the Reorganization and pursuant to an investment agreement (the "Investment Agreement"), the Company received approximately $205.3 million in cash upon the issuance to the partners of AmWest Partners, L.P. ("AmWest"), and to certain assignees of AmWest (as described below), of rights to acquire (i) 1,200,000 shares of Class A Common Stock, (ii) 12,981,636 shares of Class B Common Stock, (iii) Warrants to purchase 2,769,231 shares of Class B Common Stock and (iv) $100 million of Senior Notes issued pursuant to the Investment Agreement (the "Investment Agreement Senior Notes"). On or about October 14, 1994 the Company issued an additional $23 million of Senior Notes (the "Additional Senior Notes" and together with the Investment Agreement Senior Notes, the "Senior Notes") in satisfaction of certain pre-existing secured claims. Certain funds managed or advised by Fidelity Management Trust Company and its affiliates (collectively, "Fidelity") and Lehman Brothers Inc. ("Lehman") purchased a portion of the securities that otherwise would have been issued to AmWest pursuant to assignments by AmWest to those parties. Pursuant to these assignments, Lehman acquired 1,333,587 shares of Class B Common Stock and Fidelity acquired 3,270,311 shares of Class B Common Stock, Warrants to purchase 133,488 additional shares of Class B Common Stock and $100 million of Investment Agreement Senior Notes. In exchange for certain pre-existing claims, Fidelity also received $13 million of Additional Senior Notes and Lehman received $10 million of Additional Senior Notes. AmWest, which dissolved upon the Effective Date, was a Texas limited partnership including as investors Mesa, Continental and TPG Partners, L.P. and certain of its affiliates (collectively, with its affiliates TPG Parallel I, L.P. and Air Partners II, L.P., "TPG"). TPG Partners, L.P. is a Delaware limited partnership which acquired aggregate beneficial ownership of securities representing 43.2% of the combined voting power of America West securities (including shares acquired for pre-existing equity interests held by TPG). See "Investment Considerations -- Concentration of Voting Power; Influence of Principal Stockholders" and "Principal Stockholders." AmWest assigned its rights to acquire securities pursuant to the Investment Agreement to its partners and certain of their respective affiliates. Pursuant to the Reorganization, Lehman, Fidelity and TPG received additional shares of Class B Common Stock for their existing claims and interests. These shares have also been registered pursuant to the Securities Act of 1933. THE OFFERING The principal terms of the Common Stock, Senior Notes and Warrants are summarized below. For a more complete description, see "Description of Capital Stock," "Description of the Senior Notes" and "Description of Warrants," respectively. The Selling Securityholders will receive all of the proceeds from the sale of the Securities offered hereby, and the Company will not receive any proceeds from the Offering. Common Stock: Securities Offered............... 1,200,000 shares of Class A Common Stock 18,698,704 shares of Class B Common Stock Common Stock outstanding(1)...... 1,200,000 shares of Class A Common Stock 43,925,000 shares of Class B Common Stock Total.................. 45,125,000 shares of Common Stock Voting Rights.................... Class A and Class B Common Stock have identical economic rights and privileges and rank equally, share ratably, and are identical in all respects as to all matters other than voting rights. The Class A Common Stock votes together with the Class B Common Stock on all matters except as otherwise required by law. Each share of Class B Common Stock has one vote; each share of Class A Common Stock has 50 votes. Listing.......................... The Class B Common Stock is listed on the New York Stock Exchange. The Company does not intend to apply for listing of the Class A Common Stock on any securities exchange or authorization quotation on the NASDAQ System. The Company does not expect that an active trading market for the Class A Common Stock will develop. Trading Symbol................... "AWA" - --------------- (1) Excluding 10,384,615 shares of Class B Common Stock reserved for issuance upon exercise of outstanding Warrants. Senior Notes: Securities Offered............... $123,000,000 aggregate principal amount of Senior Notes including $100 million of Investment Agreement Senior Notes and $23 million of Additional Senior Notes Maturity......................... The seventh anniversary of the date of issuance Interest Rate.................... The Senior Notes bear interest at a rate of 11 1/4% per annum. Interest accrues from the date of issuance thereof and is payable semi-annually in arrears on each March 1 and September 1, commencing March 1, 1995. Ranking.......................... The Senior Notes rank senior in right of payment to all existing and future subordinated Indebtedness (defined in the Indenture) of the Company and rank pari passu in right of payment with all other Indebtedness of the Company. Certain Indebtedness, however, including the Secured Debt, is effectively senior in right of payment to the Senior Notes with respect to assets that constitute collateral securing such other Indebtedness. Optional Redemption.............. The Senior Notes offered hereby may be redeemed at the option of the Company (i) prior to September 1, 1997, (A) at any time, in whole but not in part, at a redemption price of 105% of the principal amount of the Senior Notes plus accrued and unpaid interest, if any, to the redemption date or (B) from time to time in part from the net proceeds of a public offering of its capital stock at a redemption price equal to 105% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date except for amounts mandatorily redeemed; and (ii) on or after September 1, 1997 at any time in whole or from time to time in part, at a redemption price equal to the following percentage of the principal amount redeemed, plus accrued and unpaid interest to the date of redemption, if redeemed during the 12-month period beginning: <TABLE> <CAPTION> SEPTEMBER 1, PERCENTAGE ----------- ---------- <S> <C> <C> 1997.... 105.0% 1998.... 103.3% 1999.... 101.7% 2000.... 100.0% </TABLE> Mandatory Redemption............. In the event that, prior to September 1, 1997, the Company consummates a Public Offering Sale, as defined in the Indenture, and immediately prior to such consummation the Company has cash and cash equivalents, not subject to any restriction on disposition, of at least $100,000,000, then the Company shall redeem Senior Notes at a redemption price equal to 104% of the aggregate principal amount of the Senior Notes so redeemed, plus accrued and unpaid interest to the redemption date. The aggregate redemption price and accrued and unpaid interest of the Senior Notes to be so redeemed shall equal the lesser of (a) 50% of the net offering proceeds of such Public Offering Sale and (b) the excess, if any, of (i) $20,000,000 over (ii) the amount of any net offering proceeds of any prior Public Offering Sale received prior to September 1, 1997 and applied to so redeem Senior Notes. Principal Covenants.............. The Indenture contains numerous covenants including covenants governing the disposition of the proceeds of certain underwritten public offerings of Common Stock of the Company, limiting certain Restricted Payments, limiting certain transactions with Affiliates, limiting certain sales of assets, limiting certain investments and allowing a holder repurchase rights upon a change of control. Listing.......................... The Company does not intend to apply for listing of the Senior Notes on any securities exchange or authorization for quotation on the NASDAQ system. The Company does not expect that an active trading market will develop for the Senior Notes. Warrants: Securities Offered............... 5,847,465 Warrants, each entitling the holder to purchase one share of Class B Common Stock at a price (the "Exercise Price") of $12.74 per share. Warrants to be Outstanding after the Offering..................... 10,384,615 Warrants Expiration....................... The Warrants are exercisable by the holders at any time prior to August 25, 1999. Redemption....................... The Warrants are not redeemable. Anti-Dilution.................... The number of shares of Class B Common Stock purchasable upon exercise of each Warrant will be adjusted upon, among other things, (i) issuance of a dividend in or other distribution of Common Stock to holders of Common Stock; (ii) a combination, subdivision or reclassification of the Class B Common Stock; and (iii) rights issuances. Voting Rights.................... Warrant holders have no voting rights. Listing.......................... The Warrants are listed on the New York Stock Exchange. Trading Symbol................... "AWAws" SUMMARY FINANCIAL DATA The summary financial data set forth below presents historical and pro forma financial information of the Company. The financial information at June 30, 1994 and 1993 and for the six months then ended has been derived from the unaudited condensed financial statements of the Company which, in the opinion of management, include all adjustments, consisting only of normal adjustments, necessary for a fair presentation of the results for the periods. The results for the six months ended June 30, 1994 are not necessarily indicative of the results to be expected for the full year. The summary information should be read in conjunction with the financial statements and related notes thereto appearing elsewhere in this Prospectus, "Unaudited Pro Forma Condensed Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." <TABLE> <CAPTION> SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, --------------------------------------------------- -------------------------------- 1993 1994 ------------------------- --------------------- PRO PRO 1991 1992 HISTORICAL FORMA(A) 1993 HISTORICAL FORMA(A) ---------- ---------- ---------- ------------ -------- ---------- -------- (IN THOUSANDS, EXCEPT RATIO AND PER SHARE AMOUNTS) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Operating revenues................... $1,413,925 $1,294,140 $1,325,364 $1,325,364 $641,515 $708,615 $708,615 Operating expenses................... 1,518,582 1,368,952 1,204,310 1,206,266 599,168 626,719 629,813 Operating income (loss).............. (104,657) (74,812) 121,054 119,098 42,347 81,896 78,802 Income (loss) before income taxes.... (222,016) (131,761) 37,924 55,532 12,647 36,782 50,504 Income tax expense................... -- -- 759 34,913 253 1,471 26,215 Net income (loss).................... (222,016) (131,761) 37,165 20,619 12,394 35,311 24,289 Earnings (loss) per share: Primary.......................... (10.39) (5.58) 1.50 0.46 0.52 1.30 0.54 Fully diluted.................... (10.39) (5.58) 1.04 0.46 0.36 0.92 0.54 Shares used for computation: Primary.......................... 21,534 23,914 27,525 45,125 29,669 28,704 45,125 Fully diluted.................... 21,534 23,914 41,509 45,125 42,804 40,607 45,125 Ratio of earnings to fixed charges(b)......................... -- -- 1.28 1.39 1.18 1.56 1.74 </TABLE> <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, 1994 YEAR ENDED ------------------------- DECEMBER 31, PRO 1993 HISTORICAL FORMA(A) ------------ ---------- ---------- <S> <C> <C> <C> BALANCE SHEET DATA: Working capital deficiency................................................. $ (124,375) $ (106,760) $ (22,934) Total assets............................................................... 1,016,743 1,100,541 1,637,252 Long-term debt, less current maturities.................................... 620,992 604,420 516,474 Total stockholders' equity (deficiency).................................... (254,262) (215,338) 587,500 </TABLE> - --------------- (a) Pro Forma information gives effect to the consummation of the Plan, including adjustments for fresh start reporting. Pro forma statement of operations data for the year ended December 31, 1993 and the six-month period ended June 30, 1994 is presented as if the Plan were consummated on January 1, 1993; balance sheet data at June 30, 1994 is presented as if the Plan were consummated on such date. See "Unaudited Pro Forma Condensed Financial Information." These amounts are presented for informational purposes only and do not purport to represent what the Company's financial position or results of operations would have been if consummation of the Plan had occurred on such dates. (b) For purposes of computing the ratio of earnings to fixed charges, "earnings" consist of income (loss) before taxes plus fixed charges less capitalized interest. "Fixed charges" consist of interest expense including amortization of debt issuance costs, capitalized interest and a portion of rent expense which is deemed to be representative of an interest factor. For the years ended December 31, 1992 and 1991, earnings were insufficient to cover fixed charges by $131,761,000 and $228,680,000, respectively.

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere or incorporated by reference in this Prospectus. See "Risk Factors" for factors a prospective investor should consider in evaluating the Company before purchasing the Notes.

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. Except as otherwise indicated, the information contained in this Prospectus assumes the Underwriters' over-allotment option is not exercised. See "Underwriting." THE COMPANY Stokely USA, Inc. is a leading domestic producer of canned and frozen vegetables. The Company processes, markets and sells a broad range of vegetables under customer private labels and under the Stokely's Finest(R) label, Stokely's Gold(TM) label and other brand labels through the retail, foodservice and industrial channels of distribution. The Company believes it is the largest processor of private label canned vegetables in the United States, selling to most major supermarket chains, including Winn Dixie, Kroger, A&P, Aldi and Safeway, and to major food wholesalers, including Super Valu and Fleming Companies, Inc. The Company is also a leading United States exporter of canned vegetables to Europe and Asia. The Company believes the breadth and mix of its product lines, including both basic and specialty vegetables, enhance its competitive position by allowing it to market its products to many different distribution channels and consumer markets. In 1993, the processed vegetable industry represented approximately $3.0 billion in annual sales of canned vegetables and approximately $2.1 billion in annual sales of frozen vegetables. During fiscal 1993, the Company began to implement a new business strategy designed to enhance its leadership position in certain markets and products, and to facilitate the Company's ability to achieve a higher and more consistent level of earnings. The key elements of the strategy are as follows: - FOCUS ON CORE PRODUCT LINES. The Company has narrowed its product focus to product lines in which it has significant market share -- corn, green beans, peas and root crops -- and has eliminated several unprofitable non-core lines. This focus has allowed the Company to significantly reduce its fixed manufacturing and administrative expenses and to reduce its variable cost per unit in an industry generally characterized by a high ratio of variable to fixed costs. - EMPHASIZE THE PRIVATE LABEL CHANNEL OF DISTRIBUTION. Since fiscal 1993, the Company has placed significant emphasis on expanding its presence in the private label channel of distribution. This channel accounts for approximately 35% of the canned vegetable industry's total retail sales and is currently experiencing market share growth. In addition, the Company's operating margins in private label are higher than margins achieved in its brand products business because of lower selling and support expenses. Currently, the Company believes its three largest competitors in the vegetable processing industry focus primarily on brand products. - MAINTAIN THE COMPANY'S BRAND MARKET SHARE WHILE PURSUING CHANGES IN PRODUCT MIX. The Stokely's Finest(R) brand is one of the major brands in its primary brand geographic area of distribution, the southeastern United States. The Company has maintained its brand position while rationalizing its brand product line, including a 25% reduction in the number of SKUs over the last two years. In addition, the Company seeks to enhance consumer recognition of its brand names and selectively expand its brand product line by developing new brand specialty products, such as its specialty line of premium products sold under the Stokely's Gold(TM) label. Sales volume of the Stokely's Gold(TM) label product line has doubled from fiscal 1992 to fiscal 1994. - PURSUE GROWTH OPPORTUNITIES IN FOREIGN MARKETS. Exports of processed vegetables represent a growing channel of distribution in the processed vegetable industry. For the past five years, the volume of total canned corn exported by U.S. processors, the major component of exported processed vegetables, has grown at a compound annual rate of 15%. The Company believes that its strength as a leading U.S. canned corn producer and a major exporter create opportunities for the Company to expand its export sales. The Company has achieved a significant market share in exports to Germany and Scandinavia and intends to increase its emphasis on expanding export sales to Eastern Europe, Asia, Canada and Mexico. - IMPROVE EFFECTIVENESS AND EFFICIENCY OF FROZEN VEGETABLE BUSINESS. In order to increase its profit margins in the frozen vegetable business, the Company has downsized its frozen vegetable operations following a period of rapid expansion and redirected most of its sales to industrial customers. The Company generally has been able to generate higher margins on its industrial sales due to decreased packaging and promotional expenses associated with sales of frozen products in bulk. The Company plans to continue to increase its presence in this channel through the addition of new customers, and to increase its leading position in certain higher margin specialty products, while remaining one of the major players in frozen corn production, the leading category item in the frozen vegetable market. Prior to fiscal 1993, the Company's principal business strategy had been to increase its revenues by expanding sales of its brand products and by developing, through acquisitions, a significant frozen vegetable business. At the time, the Company believed that the brand vegetable market and frozen vegetable market tended to have higher margins than the Company's private label canned business and would help smooth out the price fluctuations inherent in the vegetable processing industry. This strategy, however, significantly increased the Company's operating expenses and as a result its operating margins began to deteriorate in fiscal 1991. Furthermore, the Company's acquisitions and capital expenditures were funded primarily by debt, which increased the Company's leverage and interest expense. This strategy, together with unfavorable market conditions in the vegetable processing industry, culminated in net losses (after-tax) for fiscal 1992 and 1993 of $9.9 million and $31.1 million (including a restructuring charge of $14.7 million), respectively. Commencing in June of 1992, the Company made significant management changes and adopted a major restructuring program allowing it to implement its new strategy. The primary elements of the restructuring program implemented in fiscal 1993 and 1994 were as follows: ELIMINATION OF UNPROFITABLE PRODUCTS - the Company eliminated or greatly reduced its capacity for several low margin or unprofitable products, including the elimination of frozen broccoli, frozen okra, frozen cauliflower, tomato products, various fruit products and other items; PLANT CLOSINGS - to increase manufacturing efficiencies, lower operating costs and reduce working capital needs, the Company closed six plants, four of which have been sold, and downsized two other facilities. Fixed manufacturing overhead has been reduced by $12.8 million, or 24.7%, for fiscal 1994 compared to fiscal 1992; REDUCTION OF FIXED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - - with an increased focus on core products, the Company has been able to operate with a lower cost structure. Fixed selling, general and administrative expenses have been reduced by $5.7 million, or 37.5%, for fiscal 1994 compared to fiscal 1992; and DEBT REDUCTION - by focusing on its core business and liquidating non-essential assets, the Company has reduced total debt by $29.5 million, or 22.4%, since fiscal 1992 to $102.3 million at the end of fiscal 1994. Principally as a result of these restructuring efforts, the Company has achieved net profits in each of its last five fiscal quarters. THE OFFERING <TABLE> <S> <C> Shares Offered by the Company....................... 3,000,000 Shares Outstanding Immediately After the Offering(1)....................................... 11,324,645 Use of Proceeds to the Company...................... Reduce indebtedness Nasdaq National Market Symbol....................... STKY </TABLE> - ------------------------- (1) Excludes 223,300 shares of Common Stock reserved for issuance pursuant to currently outstanding options, 400,000 shares of Common Stock reserved for issuance pursuant to options available for grant under an existing option plan and 90,000 shares of Common Stock reserved for issuance pursuant to currently outstanding warrants which are not expected to be exercised in connection with this Offering. - -------------------------------------------------------------------------------- SUMMARY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <TABLE> <CAPTION> SIX MONTHS ENDED FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30, ---------------------------------------------------- ------------------ 1990 1991 1992 1993 1994 1993 1994 -------- -------- -------- -------- -------- -------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales.......................... $271,963 $257,520 $280,368 $281,382 $256,145 $127,505 $97,131 Other revenue...................... (436) 1,090 676 2,145 4,691 4,600 99 -------- -------- -------- -------- -------- -------- ------- Total revenues................. 271,527 258,610 281,044 283,527 260,836 132,105 97,230 Cost of products sold.............. 193,454 204,922 238,804 249,982 216,392 113,592 74,148 Selling, general and administrative expenses......................... 44,461 40,902 48,481 42,139 36,476 18,016 13,464 Nonrecurring charge(1)............. -- -- -- 21,145 -- -- -- -------- -------- -------- -------- -------- -------- ------- Operating earnings (loss).......... 33,612 12,786 (6,241) (29,739) 7,968 497 9,618 Interest expense................... 4,721 7,082 8,592 12,721 12,710 6,482 4,914 -------- -------- -------- -------- -------- -------- ------- Earnings (loss) before income taxes and cumulative effect of change in accounting principle.......... 28,891 5,704 (14,833) (42,460) (4,742) (5,985) 4,704 Income taxes (credit).............. 11,156 1,888 (4,931) (12,983) (2,527) (718) 946 -------- -------- -------- -------- -------- -------- ------- Earnings (loss) before cumulative effect of change in accounting principle........................ 17,735 3,816 (9,902) (29,477) (2,215) (5,267) 3,758 Cumulative effect of change in accounting principle(2).......... -- -- -- (1,650) -- -- -- -------- -------- -------- -------- -------- -------- ------- Net earnings (loss)................ $ 17,735 $ 3,816 $ (9,902) $(31,127) $ (2,215) $ (5,267) $ 3,758 ========= ========= ========= ========= ========= ========= ======== Net earnings (loss) per share(2)... $2.15 $0.46 $(1.19) $(3.75) $(0.27) $(0.63) $0.45 Pro forma earnings (loss) per share(3)......................... $(0.10) $0.41 Weighted average shares outstanding...................... 8,260 8,287 8,288 8,302 8,320 8,316 8,325 Dividends per share................ $0.26 $0.20 $0.20 -- -- -- -- </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1994 -------------------------- ACTUAL AS ADJUSTED(3) -------- -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital............................................................. $ 46,057 $ 56,832 Total assets................................................................ 232,780 232,780 Total debt.................................................................. 118,204 90,429 Shareholders' equity........................................................ 36,398 64,173 </TABLE> ------------------------------- (1) In connection with the Company's restructuring plan, the Company sold, closed or downsized certain processing facilities, resulting in a nonrecurring charge during the fiscal year ended March 31, 1993 from the write-down of such processing facilities, equipment and inventories to their estimated net realizable value and from provisions for severance, consolidation costs and plant closing costs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (2) On April 1, 1992, the Company adopted Statement of Financial Accounting Standard No. 106 ("SFAS No. 106"), "Employers' Accounting for Postretirement Benefits Other than Pensions." The Company recognized as expense in fiscal 1993 the accumulated postretirement benefit obligation aggregating $1.7 million, after taxes of $850,000. The net loss per share for the fiscal year ended March 31, 1993 includes a $0.20 per share loss due to the adoption of SFAS No. 106. (3) The pro forma earnings (loss) per share data assumes that the Offering had occurred at the beginning of each period presented and gives effect to the reduction in interest expense resulting from the application of the net proceeds therefrom to reduce indebtedness. As Adjusted reflects the sale of 3,000,000 shares of Common Stock being offered by the Company at an assumed public offering price of $10.00 per share, after deducting the underwriting discount and estimated Offering expenses, and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."

parsed_sections/prospectus_summary/1994/CIK0000795178_mesa_prospectus_summary.txt

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+SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus. Potential investors are urged to read the more detailed information set forth elsewhere in this Prospectus. A Glossary of frequently used capitalized and other specialized terms is attached as Annex A (located inside the back cover). MESA MESA Inc. is one of the largest independent natural gas producers in the United States. Mesa owns proved natural gas, natural gas liquids and oil reserves estimated as of December 31, 1992 at approximately 1.8 trillion cubic feet of natural gas equivalents. Over 70% of Mesa's total equivalent proved reserves are natural gas and almost all of its other reserves are natural gas liquids. Substantially all of Mesa's reserves are proved developed reserves. Mesa's principal producing properties are in the Hugoton field of southwest Kansas and the West Panhandle field of Texas, which together account for over 95% of Mesa's equivalent proved reserves at December 31, 1992. These two fields are in the same producing trend and contain shallow natural gas reserves that are expected to produce beyond the year 2020. The Hugoton field is the largest producing gas field in the continental United States. Mesa also owns and operates natural gas processing plants located in both of these fields which are capable of processing substantially all of Mesa's natural gas production in these fields. Mesa considers itself one of the most efficient operators of shallow natural gas properties in the United States. Mesa holds all of its assets and conducts its operations through its subsidiaries, all of which are wholly-owned following a January 1994 restructuring that converted the general partner interests in the subsidiaries to common stock of Mesa. The Company's direct corporate subsidiaries are: - Mesa Operating Co. ("MOC"), which owns all of Mesa's oil and gas properties, other than Mesa's Hugoton field natural gas properties, as well as an approximate 81% limited partnership interest in Hugoton Capital Limited Partnership ("HCLP") and certain other assets; - Mesa Midcontinent Co. ("MMC"), which owns principally cash and securities, as well as an approximate 19% limited partnership interest in HCLP; and - Mesa Holding Co. ("MHC"), which owns principally cash, as well as the outstanding capital stock of Mesa Environmental Ventures Co. ("Mesa Environmental"). The Company's other significant subsidiaries, owned indirectly, are: - HCLP, a limited partnership which owns substantially all of Mesa's Hugoton field natural gas properties; and - Mesa Environmental, which is engaged in promoting the use of natural gas as a motor vehicle fuel and developing and marketing natural gas fuel equipment for the transportation market. Capital is a wholly owned finance subsidiary of MOC. Mesa's business strategy includes (i) continuing its effort to strengthen its financial condition by raising equity capital and applying the proceeds thereof to retire debt, and issuing new lower cost debt to refinance its existing high cost debt securities, (ii) maximizing the value of its existing high-quality, long-life reserves through efficient operating and marketing practices, (iii) increasing its capability to process natural gas and to extract natural gas liquids and helium by expanding and modernizing processing facilities, (iv) conducting selective exploratory and development activities, principally in existing areas of operations, and (v) promoting the use of natural gas as a motor vehicle fuel and developing and marketing natural gas fuel equipment for the transportation market. See "Business." PURPOSE OF THE OFFERING The proceeds of the sale of the Secured Notes offered hereby will be used to fund all or a portion of Mesa's share of the payment to be made to Unocal Corporation to settle a lawsuit by Unocal against Mesa and other defendants. See "Unocal Litigation and Settlement." The Secured Notes will be issued pursuant to the same indenture (the "Secured Indenture") under which the Obligors currently have outstanding $569,277,000 face amount (at maturity) of Secured Notes, which Secured Notes were issued in connection with the Obligors' recently completed debt exchange offer. The Secured Notes offered hereby will be fungible with the currently outstanding Secured Notes. The issuance of the additional amount of Secured Notes offered hereby was expressly contemplated in the Secured Indenture for the purpose of settling or compromising the Unocal lawsuit. See "Description of the Secured Notes -- Provisions Relating to the Issuance of the Additional Secured Notes Offered Hereby." The Unocal lawsuit was originally filed in 1986 against Mesa Petroleum Co., a predecessor of the Company, certain subsidiaries of Mesa Petroleum Co. and certain other parties. The lawsuit alleged that the defendants had purchased and sold Unocal common shares within a six-month period in 1985 in transactions subject to Section 16(b) of the Securities Exchange Act of 1934, resulting in alleged short-swing profits of approximately $99 million that were recoverable by Unocal under Section 16(b). The plaintiffs also asked the Court to grant pre-judgment interest, which amount could currently exceed $50 million. Mesa and the other defendants contended that none of the transactions in Unocal shares were subject to Section 16(b) and, further, that no profit was realized. However, in light of the significant uncertainties relating to continuing the litigation and other relevant circumstances, Mesa determined that entering into a settlement agreement with Unocal (the "Settlement Agreement") would be in the best interests of Mesa and its stockholders. Pursuant to the Settlement Agreement, the Mesa and the other defendants have agreed to pay to Unocal an aggregate of $47.5 million, of which $42.75 million will be paid by Mesa and $4.75 million will be paid by certain other defendants not affiliated with Mesa. The Settlement Agreement is subject to approval of the Federal District Court for the Central District of California, following a hearing to determine the fairness, reasonableness and adequacy of the amounts to be paid pursuant to the Settlement Agreement and whether the Settlement Agreement should be approved by the Court. Such hearing is currently scheduled for February 28, 1994. The Secured Notes offered hereby will not be issued unless and until such final approval is received. The Court preliminarily approved the Settlement on January 18, 1994. See "Plan of Distribution." Both the Settlement Agreement and the Exchange Offer described below have or had as a principal goal the reduction of near term financial risk to Mesa so as to permit Mesa to undertake, subject to market conditions, an orderly recapitalization. Mesa will seek to deleverage its balance sheet principally through the public or private sale of equity securities and the application of the proceeds therefrom to repay debt, and by reducing the interest expense on its remaining debt by refinancing such debt at lower rates. Mesa believes that the combination of the Exchange Offer and the Settlement has removed the actual and potential requirement for large cash outflows from Mesa until at least December 1995, when Mesa will begin making semiannual cash interest payments on the Discount Notes, or until June 1996, when Mesa's unsecured discount notes mature. EXCHANGE OFFER On August 26, 1993, Mesa completed an exchange offer (the "Exchange Offer") for all of the outstanding 13 1/2% Subordinated Notes due May 1, 1999 (the "13 1/2% Subordinated Notes") and 12% Subordinated Notes due August 1, 1996 (the "12% Subordinated Notes" and, together with the 13 1/2% Subordinated Notes, the "Subordinated Notes") of the Obligors. Pursuant to the Exchange Offer, approximately $586.3 million aggregate principal amount of Subordinated Notes were tendered and accepted for exchange, and the Obligors issued approximately $569.3 million aggregate principal amount ($472.9 million accreted value at December 31, 1993) of Secured Notes, approximately $178.8 aggregate principal amount ($148.6 million accreted value at December 31, 1993) of 12 3/4% Discount Notes due June 30, 1996 (the "Unsecured Notes" and, together with the Secured Notes, the "Discount Notes") and approximately $29.3 million aggregate principal amount of 0% Convertible Notes due June 30, 1998 (the "Convertible Notes"). The terms and provisions of the Secured Notes and the Unsecured Notes are substantially similar, except with respect to security, maturity and redemption provisions. Pursuant to the terms of the indenture governing the Convertible Notes, all of the previously outstanding Convertible Notes have been converted into approximately 7.5 million shares of the Company's common stock (the "Common Stock"). The Exchange Offer reduced the Obligors' cash requirements through December 1995, which enhances the Obligors' ability to service their debt obligations and make capital expenditures from available cash and operating cash flows. Specifically, completion of the Exchange Offer enabled the Obligors to replace substantially all of their Subordinated Notes, which in the aggregate had cash interest requirements of $75 million per year through August 1996, with securities that do not require interest payments until December 1995. In exchange for accepting the deferral of interest payments, tendering Subordinated Noteholders obtained, among other things, second lien security interests in certain assets to collateralize the Secured Notes received in the Exchange Offer, improved ranking of their securities relative to non-tendering Subordinated Noteholders, better covenant protection and debt securities convertible into equity of the Company. The Exchange Offer also altered the timing of required principal repayments by the Obligors. The 12% Subordinated Notes mature in 1996 and the 13 1/2% Subordinated Notes mature in 1999. The Exchange Offer had the effect of moving approximately $115 million of scheduled principal payments from 1996 to 1998 and approximately $293 million of scheduled principal payments from 1999 to 1998. In addition, the Exchange Offer resulted in exchanging Subordinated Noteholders receiving Convertible Notes in exchange for a portion of their Subordinated Notes. The Convertible Notes were convertible into shares of Common Stock at the option of the holders at any time and by Mesa at any time after November 26, 1993. In December 1993, the Obligors converted all of the outstanding Convertible Notes into shares of Common Stock. As a result, a portion of each exchanging Subordinated Noteholder's debt securities was converted into equity. Concurrently with the Exchange Offer, Mesa's bank lenders agreed to amend Mesa's Credit Agreement in order to extend the payment of a portion of the outstanding principal, which otherwise would have matured in June 1994 (or earlier as a result of the then current default in the payment of interest on the Subordinated Notes, which default was cured upon completion of the Exchange Offer), and to amend certain covenants thereunder, including a reduction of Mesa's tangible adjusted equity requirement. In return, the banks received, among other things, additional security, earlier payment of a portion of the outstanding principal and an increase in the rate of interest payable on the Credit Agreement. Pursuant to the amendments, upon the completion of the Exchange Offer, Mesa repaid $20.6 million of borrowings under the Credit Agreement and made additional principal payments of $18.7 million in the fourth quarter of 1993. The Credit Agreement requires that Mesa make additional principal payments of $19.5 million in the first half of 1994 and $50 million (including cash collateralization of $10.4 million in letters of credit) on June 30, 1995. THE OFFERING Issue...................... 12 3/4% Secured Discount Notes due June 30, 1998. Aggregate Amount........... Consummation of the Offering is conditioned upon, among other things, the sale of an aggregate amount of Secured Notes that would result in net proceeds of at least $40 million, before deducting expenses of the Company, unless a Prospectus Supplement otherwise provides. The Obligors will not issue an amount of Secured Notes pursuant to this Offering that would result in net proceeds of more than $42.75 million, before deducting expenses of the Company. Yield...................... The yield to maturity of a Secured Note is 12 3/4%, based on the following terms of the Secured Notes (expressed per $1,000 face amount): (i) the Accreted Value of a Secured Note of approximately $830.77 at December 31, 1993, (ii) the increase in Accreted Value of a Secured Note to $1,000 from December 31, 1993 through and including June 30, 1995, (iii) cash interest payments at 12 3/4% per annum paid semiannually in arrears thereafter, and (iv) the payment of $1,000 (representing the Accreted Value as of December 31, 1993 of approximately $830.77 plus the cumulative increase in Accreted Value from December 31, 1993 through and including June 30, 1995, totaling approximately $169.23) at maturity. The Accreted Value of each $1,000 face amount of Secured Notes at each June 30 and December 31 from December 31, 1993 through and including June 30, 1995 is shown in the table below. <TABLE> <CAPTION> ACCRETED VALUE -------------- <S> <C> December 31, 1993............................... $ 830.7709 June 30, 1994................................... 883.7326 December 31, 1994............................... 940.0705 June 30, 1995 and thereafter.................... 1,000.0000 </TABLE> Interest................... The Secured Notes do not bear interest through June 30, 1995. However, the Accreted Value of the Secured Notes will increase from December 31, 1993 through and including June 30, 1995 at a rate of 12 3/4% per annum, compounded semiannually on each June 30 and December 31. On July 1, 1995, each Secured Note will have a final Accreted Value of $1,000 (or an integral multiple thereof). From and after July 1, 1995 the Secured Notes will accrue interest at a rate of 12 3/4% per annum, payable only in cash. Such interest will be payable semiannually in arrears on June 30 and December 31 of each year, beginning December 31, 1995. Obligors................... The Secured Notes are the joint and several obligations of the Company, MOC and Capital. Security................... The obligations of the Obligors under the Secured Notes are secured by (i) a mortgage and security agreement granting a second lien on certain properties and related assets and contractual rights of MOC in the West Panhandle field of Texas and (ii) a pledge agreement granting a second lien and security interest in a 65% limited partnership interest in HCLP (which will be increased to approximately 77% upon issuance of all Secured Notes offered hereby), which is part of the limited partnership interest in HCLP owned by MOC. Such liens are subordinate to prior liens to secure the $69.5 million of First Lien Debt (as defined) outstanding under the Credit Agreement at December 31, 1993 and any future First Lien Debt, subject to the limitations described herein. In addition, the right of the Trustee for the Secured Notes to exercise rights with respect to the Collateral is subject to the terms of an Intercreditor Agreement with the collateral agent for the holders of such First Lien Debt. See "Description of the Secured Notes -- Security." Mandatory Retirement....... In the event that as of August 31, 1994 or August 31, 1995, the Obligors have Mandatory Retirement Funds (as defined), the Obligors will be required to redeem or make an offer to purchase Secured Notes with such funds on the terms described herein. The indenture for the Unsecured Notes contains a similar provision, and Mandatory Retirement Funds will first be applied to redeem or offer to purchase all outstanding Unsecured Notes and then to redeem or offer to purchase Secured Notes. Optional Redemption........ The Secured Notes may be redeemed at the option of the Obligors, in whole at any time or in part from time to time, at redemption prices ranging from a current price of 110.25% of the Accreted Value thereof at the redemption date and declining on a semiannual basis to 100% at July 1, 1996, as set forth herein, plus accrued interest thereon to the redemption date if such date is on or after July 1, 1995. Change in Control.......... In the event of a Change in Control (as defined), the Obligors will be required to make an offer to purchase all of the Secured Notes, (a) at a price equal to 101% of the Accreted Value thereof on the date of purchase if such date is on or prior to June 30, 1995, and (b) at a price equal to 101% of the face amount thereof plus accrued interest thereon to the date of purchase if such date is on or after July 1, 1995. See "Risk Factors -- Funding of Change in Control Offer."

parsed_sections/prospectus_summary/1994/CIK0000800469_resorts_prospectus_summary.txt

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the detailed information and financial statements and related notes appearing elsewhere in this Prospectus. THE REGISTRANTS RII is a holding company which, through its subsidiary, RIH, is principally engaged in the ownership and operation of the Resorts Casino Hotel in Atlantic City, New Jersey. In addition, RII owns land in Atlantic City at various sites, including approximately 10 acres of Boardwalk property that the Company leases to Atlantic City Showboat, Inc. ("ACS") under a 99-year net lease (the "Showboat Lease") and approximately 90 acres which are available for development. RII was incorporated in 1958 and is a Delaware corporation. RIHF was incorporated in Delaware in 1993 for the limited purpose of issuing the Mortgage Notes and the Junior Mortgage Notes, and receiving certain corresponding promissory notes of RIH. RIHF also entered into the Senior Facility. See "Restructuring of Series Notes." RIHF is a wholly owned subsidiary of RII. RIH owns and operates all the property and improvements of the Resorts Casino Hotel. The Resorts Casino Hotel is located on the Boardwalk in Atlantic City, New Jersey, and has approximately 670 guest rooms, a 60,000-square-foot casino and related facilities. RIH was incorporated in 1903 and is a New Jersey corporation. RIH has issued certain promissory notes and guarantees relating to the Mortgage Notes and Junior Mortgage Notes.

parsed_sections/prospectus_summary/1994/CIK0000806085_lehman_prospectus_summary.txt

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus. Capitalized terms used but not defined in this summary are defined elsewhere in this Prospectus. Unless the context otherwise requires, the information contained in this Prospectus, including numbers of shares, gives effect to a 0.3179723 for 1 reverse stock split (the "Reverse Stock Split") of the outstanding Common Stock. The calculation of the reverse split ratio is based on the number of American Express common shares expected to be outstanding as of the record date for the Distribution; however, the final reverse split ratio will be based on the number of American Express common shares actually outstanding as of the record date for the Distribution.

parsed_sections/prospectus_summary/1994/CIK0000807877_bayou_prospectus_summary.txt

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus. See "Investment Considerations" for certain factors that should be considered in connection with an investment in the First Mortgage Notes offered hereby. Unless the context otherwise requires, all references to "the Company" mean the Company and its subsidiaries and all references to a fiscal year refer to the fiscal year of the Company which ends September 30 (for example, references to "fiscal 1993" mean the fiscal year ended September 30, 1993). THE COMPANY The Company is a leading producer of light structural steel products. The Company owns and operates a steel minimill strategically located on the Mississippi River in LaPlace, Louisiana, 35 miles northwest of New Orleans. The minimill, constructed at a cost of $243 million in 1981, is one of the most modern facilities in the world in its product line and utilizes state-of-the- art equipment and technology. The Company produces a variety of light structural steel products including angles, flats, channels, standard beams and wide-flange beams (collectively, "shapes"). The shapes produced by the Company have a wide range of commercial and industrial applications, including the construction and manufacturing of petrochemical plants, barges and light ships, railcars, trucks and trailers, rack systems, tunnel and mine support products, joists, sign and guardrail posts for highways, power and radio transmission towers, and bridges. The Company sells its products to approximately 600 customers, most of which are steel service centers, in 44 states, Canada, Mexico and overseas. The Company also sells excess billets (which have not been rolled into shapes) on a worldwide basis to other steel producers for their own rolling or forging applications. In fiscal 1993, the Company sold 403,274 tons of shapes and 59,604 tons of billets. According to the American Iron and Steel Institute ("AISI"), the domestic market demand for all structural steel shape products in 1992 was 5.1 million tons. The Company estimates that its share of the total domestic shapes market was approximately 8% in 1992. The Company believes that its share of the light structural steel shapes market (the primary market in which the Company competes) is much higher, and that it is one of the five largest producers of light structural steel shapes in the U.S. The term "minimill" refers to a relatively low-cost steel production facility which uses steel scrap, rather than iron ore, as its basic raw material. In general, minimills recycle scrap using electric arc furnaces, continuous casters and rolling mills. The Company's minimill, which was owned and operated by Voest-Alpine A.G. (a state-owned Austrian industrial company) ("Voest- Alpine") until it was purchased by the Company in September 1986, includes a Krupp computer-controlled, electric arc furnace utilizing water-cooled sidewalls and roofs, two Voest-Alpine four-strand continuous casters, a computer supervised, Italimpianti reheat furnace and a 15-stand Danieli rolling mill (a second Krupp furnace is currently not in operation, but is available for additional production). The Company's steelmaking facility, which includes a deep-water dock, is strategically located on the Mississippi River, which the Company believes gives it certain transportation cost advantages because it can ship its product by barge, the least costly method of transportation in the steel industry. In addition, the Company operates three inventory stocking warehouses in Chicago, Tulsa and Pittsburgh which supplement its operations in Louisiana. These facilities, each of which includes an inland waterway dock, enable the Company to significantly increase its marketing territory by providing storage capacity for its finished products in three additional markets and by allowing the Company to meet customer demand far from its minimill facility on a timely basis. The Company believes that the location of its minimill on the Mississippi River, and its network of inland waterway warehouses, enable it to access markets for its products that would otherwise be unavailable to the Company. The Company believes that the Mississippi River location of its minimill also gives it advantages over other minimills in the purchase of steel scrap, which accounts for nearly 42% of total production costs. The Company is able to efficiently transport scrap from suppliers throughout the inland waterway system and through the Gulf of Mexico, permitting it to take advantage of scrap purchasing opportunities far from its minimill facility, and to protect itself from supply imbalances that develop from time to time in specific local markets. In addition, unlike most other minimills, the Company, through its own scrap purchasing staff, buys scrap directly from scrap dealers and contractors rather than through brokers. The Company believes that its enhanced knowledge of scrap market conditions gained by being directly involved in scrap procurement on a daily basis, coupled with management's long experience in metals recycling markets, gives the Company a competitive advantage. In March 1993, following the expiration of its existing labor contract, the United Steelworkers of America Local 9121 (the "Union") initiated a strike against the Company after the Company and the Union failed to reach agreement on a new labor contract. In connection with the strike, the Union filed unfair labor practice charges against the Company with the regional office of the National Labor Relations Board ("NLRB"), which included 22 specific allegations. In late January, the Regional Director of the NLRB informed the Company that it had sufficient grounds to issue a complaint against the Company and order a trial with respect to eight of these allegations, which included charges by the Union that the Company: withdrew from, or altered the terms of, tentatively agreed-upon bargaining proposals in retaliation against the Union's announcing or taking part in activity protected under the National Labor Relations Act ("NLRA"); offered bargaining proposals which contained unlawful limitations on engaging in protected Union activity on work time; threatened to unilaterally change the terms and conditions of employment for employees in the bargaining unit without bargaining in good faith with the Union; offered regressive bargaining proposals in bad faith; raised new bargaining proposals at advanced stages of bargaining in bad faith; offered bargaining proposals which required the Union to reopen the contracting out clause without providing for its right to strike in order to frustrate bargaining or to prevent the reaching of an agreement; made regressive bargaining proposals in retaliation for filing charges with the NLRB; and interfered with, restrained and coerced employees in the exercise of their rights guaranteed by Section 7 of the NLRA. In order to avoid a lengthy and expensive trial on these issues, the Company agreed to negotiate a settlement agreement with the NLRB. The proposed settlement agreement does not contain an admission by the Company that it engaged in any unfair labor practices. The settlement agreement requires the Company to post a notice stating that it will not engage in any of the actions specified in the eight allegations described above. The other 14 allegations will be dismissed concurrently with the approval by the NLRB of the settlement agreement. As part of the proposed settlement agreement, the Company would also agree to accord all eligible striking employees, who have not engaged in unprotected activity, upon unconditional application, full reinstatement to their former jobs, or if their jobs no longer exist, to substantially equivalent positions, without prejudice to their seniority or other rights or privileges of employment. Since the strike began, the Company has permitted any striking employee who wished to return to his job, upon the terms of the expired contract, the opportunity to do so (and the temporary replacement workers have been operating under the terms of the expired contract). The Company has signed the proposed settlement agreement but has been informed by the NLRB that the Union will not sign the proposed agreement. The Company has been informed by the NLRB that the NLRB will unilaterally approve the settlement agreement and the Company expects such approval by the end of February. The Company expects that the Union will appeal the settlement agreement and the dismissal of the 14 other charges. However, even if the appeal were successful and a trial were ordered, the Company does not believe that the ultimate outcome would have a material affect on the Company's operations. Since the Company has not replaced any of the striking workers with permanent replacement employees and has not implemented any of its proposed contract terms, a return of striking workers upon the terms of the expired contract would have no financial effect on the Company's operations, although it could disrupt operations for a time. The Company is currently operating at full capacity, utilizing a combination of temporary replacement workers, Union employees who have returned to work and salaried employees, and since July 1993 overall production and productivity have been near pre-strike levels. The Company believes it can maintain and continue to improve its current production and productivity levels even if the strike continues indefinitely. During the initial phases of the strike, however, the Company had to curtail its operations (which resulted in reduced production of approximately 27,000 tons in the melt shop and approximately 30,000 tons in the rolling mill, higher fixed costs per ton produced during such period, higher per ton conversion costs--the cost of converting raw materials into shapes--and lost sales due to lower inventory levels resulting from reduced production) and productivity was impacted by retraining of new employees and higher consumption of materials for several months, all of which adversely affected the Company's profitability, particularly in the early weeks of the strike. As of December 31, 1993, the Company has incurred approximately $3.6 million in out-of-pocket costs for security, legal matters and other services related to the strike ($2.5 million of which was incurred during the first three months of the strike). Although uncertainties inherent in strikes generally make it impossible to predict the duration or ultimate cost of the strike to the Company, the Company expects that future strike-related costs will not exceed $100,000 per month. The Company's principal operating strategy is to improve operating results by reducing costs and increasing sales of higher margin shape products. The Company believes that it can lower its labor costs by as much as $7 per ton from fiscal 1993 levels by making operational changes and operating the minimill with fewer workers. The Company began to implement many operational changes in fiscal 1993, but their impact is not fully reflected in fiscal 1993 results since these changes were implemented over the course of the year. In connection with the foregoing, the Company recently increased its melt shop operations by changing from three to four shifts (and by operating seven days a week rather than six) as part of its cost savings program. Labor costs per ton in fiscal 1993 also were somewhat distorted by the effects of the strike, which resulted in periods of lower production and productivity, periods of substantially increased overtime and the Company's need to temporarily use outside contractors. The Company also intends to implement a two-year, $8.6 million capital expenditure program upon completion of the Offering to reduce its production and operating costs and increase its rolling mill capacity. The principal elements of this program are (i) an automobile shredder to enable the Company to shred car bodies on-site and reduce scrap costs, (ii) a steel straightener to improve production capacity in the rolling mill, (iii) an off-line sawing system and conveyor to further improve production capacity in the rolling mill, (iv) a second overhead crane to reduce product changeover time in the rolling mill and (v) a shipping bay rail spur to reduce the handling of finished products. The Company believes that these capital projects, when fully implemented, would result in annual operating cost savings of approximately $7.10 per ton. The Company believes that the aggregate annual operating cost savings resulting from its labor initiatives and proposed capital expenditure program, when fully implemented, would approximate $6.5 million. Although these savings estimates are based upon historical data and assumptions that management believes are reasonable, there can be no assurance that the Company will be able to achieve these cost savings. Furthermore, these anticipated cost savings could be offset by increases in raw material costs (the largest component of which is the cost of scrap), recessionary conditions in the steel industry, decreased demand for the Company's products, oversupply of shape products and competition, each of which have had, or in the future could have, a material impact on the Company's costs. THE OFFERING Securities.............. $75,000,000 aggregate principal amount of % First Mortgage Notes due 2001. Interest Payment Dates.. Interest will accrue from the date of issuance and will be payable semi-annually on each 15 and 15, commencing 15, 1994. Optional Redemption..... The First Mortgage Notes will be redeemable, in whole or in part, at any time on and after 15, 1998, initially at % of their principal amount, plus ac- crued interest to the date of redemption, and declin- ing ratably to par on 15, 2000. Ranking................. The First Mortgage Notes will rank pari passu in right of payment with any existing and future senior Indebtedness of the Company, including obligations of the Company arising in connection with the Credit Fa- cility, and will rank senior to all subordinated In- debtedness of the Company. Security................ As security for the First Mortgage Notes, the Company will grant a first priority security interest, sub- ject to certain exceptions, in substantially all un- encumbered existing and future real and personal property, fixtures, machinery and equipment (includ- ing certain operating equipment classified as inven- tory) and the proceeds thereof, whether existing or hereafter acquired. The Credit Facility and a pur- chase money facility relating to the Tulsa stocking location are secured by a lien on the inventory and accounts receivable of the Company. Change of Control....... In the event of a Change of Control, Holders will have the right to require the Company to purchase all First Mortgage Notes then outstanding at a purchase price equal to 101% of the principal amount thereof, plus accrued interest to the date of repurchase. Change of Control generally means that control of the Company (whether through stock ownership or control of the Company's assets) is held by persons other than controlling persons of the Company as of the date of the Indenture. A Change of Control could constitute a default under the Credit Facility. If a Change of Control were to occur, the Company might be unable to repay all of its obligations under the Credit Facility, to pur- chase all of the First Mortgage Notes tendered and to repay other indebtedness that may become payable upon the occurrence of a Change of Control. Asset Sale Offers....... The net cash proceeds of sales or other dispositions of Collateral (as defined herein) by the Company shall become subject to the lien of the Indenture and the Security Documents. In the event the net cash proceeds of asset sales (excluding the sale of cer- tain obsolete assets) equal or exceed $5 million, the Company shall elect, within six months of such date, to either apply such net cash proceeds to the acqui- sition of assets that, upon purchase, shall become subject to the lien of the Security Documents if the net cash proceeds represent Collateral Proceeds, or to make offers to purchase a portion (calculated as set forth herein) of the First Mortgage Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued interest to the date of repur- chase. Notwithstanding the foregoing, the Company and its Subsidiaries, in the aggregate, shall be permit- ted to retain $1,000,000 of the net cash proceeds from asset sales. Covenants............... The Indenture under which the First Mortgage Notes will be issued will contain certain restrictive cove- nants that, among other things, will limit the abil- ity of the Company to incur additional indebtedness; create liens; make certain restricted payments; en- gage in certain transactions with affiliates; engage in sale and leaseback transactions; dispose of as- sets; issue preferred stock of its subsidiaries; transfer assets to its subsidiaries; enter into agreements that restrict the ability of its subsidi- aries to make dividends and distributions; engage in mergers, consolidations and transfers of substan- tially all of the Company's assets; make certain in- vestments, loans and advances; and create non-re- course subsidiaries. For a more detailed description of the First Mortgage Notes, see "Description of the First Mortgage Notes." USE OF PROCEEDS The net proceeds of this Offering will be used for the repayment of outstanding indebtedness, implementation of capital projects and general working capital purposes. See "Use of Proceeds."

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+SUMMARY The following information is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements contained elsewhere in this Prospectus. As used in this Prospectus, the "Company" or "Peters" refers to J.M. Peters Company, Inc., a Delaware corporation, and its subsidiaries and consolidated partnerships (including the Guarantors), unless the context requires otherwise. THE COMPANY The Company is one of the leading single family homebuilders in Orange County, California and Las Vegas, Nevada, where it builds and sells homes targeted to entry level and move-up buyers. Since 1975, the Company has built and sold nearly 8,000 homes, principally in Orange County, but also in the adjacent counties of Riverside, San Diego and Los Angeles. Since 1969, Durable Homes, Inc. ("Durable"), a wholly-owned subsidiary that was acquired by the Company in 1993, has built and sold nearly 7,000 homes, principally in Las Vegas. The Company believes that in 1993 it was the 10th largest homebuilder in Orange County and Durable was the 8th largest homebuilder in Las Vegas (in each case, based on unit sales). During the fiscal year ended February 28, 1994, the Company (including Durable's results on a pro forma basis for the full fiscal year) closed 644 home sales at an average sales price of $159,000 (including 205 homes closed in California at an average sales price of $293,000 and 439 homes closed in Nevada at an average sales price of $96,000). During the fiscal quarter ended May 31, 1994, the Company closed 193 homes at an average price of $158,500 and 6 custom lots at an average price of $192,000. Recent market information indicates that the Orange County housing market is improving and that the Las Vegas housing market remains quite strong. The number of sales of new homes in Orange County was 15% higher during 1993 than during 1992, and the overall inventory of unsold completed new homes in Orange County decreased from an approximately 40 week supply in September 1990 to an approximately 14 week supply in June 1994. The percentage of households in the Orange County area that can afford a median priced home increased from 14% in December 1989 to 42% in May 1994. Las Vegas, with an expanding job base and relatively low median housing prices, was one of the fastest growing markets in the United States for new home sales in 1993, with annual unit sales of 15,800, 40% greater than the 1992 level. The U.S. Census Bureau ranked Las Vegas as the number one metropolitan area in percentage population growth between 1990 and 1992, with a 14% gain to 971,200 people. During the same period, Orange County gained 106,000 new residents, an increase of over 4%. While the Company believes that the housing market in California is recovering and that the housing market in Nevada is holding strong, the Company will continue to be affected by real estate market conditions in areas where its development projects are located and in areas where its potential customers reside. The residential homebuilding industry is cyclical and sensitive to changes in general national and regional economic conditions, such as: levels of employment; consumer confidence and income; availability of financing to homebuilders for acquisitions, development and construction; availability of financing to homebuyers for permanent mortgages; interest rate levels; the condition of the resale market for used homes; and the general demand for housing. Housing demand is particularly sensitive to changes in interest rates. If mortgage interest rates increase significantly, thus affecting prospective buyers' ability to obtain affordable financing for their home purchases, the Company's sales and operating results may be adversely affected. In August 1992, Capital Pacific Homes, Inc., a Delaware corporation ("CPH") that is wholly owned by Hadi Makarechian, Chairman of the Board and Chief Executive Officer of the Company, and Dale Dowers, President and Chief Operating Officer of the Company (who have 35 years of combined financial, construction, homebuilding and design experience), acquired control of the Company in a $47.25 million purchase (the "Acquisition") from The Resolution Trust Corporation (the "RTC"). At the time of the Acquisition, the Company had an experienced management team in place and almost 2,000 entitled lots in California (a majority of which were still held by the Company as of May 31, 1994). The Acquisition (and the Company's results of operations for the first six months of fiscal year 1993) allowed the Company to significantly improve its balance sheet, as debt was reduced by $215 million (from $263 million to $48 million), stockholders' equity increased by $76 million to $51 million and the book value of residential real Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED SEPTEMBER 21, 1994 PROSPECTUS OFFER FOR ALL OUTSTANDING 12 3/4% SENIOR NOTES DUE 2002 IN EXCHANGE FOR 12 3/4% SENIOR NOTES DUE MAY 1, 2002 OF J.M. PETERS COMPANY, INC. FULLY AND UNCONDITIONALLY GUARANTEED BY DURABLE HOMES, INC. PETERS RANCHLAND COMPANY, INC. AND J.M. PETERS NEVADA, INC. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1994, UNLESS EXTENDED J.M. Peters Company, Inc., a Delaware corporation (the "Company"), hereby offers to exchange an aggregate principal amount of up to $100,000,000 of its 12 3/4% Senior Notes Due May 1, 2002 (the "New Notes") for a like principal amount of its 12 3/4% Senior Notes Due 2002 (the "Old Notes") outstanding on the date hereof upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"). The New Notes and Old Notes are collectively hereinafter referred to as the "Notes." The terms of the New Notes are identical in all material respects to those of the Old Notes except (i) for certain transfer restrictions and registration rights relating to the Old Notes and (ii) that, if by November 14, 1994, neither an Exchange Offer with respect to the Old Notes has been consummated nor a Shelf Registration Statement (as defined) with respect to such Notes has been declared effective, the interest rate on each Old Note from and after November 14, 1994 shall be permanently increased to a rate of 13 1/4% per annum. The New Notes will be issued pursuant to, and entitled to the benefits of, the Indenture (as defined) governing the Old Notes. The Old Notes and the New Notes are jointly, severally, fully and unconditionally guaranteed by Durable Homes, Inc., Peters Ranchland Company, Inc. and J.M. Peters Nevada, Inc. (collectively, the "Guarantors"), each of which is a wholly-owned subsidiary of the Company. The New Notes will be senior unsecured indebtedness of the Company, ranking pari passu in right of payment with the Company's other unsecured indebtedness. At May 31, 1994, the Company had no indebtedness junior to the Old Notes and $10 million of secured indebtedness senior to Old Notes. Holders of future secured indebtedness will be entitled to payment out of the proceeds of their collateral prior to any holders of general unsecured indebtedness, including holders of the Notes. See "Description of the Notes." The New Notes will bear interest from and including the date of consummation of the Exchange Offer. Interest on the New Notes will be payable in arrears on May 1 and November 1 of each year commencing November 1, 1994. Additionally, interest on the New Notes will accrue from the last interest payment date on which interest was paid on the Old Notes surrendered in exchange therefor or, if no interest has been paid on the Old Notes, from the date of original issue of the Old Notes. The New Notes are being offered hereunder in order to satisfy certain obligations of the Company contained in the Notes Registration Rights Agreement dated May 13, 1994 (the "Registration Agreement"), between the Company and Morgan Stanley & Co. Incorporated, as the initial purchaser, with respect to the initial sale of the Old Notes. The Company will not receive any proceeds from the Exchange Offer. The Company will pay all the expenses incident to the Exchange Offer. Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date for the Exchange Offer. In the event the Company terminates the Exchange Offer and does not accept for exchange any Old Notes with respect to the Exchange Offer, the Company will promptly return such Old Notes to the holders thereof. See "The Exchange Offer." ------------------------ Prior to the Exchange Offer, there has been no public market for the Old Notes. If a market for the New Notes should develop, such New Notes could trade at a discount from their principal amount. The Company currently does not intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotation system and no active public market for the New Notes is currently anticipated. There can be no assurance that an active public market for the New Notes will develop. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange pursuant to the Exchange Offer. SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH 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 , 1994. estate inventories was written down 51% from $225 million to $111 million. Prior to the Acquisition, the Company had already taken significant writedowns to its land inventory. Such writedowns aggregated approximately $140.3 million during fiscal years 1991 and 1992. During much of the period of RTC control, new construction and acquisition activity was halted in California as the RTC followed a strategy essentially limited to liquidating inventory. Closings in California decreased from 775 homes in fiscal year 1990 (the year prior to RTC control) to 115 homes in fiscal year 1993 (the last year that included any period of RTC control). At the time of the Acquisition, construction activity had virtually ceased and there were only 13 completed and 15 partially completed homes remaining at the Company. Because of the time required to recommence active building operations after the Acquisition, the Company did not begin closing a significant number of homes in California until the third and fourth quarters of fiscal year 1994. Because of the 22 months of RTC control, the period required to recommence California operations and the acquisition of Durable in the middle of fiscal year 1994, management of the Company does not believe that its historical operating results prior to the third and fourth quarters of fiscal year 1994 are meaningful indicators of its future performance. Since the Acquisition, the Company has focused on: (i) recommencing California building operations; (ii) diversifying its geographic markets to include areas outside of Southern California; (iii) diversifying its product offerings to include both entry level and move-up homes in order to appeal to a broad customer base; (iv) improving and broadening its capital base and sources of financial liquidity; (v) controlling costs while increasing operational efficiency; and (vi) reducing land and inventory risk by avoiding speculative building, constraining project sizes, avoiding entitlement risks and acquiring land through the use of options, purchase contracts, development agreements and joint ventures. The Company believes that it has made progress in implementing the strategic goals described above. Since the Acquisition, the Company has: (i) recommenced active building operations in Southern California; (ii) become a significant participant in the Las Vegas, Nevada residential housing market through its acquisition of Durable (the "Durable Acquisition"); (iii) reduced prices, largely as a result of its reduced land basis, on its California products without adversely affecting its product design or quality; (iv) obtained approximately $120 million of construction financing commitments, which includes approximately $66 million from IHP Investment Fund I, L.P. (the "CalPERS LP"), the limited partner in four California partnerships with the Company (the "CalPERS Partnerships"), which amounts the Company has utilized in the past but are presently not available to the Company as a result of restrictions contained in the Indenture; (v) established new management control systems and reduced overhead; and (vi) completed the sale and issuance of the Old Notes and the Warrants. While the Company believes that it has made progress in achieving its strategic goals, the Company had significant operating losses during the 1991, 1992 and 1993 fiscal years, which included the 22-month period of RTC control (November 1990 to August 1992). During much of the period of RTC control, the operations of the Company essentially were limited to liquidating standing inventory and, at the direction of its RTC-controlled board of directors, the Company did not start any new projects or acquire land or options for land for new projects. The Company was profitable during the 1994 fiscal year, but it did incur losses during the first two quarters of such fiscal year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." At May 31, 1994, the Company was in various stages of development with respect to 21 active projects, including 11 projects located in the Orange and Riverside Counties of Southern California and in 10 projects located in Las Vegas and Laughlin, Nevada. The Company is actively selling homes in 18 of these projects. At May 31, 1994, the Company owned approximately 1,515 building sites (946 in California and 569 in Nevada) and controlled an additional 1,396 building sites (639 in California and 757 in Nevada) through options and purchase contracts. The Company expects to start construction on approximately 14 new projects during fiscal year 1995 and also expects that substantially all of the projects that generated closings during the third and fourth quarters of fiscal year 1994 will be generating closings throughout fiscal year 1995. At May 31, 1994, the Company had a total backlog of 279 homes sold with an aggregate sales value of $55.1 million, which is moderately lower than the backlog at the start of the third and fourth quarters of fiscal year 1994. The backlog at May 31, 1994 included 132 homes sold with an aggregate sales value of $40.0 million in California and 147 homes sold with an aggregate sales value of $15.1 million in Nevada. The Company was originally incorporated in California in 1975, reincorporated in Nevada in 1987 and reincorporated in Delaware in 1993. Durable was incorporated in Nevada in 1975. Peters Ranchland Company, Inc. was incorporated in Delaware in 1992. J.M. Peters Nevada, Inc. was incorporated in Delaware in 1993. The principal executive offices of the Company and each of the Guarantors are located at 3501 Jamboree Road, Suite 200, Newport Beach, California, 92660, and the telephone number is (714) 854-2500. STRUCTURE OF THE COMPANY The Company conducts its business directly and through its subsidiaries and consolidated partnerships. As of May 31, 1994, approximately 76.0% of the Company's assets were held directly at J.M. Peters Company, Inc, approximately 10.6% were held directly at Durable and approximately 13.4% were held through Peters Ranchland, Inc. The following chart sets forth the structure of the Company: <TABLE> <S> <C> <C> <C> <C> ------------------------------ J.M. PETERS COMPANY, INC. a Delaware corporation ------------------------------ - ------------------------ ------------------------ ------------------------ J.M. PETERS NEVADA, DURABLE HOMES, INC.* PETERS RANCHLAND INC. a Nevada corporation COMPANY, INC. a Delaware corporation Wholly Owned Subsidiary a Delaware corporation Wholly Owned Subsidiary Wholly Owned Subsidiary - ------------------------ ------------------------ ------------------------ - ------------------------ ------------------------ ------------------------ General Partner of: General Partner of: General Partner of: Taos Estates, L.P. Las Hadas, L.P. Ranchland Alicanta Development, L.P. Plateau Venture, L.P. Ranchland Montilla, Development, L.P. Portraits Venture, L.P. Ranchland Fairway Estates Development, L.P. Taos Estates, L.P. Ranchland Portola Development, L.P. - ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ P.B. PARTNERS BAYHILL ESCORW, INC. NEWPORT DESIGN CAPITAL PACIFIC DURABLE HOMES OF a California a California corporation CENTER, INC. COMMUNITIES, INC. CALIFORNIA, INC., general partnership 50% the Company a California corporation a Delaware corporation a Delaware corporation 50% the Company 50% Bernard Selz Wholly Owned Subsidiary Wholly Owned Subsidiary Wholly Owned Subsidiary 50% Bramalea California, Inc. - ------------------------ ------------------------ ------------------------ ------------------------ ----------------------- * Joint, several, full and unconditional guarantors of the Notes. </TABLE> See "Business -- Joint Ventures" for additional information regarding each subsidiary's interest in the joint ventures for which it acts as the general partner. RECENT DEVELOPMENTS The Company's backlog of sold but unclosed homes stood at 222 homes at August 31, 1994 versus 297 homes at August 31, 1993. The lower backlog is the result of a temporary lack of inventory for sale in California and Nevada and the effect of increased interest rates on the entry-level buyer of Durable homes in Nevada. In the quarter ended August 31, 1994, the Company closed 172 homes, up from 15 homes closed in the comparable period ended August 31, 1993. The Company has recently formed two new subsidiaries. J.M. Peters Arizona, Inc. will concentrate on homebuilding in the Arizona market. Capital Pacific Mortgage, Inc. was formed for the purpose of entering into a joint venture with a Nevada mortgage broker for the purpose of financing sales of the Company's homes. The joint venture will be accounted for by the equity method. Neither the new subsidiaries nor the joint venture have any operating results to date. THE EXCHANGE OFFER SECURITIES OFFERED... Up to $100,000,000 aggregate principal amount of 12 3/4% Senior Notes Due May 1, 2002. The terms of the New Notes and Old Notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the Old Notes and except for certain interest provisions relating to the Old Notes described below under "-- Terms of the New Notes." THE EXCHANGE OFFER... The New Notes are being offered in exchange for a like principal amount of Old Notes. Old Notes may be exchanged only in integral multiples of $1,000. The issuance of the New Notes is intended to satisfy obligations of the Company contained in the Registration Agreement. EXPIRATION DATE; WITHDRAWAL OF TENDER............. The Exchange Offer will expire 5:00 p.m. New York City time, on , 1994, or such later date and time to which it is extended by the Company. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. CERTAIN CONDITIONS TO THE EXCHANGE OFFERS............ The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. The Company currently expects that each of the conditions will be satisfied and that no waivers will be necessary. See "The Exchange Offer -- Certain Conditions to the Exchange Offer." PROCEDURES FOR TENDERING OLD NOTES Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with such Old Notes and any other required documentation, to the Exchange Agent (as defined) at the address set forth herein. See "The Exchange Offer -- Procedures for Tendering Old Notes." USE OF PROCEEDS...... There will be no proceeds to the Company from the exchange of Notes pursuant to the Exchange Offer. EXCHANGE AGENT....... United States Trust Company of New York is serving as the Exchange Agent in connection with the Exchange Offer. FEDERAL INCOME TAX CONSEQUENCES....... The exchange of Notes pursuant to the Exchange Offer will not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE EXCHANGE OFFER Based on certain interpretive letters issued by the staff of the Commission to third parties in unrelated transactions, holders of Old Notes (other than any holder who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who exchange their Old Notes for New Notes pursuant to the Exchange Offer generally may offer such New Notes for resale, resell such New Notes, and otherwise transfer such New Notes without compliance with the registration and prospectus delivery provisions of the Securities Act provided such New Notes are acquired in the ordinary course of the holder's business and such holders have no arrangement with any person to participate in a distribution of such New Notes. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution". In addition, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdiction or an exemption from registration or qualification is available and is complied with. The Company has agreed, pursuant to the Registration Agreement and subject to certain specified limitations therein, to register or qualify the New Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Notes reasonably requests in writing. If a holder of Old Notes does not exchange such Old Notes for New Notes pursuant to the Exchange Offer, such Old Notes will continue to be subject to the restrictions on transfer contained in the legend thereon. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. See "The Exchange Offer -- Consequences of Failure to Exchange; Resales of New Notes." The Old Notes were initially issued in units consisting of ten Old Notes and 79 Warrants to purchase Company Common Stock (the "Warrants"). Upon commencement of the Exchange Offer, the Old Notes and the Warrants will become separately transferable. Following commencement of the Exchange Offer but prior to its consummation, the Old Notes and the Warrants may be traded separately in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market. Following consummation of the Exchange Offer, the Warrants will remain eligible for PORTAL trading, but the New Notes will not be eligible for PORTAL trading. TERMS OF NEW NOTES The terms of the New Notes are identical in all material respects to the Old Notes, except (i) for certain transfer restrictions and registration rights relating to the Old Notes and (ii) that, if by November 14, 1994, neither the Exchange Offer has been consummated nor a Shelf Registration Statement with respect to such Notes has been declared effective, the interest rate on each Old Note from and after November 14, 1994 shall be permanently increased to a rate of 13 1/4% per annum. AGGREGATE PRINCIPAL AMOUNT..............$100,000,000. For a discussion of the federal income tax treatment of the New Notes, see "Certain Federal Income Tax Considerations." INTEREST PAYMENT DATES...............May 1 and November 1 of each year, commencing November 1, 1994. MATURITY..............May 1, 2002. GUARANTEES The New Notes will be fully and unconditionally guaranteed by Durable and certain of the Company's other subsidiaries. Each of the guarantees will be a senior unsecured obligation of such subsidiary and will rank pari passu in right of payment with all existing and future senior unsecured indebtedness of such subsidiary. See "Description of the Notes -- The Subsidiary Guarantees." OPTIONAL REDEMPTION Prior to May 1, 1997, the Company may use the proceeds of one or more Public Equity Offerings (as defined) to redeem up to 35% of the aggregate principal amount of the Notes at 112.75% of their principal amount, plus accrued interest. The New Notes will not otherwise be redeemable at the option of the Company prior to May 1, 1999. Thereafter, the New Notes will be redeemable at 106.375% of their principal amount, declining ratably to par on and after May 1, 2001, plus accrued interest. OFFERS TO PURCHASE In the event of a Change of Control, holders of the New Notes will have the right to require the Company to purchase the New Notes then outstanding at a purchase price equal to 101% of the principal amount of the New Notes, plus accrued interest to the date of purchase. In the event that for two consecutive fiscal quarters the Company's Consolidated Tangible Net Worth (as defined) is less than $37 million, the Company will be required to offer to purchase 10% of the then outstanding principal amount of the Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued interest to the date of purchase. At February 28, 1994, after giving effect to the issuance of the Old Notes and the Warrants and the application of the estimated net proceeds thereof, the Consolidated Tangible Net Worth of the Company would have been $57.1 million. In addition, under certain circumstances the Company will be required to offer to purchase New Notes with the proceeds of certain Asset Sales (as defined). For more complete information regarding mandatory offers to purchase the New Notes, see "Description of the Notes -- Certain Covenants -- Maintenance of Consolidated Tangible Net Worth," "Description of the Notes -- Certain Covenants -- Limitation on Asset Sales" and "Description of the Notes -- Repurchase of Notes upon a Change of Control." RANKING; SECURED INDEBTEDNESS....... The New Notes will be senior unsecured indebtedness of the Company, ranking pari passu in right of payment with all existing and future unsecured indebtedness of the Company that is not, by its terms, expressly subordinated in right of payment to the Notes. At May 31, 1994, the Company had no indebtedness junior to the Old Notes and $10 million of secured indebtedness senior to the Old Notes. The Company may Incur (as defined) each and all of the following: (i) Indebtedness (as defined) outstanding at any time in an aggregate principal amount not to exceed the greater of (A) $15 million or (B)(1) 10% of the Adjusted Consolidated Net Tangible Assets (as defined) if Adjusted Consolidated Net Tangible Assets are less than $200 million, or (2) 15% of Adjusted Consolidated Net Tangible Assets if Adjusted Consolidated Net Tangible Assets are equal to or greater than $200 million, in the case of each of clauses (A) and (B), less any amount of Indebtedness permanently repaid as provided under the heading "Description of the Notes -- Covenants -- Limitation on Asset Sales," (ii) Indebtedness to any Restricted Subsidiary (as defined) that is a Wholly Owned Subsidiary (as defined) of the Company; (iii) Non-Recourse Indebtedness (as defined); (iv) Refinancing Indebtedness (as defined), other than with respect to Indebtedness Incurred under clause (i) of this paragraph; and (v) Indebtedness under Interest Rate Agreements (as defined). The Indenture also permits the Company to grant liens to secure additional Indebtedness permitted by the Indenture so long as the amount of such secured Indebtedness (other than Non-Recourse Indebtedness) does not exceed 40% of the Adjusted Consolidated Net Tangible Assets (as defined) of the Company and also permits certain other liens. See "Description of the Notes -- Certain Covenants -- Limitation on Liens." Holders of such secured indebtedness will be entitled to payment out of the proceeds of their collateral prior to any holders of general unsecured indebtedness, including the holders of Notes. CERTAIN COVENANTS.... The Indenture contains certain covenants that, among other things, limit the incurrence of additional indebtedness by the Company and its Restricted Subsidiaries (as defined); the payment of dividends; the repurchase of capital stock and subordinated indebtedness; the making of certain other distributions and of certain loans and investments; the ability to create certain liens; the creation of restrictions on the ability of Restricted Subsidiaries to pay dividends or make other payments to the Company; and the ability to enter into certain transactions with affiliates or merge, consolidate or transfer substantially all assets. See "Description of the Notes -- Certain Covenants."

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes that the Underwriters' over-allotment option will not be exercised. Investors should carefully consider the information set forth under the heading "Investment Considerations." THE COMPANY Larizza Industries, Inc. (the "Company") designs and manufactures high-quality, plastic-based components and systems utilized in the interiors of automobiles, light trucks, sport utility vehicles and mini-vans. The Company's product line ranges from injection molded plastic components, such as sidewall trim, air outlet assemblies and cupholders, to highly complex systems, such as complete instrument panels and door panels. See "Business -- Products." Presently, the Company's principal customers are various divisions of General Motors Corporation ("General Motors"), Chrysler Corporation ("Chrysler"), Ford Motor Company ("Ford") and Honda Motor Company ("Honda"). See "Business -- Customers." The Company supplies components and systems for a diverse group of vehicle models manufactured by North American automotive original equipment manufacturers ("automotive OEMs"). The Company currently manufactures components and systems included on approximately 50 models being produced for the 1994 model year and expects to manufacture components and systems to be included on approximately 50 models to be produced for the 1995 model year. Examples of models for which the Company supplies components or systems include the Chevrolet Lumina/Monte Carlo (automobile), the Chevrolet Blazer (light truck), the Chrysler Jeep Grand Cherokee (sport utility vehicle) and the Mercury Villager (mini-van). See "Business -- Customers." In 1994, light trucks, sport utility vehicles and mini-vans are expected to account for more than half of the Company's revenues. The Company is generally selected to supply a particular component two to four years in advance of production. Once selected, the Company usually supplies the component on a sole-source basis for the life of a vehicle model or until the component or system is redesigned. See "Business -- Marketing." The Company has been selected as the sole-source supplier for certain components and systems on a diverse group of 1996, 1997 and 1998 model year vehicles. The Company is also on development teams to engineer and design various components for the 1997 Chevrolet Corsica, Beretta and Corvette, and the 1998 Buick Skylark, Oldsmobile Achieva, Pontiac Grand Am, General Motors "CK" Truck and Chrysler "LH" automobiles. See "Business -- Customers." In response to competitive pressures in the industry, automotive OEMs have established programs to shift the production of components and systems to external suppliers ("outsourcing"), thus capitalizing on their lower overhead costs, greater flexibility and engineering expertise. Simultaneously, automotive OEMs are reducing their supplier base by (i) mandating that their external suppliers meet higher quality and cost standards and assume more responsibility for engineering the products they produce, and (ii) obtaining their entire supply of particular components and systems from single manufacturers or small groups of manufacturers. The Company believes that the outsourcing trend and the automotive OEMs' programs to reduce their supplier bases increase the opportunities available to the remaining external suppliers. See "Business -- Industry Overview." The Company's primary business strategy is to pursue internal growth by capitalizing on favorable trends in the North American automotive industry by (i) maintaining high product quality and superior levels of customer service and (ii) optimizing profitability and operating efficiencies through the reduction of manufacturing costs and the maximization of plant utilization. In addition, the Company intends to expand its product line and increase sales of systems which, because of their inherently greater complexity and higher labor content, produce higher profit margins. The Company may also consider the acquisition of other companies engaged in the Company's core business if attractive opportunities arise. There are, however, no negotiations for such acquisitions at present, and there can be no assurance that any acquisitions will be completed. See "Business -- Business Strategy." The Company implements its strategy of maintaining high product quality and superior levels of customer service and reducing its manufacturing costs by applying a "lean manufacturing" philosophy and INTERIOR SYSTEMS ________________________ | | | | | | | | | | | | |________________________| Instrument Panel Clusters _________________________ | | | | | | | | | | |_________________________| Air Outlets Garnish Molding {Van} ________________________ | | | | | | | | | | | | |________________________| (PHOTOGRAPHS) (SEE APPENDIX A) developing and expanding the Company's engineering and design capabilities. The primary element of this philosophy is the reduction of manufacturing costs through the elimination of waste and the involvement of all employees in continuously improving the Company's operations. As part of this philosophy, the Company has instituted a performance-based compensation system linked to individual plant profitability. Additionally, the Company has developed and expanded its engineering and design capabilities by adding engineers and increasing its use of engineering subcontractors, often working with its customers early in the design phase for a component or system and, in some cases, designing the component or system when bidding on a contract. The Company believes that the numerous quality awards it has received from its principal customers evidence the Company's historical success in implementing its business strategy by delivering the quality, service and price required by its customers. See "Business -- Business Strategy." THE CONVERSION Pursuant to the Amended and Restated Credit Agreement, dated as of January 18, 1989 and amended and restated as of December 23, 1991 (the "Credit Agreement"), among the Company, various financial institutions (the "Lenders") and Bankers Trust Company ("BTCo"), as agent, Internationale Nederlanden (U.S.) Capital Corporation ("ING Capital") and Oppenheimer & Co., Inc. ("Oppenheimer"), as the Lenders and the then current holders of the term loans under the Credit Agreement (the "Term Loans"), converted the entire $47,000,000 of principal and $9,254,000 of accrued interest under the Terms Loans into 8,283,040 shares of Common Stock on March 11, 1994 (the "Conversion"). The Conversion reduced long- term debt, accrued interest and deferred gain on debt restructure on the Company's balance sheet as of the date of the Conversion by $47,000,000, $9,254,000, and $3,323,000, respectively, and increased shareholders' equity by $59,577,000. ING Capital and Oppenheimer and its affiliates are the Selling Shareholders in this offering and are selling all of the Common Stock they received as a result of the Conversion. ING Capital and BTCo are holders of the Company's long-term debt which remains outstanding after the Conversion. See "Principal and Selling Shareholders -- Conversion." THE OFFERING <TABLE> <S> <C> Common Stock offered by the Selling Shareholders: United States Offering................................................ 6,626,440 shares International Offering................................................ 1,656,600 shares --------- Total............................................................ 8,283,040 shares Common Stock outstanding................................................ 22,088,107 shares(1) American Stock Exchange Symbol.......................................... LII </TABLE> - ------------------------- (1) Gives effect to the Conversion. See "Principal and Selling Shareholders -- Conversion." SUMMARY CONSOLIDATED FINANCIAL DATA The following historical summary consolidated financial data of the Company have been derived from the consolidated financial statements of the Company, which consolidated financial statements have been audited by KPMG Peat Marwick, independent auditors. The consolidated financial statements as of December 31, 1993 and 1992 and for each of the years in the three-year period ended December 31, 1993, and the auditors' report thereon, which refers to a change in the method of accounting for income taxes, are included elsewhere in this Prospectus. The unaudited pro forma operating data and per share data for the periods indicated give effect to the Conversion as if it had occurred as of January 1, 1993 and have been adjusted to eliminate the use of Canadian net operating loss carryforwards, which will not be available to the Company in 1994 because they were fully utilized in 1993. The unaudited pro forma balance sheet data for the periods indicated give effect to the Conversion as if it had occurred as of December 31, 1993. See "Principal and Selling Shareholders -- Conversion." The information below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related notes appearing elsewhere in this Prospectus. See "Index to Consolidated Financial Statements." ____________________ | | | | | | ______________________ | | | | | | | | | | | | | | | | |____________________| | | Console/Instrument | | Panel Components |______________________| Door Panels ___________________________________________ | | | | | | | | | | | | | | | | | | | | | | | | | | |___________________________________________| Picture of Mini Van Cup Holders _______________________ | | | | Garnish Molding/ | | Padded Products | | _____________________ | | | | | | | | | | | | |_______________________| | | | | | | |_____________________| (PHOTOGRAPHS) (SEE APPENDIX A) SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <TABLE> <CAPTION> HISTORICAL PRO FORMA(1) -------------------------------------------- ------------ YEAR ENDED DECEMBER 31, YEAR ENDED -------------------------------------------- DECEMBER 31, 1993 1992 1991(2) 1993 ------------ ------------ ------------ ------------ (UNAUDITED) <S> <C> <C> <C> <C> OPERATING DATA: Net sales.......................................................... $148,257 $ 148,257 $ 111,307 $ 85,951 Cost of goods sold................................................. 115,660 115,660 92,036 73,955 ------------ ------------ ------------ ------------ Gross profit....................................................... 32,597 32,597 19,271 11,996 Selling, general and administrative expenses....................... 11,500 11,500 10,935 8,261 Nonrecurring operating expenses.................................... -- -- -- 4,033 ------------ ------------ ------------ ------------ Operating income (loss)............................................ 21,097 21,097 8,336 (298) Other expense, net................................................. (3,160) (6,640) (6,855) (11,023) ------------ ------------ ------------ ------------ Income (loss) from continuing operations, before income taxes and extraordinary gain............................................... 17,937 14,457 1,481 (11,321) Income tax provision (benefit)..................................... 4,821 2,070 -- 1,594 ------------ ------------ ------------ ------------ Income (loss) from continuing operations, before extraordinary gain............................................................. 13,116 12,387 1,481 (12,915) Loss related to discontinued operations............................ -- -- -- (3,900) ------------ ------------ ------------ ------------ Income (loss) before extraordinary gain............................ 13,116 12,387 1,481 (16,815) Extraordinary gain on extinguishment of debt....................... -- -- 711 -- ------------ ------------ ------------ ------------ Net income (loss).................................................. $ 13,116 $ 12,387 $ 2,192 $ (16,815) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ SHARE AND PER SHARE DATA: Income (loss) per common share: Primary: Income (loss) from continuing operations before extraordinary gain......................................................... $.59 $.90 $.11 $(.94) Net income (loss).............................................. $.59 $.90 $.16 $(1.22) Fully diluted: Income from continuing operations before extraordinary gain.... $.72 Net income..................................................... $.72 Weighted average number of shares of common stock outstanding: Primary.......................................................... 22,088 13,805 13,805 13,805 Fully diluted.................................................... 22,088 Cash dividends paid per common share (declared in 1988)............ -- -- -- -- <CAPTION> 1990(3) 1989(4) ------------ ------------ <S> <<C> <C> OPERATING DATA: Net sales.......................................................... $ 96,739 $ 143,869 Cost of goods sold................................................. 86,254 135,829 ------------ ------------ Gross profit....................................................... 10,485 8,040 Selling, general and administrative expenses....................... 10,506 13,606 Nonrecurring operating expenses.................................... 12,522 14,113 ------------ ------------ Operating income (loss)............................................ (12,543) (19,679) Other expense, net................................................. (12,682) (14,201) ------------ ------------ Income (loss) from continuing operations, before income taxes and extraordinary gain............................................... (25,225) (33,880) Income tax provision (benefit)..................................... 50 (5,061) ------------ ------------ Income (loss) from continuing operations, before extraordinary gain............................................................. (25,275) (28,819) Loss related to discontinued operations............................ (19,455) (283) ------------ ------------ Income (loss) before extraordinary gain............................ (44,730) (29,102) Extraordinary gain on extinguishment of debt....................... -- -- ------------ ------------ Net income (loss).................................................. $ (44,730) $ (29,102) ------------ ------------ ------------ ------------ SHARE AND PER SHARE DATA: Income (loss) per common share: Primary: Income (loss) from continuing operations before extraordinary gain......................................................... $(1.83) $(2.09) Net income (loss).............................................. $(3.24) $(2.11) Fully diluted: Income from continuing operations before extraordinary gain.... Net income..................................................... Weighted average number of shares of common stock outstanding: Primary.......................................................... 13,805 13,805 Fully diluted.................................................... Cash dividends paid per common share (declared in 1988)............ -- $1.25 </TABLE> <TABLE> <CAPTION> HISTORICAL -------------------------------------------- PRO FORMA(1) DECEMBER 31, ------------ -------------------------------------------- DECEMBER 31, 1993 1992 1991(2) 1993 ------------ ------------ ------------ ------------ (UNAUDITED) <S> <C> <C> <C> <C> BALANCE SHEET DATA: Working capital (deficiency)........................................ $ 4,279 $ 4,279 $ 5,964 $ 1,943 Total assets........................................................ 63,854 63,854 62,657 60,150 Long-term obligations, excluding current installments (5)........... 35,240 90,703 104,398 99,308 Total shareholders' deficit......................................... (5,142) (64,073) (75,182) (74,616) <CAPTION> 1990(3) 1989(4) ------------ ------------ <S> <<C> <C> BALANCE SHEET DATA: Working capital (deficiency)........................................ $ (95,884) $ (75,033) Total assets........................................................ 82,149 130,734 Long-term obligations, excluding current installments (5)........... 1,864 9,052 Total shareholders' deficit......................................... (57,835) (18,060) </TABLE> - ------------------------ (1) The pro forma data give effect to the Conversion as if it had occurred as of January 1, 1993 for operating data and share and per share data, and as if it had occurred as of December 31, 1993 for balance sheet data. The pro forma operating data and share and per share data have also been adjusted to eliminate the use of Canadian net operating loss carryforwards, which will not be available to the Company in 1994 because they were fully utilized in 1993. The pro forma balance sheet adjustments to reflect the Conversion reduce long-term debt (excluding current installments), deferred gain on debt restructure, and accrued interest and increase shareholders' equity by $47.0 million, $3.5 million, $8.5 million, and $58.9 million, respectively. The pro forma income statement adjustments to reflect the Conversion reduce other expense (to eliminate the interest on the converted debt less the applicable portion of the amortization of the deferred gain on debt restructure) and increase the income tax provision (to reflect the increased income and to eliminate the use of Canadian net operating loss carryforwards) by $3.5 million and $2.8 million, respectively. The number of shares outstanding used to calculate earnings per share was also increased by 8.3 million shares to reflect the issuance of shares as a result of the Conversion. (2) The Company sold the majority of its defense group and its automotive electrical division in 1991. These businesses have been accounted for as discontinued operations. (3) The Company sold its plating operations and closed its automotive harness assembly operations and its Ann Arbor plant in 1990. See "Business -- General." The plating and automotive harness assembly operations accounted for $9.9 million of the Company's sales in 1990. (4) The Company closed its Pulsar operation in 1989. The Company's Pulsar operation and the Company's plating and automotive harness assembly operations accounted for $45.9 million of the Company's sales in 1989. (5) Includes the long-term portion of debt, capitalized lease obligations and accrued interest.

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the detailed information and financial statements and related notes appearing elsewhere in this Prospectus. THE REGISTRANTS RII is a holding company which, through its subsidiary, RIH, is principally engaged in the ownership and operation of the Resorts Casino Hotel in Atlantic City, New Jersey. In addition, RII owns land in Atlantic City at various sites, including approximately 10 acres of Boardwalk property that the Company leases to Atlantic City Showboat, Inc. ("ACS") under a 99-year net lease (the "Showboat Lease") and approximately 90 acres which are available for development. RII was incorporated in 1958 and is a Delaware corporation. RIHF was incorporated in Delaware in 1993 for the limited purpose of issuing the Mortgage Notes and the Junior Mortgage Notes, and receiving certain corresponding promissory notes of RIH. RIHF also entered into the Senior Facility. See "Restructuring of Series Notes." RIHF is a wholly owned subsidiary of RII. RIH owns and operates all the property and improvements of the Resorts Casino Hotel. The Resorts Casino Hotel is located on the Boardwalk in Atlantic City, New Jersey, and has approximately 670 guest rooms, a 60,000-square-foot casino and related facilities. RIH was incorporated in 1903 and is a New Jersey corporation. RIH has issued certain promissory notes and guarantees relating to the Mortgage Notes and Junior Mortgage Notes.

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus. THE COMPANY Wherehouse, which is headquartered in Torrance, California, believes that, in terms of both revenues and store count, it is currently the largest specialty retailer of prerecorded music in the western U.S. and the second largest renter of videocassettes in the western U.S. The Company operated approximately 347 stores in eleven states as of April 30, 1994. The Company's major marketing areas are the metropolitan areas of Los Angeles, San Francisco, Seattle, Phoenix, Sacramento, San Diego, Fresno, Las Vegas, Denver and Salt Lake City. All but two of the Company's stores sell prerecorded music, videocassettes, video games and acces- sories, sales of which constitute approximately 81% of the Company's fiscal 1994 (year ended January 31, 1994) revenues. In addition, approximately 75% of the Company's stores also rent videocassettes and video games. Rentals of videocassettes and video games, in the aggregate, constituted approximately 19% of the Company's fiscal 1994 revenues. The Company was founded as a record retailer in 1970 and until early 1988 was an independent publicly traded company listed on the American Stock Exchange. Since 1988, the Company has been privately held. On June 11, 1992, the Company was acquired from affiliates of Adler & Shaykin ("A&S") through the acquisition (the "Acquisi- tion") by Grammy Corp., a Delaware corporation, of all of the outstanding shares of capital stock and all other related equity securities of WEI, which Acquisition was effected through the merger (the "Merger") of Grammy Corp. with and into WEI, with WEI surviving the Merger as the surviving corporation operating under the name "WEI Holdings, Inc." Grammy Corp. was formed by MLCP on February 26, 1992 solely to effect the Acquisition. WEI holds all of the capital stock of the Company and, in turn, is owned by affiliates of MLCP and certain members of management of the Company. As of April 30, 1994, MLCP and its affiliates owned approximately 92.4% of the common stock par value $.10, of WEI, and management of the Company owned approximately 7.6% of the WEI Common Stock, on a fully diluted basis, excluding unvested performance based options and unallocated options reserved for future grant under the WEI Management Stock Option Plan. See "Security Ownership." WEI is not an operating company. The Company's principal executive office is located at 19701 Hamilton Ave., Torrance, California 90502-1334, telephone number (310) 538-2314. <page-11> WEI's principal executive office is located at 19701 Hamilton Ave., Torrance, California 90502-1334, telephone number (310) 538-2314. FOR A DISCUSSION OF CERTAIN RISKS ASSOCAITED WITH AN INVESTMENT IN THE NOTES, SEE "INVESTMENT CONSIDERATIONS." SUMMARY OF TERMS OF THE NOTES Aggregate Principal Amount........ $110,000,000 Interest Payment Dates............ February 1 and August 1 Interest Rate..................... 13% Maturity Date.............................. August 1, 2002 Sinking Fund...................... The Company will deposit $27,500,000 with the Trustee under the Indenture on each of August 1, 2000 and August 1, 2001 for the redemption of a maximum of 50% in aggregate principal amount of the Notes at a redemption price equal to 100% of the principal amount thereof plus accrued interest thereon to the date of redemption. Optional Redemption.............. The Notes may be redeemed at any time on or after August 1, 1997, at the option of the Company, in whole or in part, at the following redemption prices (expressed as percent- ages of the principal amount), if redeemed during the 12-month period beginning August 1 of the years indicated below: Redemption Year Price ---- ---------- 1997 104.875% 1998 103.250% 1999 101.625% and thereafter at 100% of the principal amount, in each case together with accrued interest to the redemption date (subject to the right of holders of record on relevant record dates to receive interest due on an interest payment date). <page-12> Change of Control................ Upon the occurrence of a Change of Control (as defined in "Description of the Notes") of the Company, the Company is obligated to make an offer to purchase all outstanding Notes at a price in cash equal to 101% of the principal amount of the Notes, plus accrued interest thereon; provided, however, that the Company shall have no obligation to accept any Notes tendered pursuant to such an offer unless it shall have (a) obtained the consent of the lenders under the Company's Bank Credit Agreement, dated as of June 11, 1992, as amended from time to time, by and among Wherehouse, as borrower, WEI, as guarantor, Bankers Trust Company, as Agent, and Heller Financial, Inc., as Co-agent (the "Bank Credit Agreement"), to such transaction or (b) repaid the entire indebtedness under the Bank Credit Agreement or offered to repay and have repaid any lender under the Bank Credit Agreement that accepts such offer. A Change of Control would also consti- tute an event of default under the Bank Credit Agreement, which represents obligations that are senior in right of payment to the Notes, and could result in circumstances under which payments in respect of the Notes could not be made under the subordina- tion provisions of the Indenture. See "Description of the Notes--Subordination." See "--Subordination" below for the amount of Senior Indebtedness, including indebtedness under the Bank Credit Agreement, outstanding at April 30, 1994. Notwith- standing any of the foregoing, the failure to make such an offer or to have satisfied the foregoing conditions precedent prior to the date on which such an offer is required to be made will constitute a covenant default and therefore an Event of Default (as defined herein) under the Indenture. No assurances can be given that the Company will be able to comply with all its obligations under its various agreements in the event of a Change of Control or to refinance any of these or other obligations that might become due by reason of these provisions. The existence of a holder's right to require the Company to repurchase its Notes upon a Change of Control may deter a third party from acquiring the Company in a transaction which constitutes a Change of Control. See "Description of the Notes-- Change of Control." <PAGE> <page-13> Guarantees....................... The Notes are guaranteed on a senior subordinated basis by WEI (the "WEI Guarantee"). Currently, WEI conducts no business other than holding the capital stock of the Company and has no significant assets other than the capital stock of the Company. See "Investment Considerations-- Subordination; Effect of Asset Encumbrances." In addition, if any Subsidiary (as defined herein) of the Company becomes a guarantor or obligor in respect of Indebtedness (as defined herein) of the Company or any of its Subsidiaries, the Company's obligations under the Notes will be guaranteed by such Subsidiary. Subordination.................... Payments on the Notes are subordinated to all existing and future Senior Indebtedness of the Company. As of April 30, 1994, the Company had out- standing an aggregate of approximately $82.9 million of Senior Indebtedness. See "Investment Considerations-- Subordination; Effect of Asset Encumbrances" and "Description of the Notes--Subordination." Certain Covenants................ The Indenture contains certain covenants, including, but not limited to, covenants with respect to the following matters: (i) limitation on indebtedness; (ii) limitation on restricted payments; (iii) limitation on transactions with affiliates; (iv) disposi- tion of proceeds of asset sales; (v) limitation on sale and leaseback transactions; (vi) limitation on liens; (vii) limitation on other senior subordinated indebted- ness; (viii) limitation on guarantees by subsidiaries; (ix) restrictions on preferred stock of subsidiaries; (x) limitation on dividends and other payment restrictions affecting subsidiaries; and (xi) transfers of assets to certain subsidiaries. See "Description of the Notes-- Certain Covenants." For more complete information regarding the Notes, see "Description of the Notes." <page-14> WHEREHOUSE ENTERTAINMENT, INC. SELECTED FINANCIAL INFORMATION (DOLLARS IN MILLIONS, EXCEPT REVENUE PER SQUARE FOOT AMOUNTS) The following table sets forth selected financial data and other operating information of Wherehouse. The financial data in the table for the three years ended January 31, 1992, for the four months ended May 31, 1992, for the eight months ended January 31, 1993, and for the year ended January 31, 1994 are derived from the financial statements of the Company and the Predecessor (as defined herein). The data should be read in conjunction with the financial statements and related Notes thereto, and other financial information included herein, as well as the discussion under "Management's Discussion of Financial Condition and Results of Operation." <PAGE> <TABLE> <CAPTION> Company Predecessor (1) ----------------- -------------------------------------- Fiscal For the For the Year 8 Months 4 Months Ended Ended Ended Fiscal Years Ended Jan. 31, Jan. 31, May 31, January 31, ------- ------- ------- ---------------------------- 1994 1993 1992 1992 1991 1990 ------- ------- ------- ------ ------ ------ <S> <C> <C> <C> <C> <C> <C> Income Statement Data Data Sales $380.2 $249.1 $105.3 $358.6 $352.2 $296.8 Rental revenue (2) 91.6 64.3 29.8 98.8 99.9 91.5 ------- ------- ------- ------- ------- ------- 471.8 313.4 135.1 457.4 452.1 388.3 Cost of sales (3) 248.0 155.2 66.9 225.5 223.0 189.7 Cost of rentals including amortization (4) 50.8 24.8 7.3 30.9 43.2 41.2 ------- ------- ------- ------- ------- ------- 298.8 180.0 74.2 256.4 266.2 230.9 Selling, general and administrative expenses (5) (6) 196.6 122.9 59.9 179.1 170.1 148.5 Restructuring charges (7) 14.3 --- --- --- --- --- ------- ------- ------- ------- ------- ------- (Loss) income from operations (37.9) 10.5 1.1 21.9 15.8 9.0 Interest expense 23.2 15.6 4.9 17.9 19.7 19.6 ------- ------- ------- ------- ------- ------- (Loss) income before income taxes (61.1) (5.1) (3.8) 3.9 (4.0) (10.6) (Benefit) provision for income taxes (19.1) (1.3) (1.9) 1.0 (2.8) (5.1) (Loss) income before extraordinary item (42.1) (3.8) (2.0) 2.9 (1.2) (5.5) ------- ------- ------- ------- ------- ------- Extraordinary item less income taxes (8) --- --- 4.5 --- --- --- ------- ------- ------- ------- ------- ------- Net (loss) income $(42.1) $ (3.8) $ (6.5) $ 2.9 $ (1.2) $ (5.5) ======= ======= ======= ======= ======= ======= Balance Sheet Data (As of End of Period) Working capital (deficiency) $ 4.9 $ (0.5) $(30.7) $(20.5) $(30.5) Adjusted operating assets and operating liabilities (9) $ 16.6 $ 16.6 $(10.3) $ 1.9 $ 9.4 Total assets 351.4 374.4 225.4 226.9 235.5 Long-term debt (including current portion) 175.1 185.1 110.0 120.5 140.2 Shareholder's equity 50.0 62.5 3.7 1.2 2.4 Other Information Capital expen- ditures (10) $ 14.6 $ 6.4 $ 2.9 $ 11.7 $ 10.7 $ 21.4 Stores open at period end 347 313 301 283 263 Retail square feet (period-end, in thousands) 2,117 2,011 1,946 1,932 1,811 1,640 Revenue/average retail square foot $ 229 $ 227(11) $ 244 $ 262 $ 256 Ratio of earnings to fixed charges(12) (13) (13) (13) 1.11x (13) (13) </TABLE> <PAGE> <page-15> NOTES TO SELECTED FINANCIAL INFORMATION (1) The Company was acquired in June 1992 by the purchase of all of WEI's ownership interest in the Company through a merger transaction in which Grammy Corp. was merged with and into WEI. The transaction was accounted for using the purchase method and the term "Predecessor" refers to the predecessor to the Company for the periods from fiscal year 1990 through May 31, 1992. The term "1988 Predecessor" refers to the predecessor to the Predecessor which was acquired by affiliates of A&S and certain other investors in 1988 (such transaction being hereinafter referred to as the "1988 Acquisition"). The Acquisition and the 1988 Acquisition caused changes in the bases of accounting thereby making period-to-period comparisons difficult. The significant effects on comparability are explained in Notes (4), (5) and (8) below. (2) Includes an estimated $1.0 in fiscal 1991 relating to the disposition of beta format videocassette rental inventory. (3) Includes net charges relating to the disposition of obsolete computer software inventory of an estimated $0.5 and $1.4 in fiscal 1991 and fiscal 1990, respectively. (4) Includes amortization of $2.8 for the fiscal year ended January 31, 1994 and $3.4 for the eight months ended January 31, 1993 related to the Acquisition purchase adjustments and amortization of $6.7 and $6.7 in fiscal 1991 and fiscal 1990, respectively, related to the purchase accounting adjustments related to the 1988 Acquisition (the "1988 Acquisition Purchase Adjustments"), and charges relating to the disposition of beta format videocassette rental inventory of an estimated $3.9 in fiscal 1991. (5) Includes amortization of $8.9 for the fiscal year ended January 31, 1994 and $6.0 related to the Acquisition purchase adjustment for the eight months ended January 31, 1993. Includes the following for the four months ended May 31, 1992, fiscal 1992, fiscal 1991 and fiscal 1990, respec- tively: amortization of $1.7, $5.0, $5.0 and $5.0 related to the 1988 Acquisition Purchase Adjustments; certain expenses associated with A&S's investment, which did not continue following the Acquisition, of $0.2, $1.1, $0.9, and $1.2; certain severance and executive recruiting expenses of $0.0, $0.4, $0.1, and $0.1; certain legal expenses associated with litigation, the payment of future expenses of which, to the extent such expense exceeds $700,000, will be funded by borrowings incurred as of the effective time of the Merger (the "Effective Time") for the Deferred Purchase Price (as is defined in the Indenture) of $0.0, $0.2, $0.3, and $0.1. (6) Includes non-cash expense accruals in accordance with Financial Accounting Standards Board Statement 13: Account- ing for Leases, of $4.9, $2.5, $0.9, $2.4 and $0.5 for the fiscal year ended January 31, 1994, the eight months ended January 31, 1993, the four months ended May 31, 1992, fiscal 1992 and fiscal 1991, respectively. (7) See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations." <page-16> (8) Represents the write-off of unamortized financing costs and pre-payment penalties paid relating to debt of the Predeces- sor refinanced at the time of the Acquisition. (9) Adjusted operating assets and operating liabilities is (i) total current assets less (ii) total current liabilities exclusive of notes payable and current maturities of capital lease obligations and long-term debt. (10) Capital expenditures exclude capital expenditures obtained through capital lease financing. (11) Calculated using revenues for the combined periods of eight months ended January 31, 1993 and the four months ended May 31, 1992. (12) For the purpose of computing the ratios of earnings to fixed charges, "earnings" consists of income (loss) before income taxes and fixed charges. "Fixed charges" consists of interest expense, amortization of debt expenses and the portion of rental expenses deemed representative of the interest factor. (13) Fixed charges exceeded earnings by $4.0 and $10.6 in fiscal 1991 and 1990, respectively, and by $3.8 for the four months ended May 31, 1992, and $5.1 for the eight months ended January 31, 1993 and by $61.1 for fiscal 1994. RECENT OPERATING RESULTS For the quarter ended April 30, 1994, the Company recorded net revenues of approximately $113,900,000 and a net loss of approximately $5,600,000. For the corresponding period of fiscal 1994, the Company recorded net revenues of approximately $102,500,000 and a net loss of approximately $5,400,000. <page-17>

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+SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus. Potential investors are urged to read the more detailed information set forth elsewhere in this Prospectus. A Glossary of frequently used capitalized and other specialized terms is attached as Annex A (located inside the back cover). MESA MESA Inc. is one of the largest independent natural gas producers in the United States. Mesa owns proved natural gas, natural gas liquids and oil reserves estimated as of December 31, 1992 at approximately 1.8 trillion cubic feet of natural gas equivalents. Over 70% of Mesa's total equivalent proved reserves are natural gas and almost all of its other reserves are natural gas liquids. Substantially all of Mesa's reserves are proved developed reserves. Mesa's principal producing properties are in the Hugoton field of southwest Kansas and the West Panhandle field of Texas, which together account for over 95% of Mesa's equivalent proved reserves at December 31, 1992. These two fields are in the same producing trend and contain shallow natural gas reserves that are expected to produce beyond the year 2020. The Hugoton field is the largest producing gas field in the continental United States. Mesa also owns and operates natural gas processing plants located in both of these fields which are capable of processing substantially all of Mesa's natural gas production in these fields. Mesa considers itself one of the most efficient operators of shallow natural gas properties in the United States. Mesa holds all of its assets and conducts its operations through its subsidiaries, all of which are wholly-owned following a January 1994 restructuring that converted the general partner interests in the subsidiaries to common stock of Mesa. The Company's direct corporate subsidiaries are: - Mesa Operating Co. ("MOC"), which owns all of Mesa's oil and gas properties, other than Mesa's Hugoton field natural gas properties, as well as an approximate 81% limited partnership interest in Hugoton Capital Limited Partnership ("HCLP") and certain other assets; - Mesa Midcontinent Co. ("MMC"), which owns principally cash and securities, as well as an approximate 19% limited partnership interest in HCLP; and - Mesa Holding Co. ("MHC"), which owns principally cash, as well as the outstanding capital stock of Mesa Environmental Ventures Co. ("Mesa Environmental"). The Company's other significant subsidiaries, owned indirectly, are: - HCLP, a limited partnership which owns substantially all of Mesa's Hugoton field natural gas properties; and - Mesa Environmental, which is engaged in promoting the use of natural gas as a motor vehicle fuel and developing and marketing natural gas fuel equipment for the transportation market. Capital is a wholly owned finance subsidiary of MOC. Mesa's business strategy includes (i) continuing its effort to strengthen its financial condition by raising equity capital and applying the proceeds thereof to retire debt, and issuing new lower cost debt to refinance its existing high cost debt securities, (ii) maximizing the value of its existing high-quality, long-life reserves through efficient operating and marketing practices, (iii) increasing its capability to process natural gas and to extract natural gas liquids and helium by expanding and modernizing processing facilities, (iv) conducting selective exploratory and development activities, principally in existing areas of operations, and (v) promoting the use of natural gas as a motor vehicle fuel and developing and marketing natural gas fuel equipment for the transportation market. See "Business." PURPOSE OF THE OFFERING The proceeds of the sale of the Secured Notes offered hereby will be used to fund all or a portion of Mesa's share of the payment to be made to Unocal Corporation to settle a lawsuit by Unocal against Mesa and other defendants. See "Unocal Litigation and Settlement." The Secured Notes will be issued pursuant to the same indenture (the "Secured Indenture") under which the Obligors currently have outstanding $569,277,000 face amount (at maturity) of Secured Notes, which Secured Notes were issued in connection with the Obligors' recently completed debt exchange offer. The Secured Notes offered hereby will be fungible with the currently outstanding Secured Notes. The issuance of the additional amount of Secured Notes offered hereby was expressly contemplated in the Secured Indenture for the purpose of settling or compromising the Unocal lawsuit. See "Description of the Secured Notes -- Provisions Relating to the Issuance of the Additional Secured Notes Offered Hereby." The Unocal lawsuit was originally filed in 1986 against Mesa Petroleum Co., a predecessor of the Company, certain subsidiaries of Mesa Petroleum Co. and certain other parties. The lawsuit alleged that the defendants had purchased and sold Unocal common shares within a six-month period in 1985 in transactions subject to Section 16(b) of the Securities Exchange Act of 1934, resulting in alleged short-swing profits of approximately $99 million that were recoverable by Unocal under Section 16(b). The plaintiffs also asked the Court to grant pre-judgment interest, which amount could currently exceed $50 million. Mesa and the other defendants contended that none of the transactions in Unocal shares were subject to Section 16(b) and, further, that no profit was realized. However, in light of the significant uncertainties relating to continuing the litigation and other relevant circumstances, Mesa determined that entering into a settlement agreement with Unocal (the "Settlement Agreement") would be in the best interests of Mesa and its stockholders. Pursuant to the Settlement Agreement, the Mesa and the other defendants have agreed to pay to Unocal an aggregate of $47.5 million, of which $42.75 million will be paid by Mesa and $4.75 million will be paid by certain other defendants not affiliated with Mesa. The Settlement Agreement is subject to approval of the Federal District Court for the Central District of California, following a hearing to determine the fairness, reasonableness and adequacy of the amounts to be paid pursuant to the Settlement Agreement and whether the Settlement Agreement should be approved by the Court. Such hearing is currently scheduled for February 28, 1994. The Secured Notes offered hereby will not be issued unless and until such final approval is received. The Court preliminarily approved the Settlement on January 18, 1994. See "Plan of Distribution." Both the Settlement Agreement and the Exchange Offer described below have or had as a principal goal the reduction of near term financial risk to Mesa so as to permit Mesa to undertake, subject to market conditions, an orderly recapitalization. Mesa will seek to deleverage its balance sheet principally through the public or private sale of equity securities and the application of the proceeds therefrom to repay debt, and by reducing the interest expense on its remaining debt by refinancing such debt at lower rates. Mesa believes that the combination of the Exchange Offer and the Settlement has removed the actual and potential requirement for large cash outflows from Mesa until at least December 1995, when Mesa will begin making semiannual cash interest payments on the Discount Notes, or until June 1996, when Mesa's unsecured discount notes mature. EXCHANGE OFFER On August 26, 1993, Mesa completed an exchange offer (the "Exchange Offer") for all of the outstanding 13 1/2% Subordinated Notes due May 1, 1999 (the "13 1/2% Subordinated Notes") and 12% Subordinated Notes due August 1, 1996 (the "12% Subordinated Notes" and, together with the 13 1/2% Subordinated Notes, the "Subordinated Notes") of the Obligors. Pursuant to the Exchange Offer, approximately $586.3 million aggregate principal amount of Subordinated Notes were tendered and accepted for exchange, and the Obligors issued approximately $569.3 million aggregate principal amount ($472.9 million accreted value at December 31, 1993) of Secured Notes, approximately $178.8 aggregate principal amount ($148.6 million accreted value at December 31, 1993) of 12 3/4% Discount Notes due June 30, 1996 (the "Unsecured Notes" and, together with the Secured Notes, the "Discount Notes") and approximately $29.3 million aggregate principal amount of 0% Convertible Notes due June 30, 1998 (the "Convertible Notes"). The terms and provisions of the Secured Notes and the Unsecured Notes are substantially similar, except with respect to security, maturity and redemption provisions. Pursuant to the terms of the indenture governing the Convertible Notes, all of the previously outstanding Convertible Notes have been converted into approximately 7.5 million shares of the Company's common stock (the "Common Stock"). The Exchange Offer reduced the Obligors' cash requirements through December 1995, which enhances the Obligors' ability to service their debt obligations and make capital expenditures from available cash and operating cash flows. Specifically, completion of the Exchange Offer enabled the Obligors to replace substantially all of their Subordinated Notes, which in the aggregate had cash interest requirements of $75 million per year through August 1996, with securities that do not require interest payments until December 1995. In exchange for accepting the deferral of interest payments, tendering Subordinated Noteholders obtained, among other things, second lien security interests in certain assets to collateralize the Secured Notes received in the Exchange Offer, improved ranking of their securities relative to non-tendering Subordinated Noteholders, better covenant protection and debt securities convertible into equity of the Company. The Exchange Offer also altered the timing of required principal repayments by the Obligors. The 12% Subordinated Notes mature in 1996 and the 13 1/2% Subordinated Notes mature in 1999. The Exchange Offer had the effect of moving approximately $115 million of scheduled principal payments from 1996 to 1998 and approximately $293 million of scheduled principal payments from 1999 to 1998. In addition, the Exchange Offer resulted in exchanging Subordinated Noteholders receiving Convertible Notes in exchange for a portion of their Subordinated Notes. The Convertible Notes were convertible into shares of Common Stock at the option of the holders at any time and by Mesa at any time after November 26, 1993. In December 1993, the Obligors converted all of the outstanding Convertible Notes into shares of Common Stock. As a result, a portion of each exchanging Subordinated Noteholder's debt securities was converted into equity. Concurrently with the Exchange Offer, Mesa's bank lenders agreed to amend Mesa's Credit Agreement in order to extend the payment of a portion of the outstanding principal, which otherwise would have matured in June 1994 (or earlier as a result of the then current default in the payment of interest on the Subordinated Notes, which default was cured upon completion of the Exchange Offer), and to amend certain covenants thereunder, including a reduction of Mesa's tangible adjusted equity requirement. In return, the banks received, among other things, additional security, earlier payment of a portion of the outstanding principal and an increase in the rate of interest payable on the Credit Agreement. Pursuant to the amendments, upon the completion of the Exchange Offer, Mesa repaid $20.6 million of borrowings under the Credit Agreement and made additional principal payments of $18.7 million in the fourth quarter of 1993. The Credit Agreement requires that Mesa make additional principal payments of $19.5 million in the first half of 1994 and $50 million (including cash collateralization of $10.4 million in letters of credit) on June 30, 1995. THE OFFERING Issue...................... 12 3/4% Secured Discount Notes due June 30, 1998. Aggregate Amount........... Consummation of the Offering is conditioned upon, among other things, the sale of an aggregate amount of Secured Notes that would result in net proceeds of at least $40 million, before deducting expenses of the Company, unless a Prospectus Supplement otherwise provides. The Obligors will not issue an amount of Secured Notes pursuant to this Offering that would result in net proceeds of more than $42.75 million, before deducting expenses of the Company. Yield...................... The yield to maturity of a Secured Note is 12 3/4%, based on the following terms of the Secured Notes (expressed per $1,000 face amount): (i) the Accreted Value of a Secured Note of approximately $830.77 at December 31, 1993, (ii) the increase in Accreted Value of a Secured Note to $1,000 from December 31, 1993 through and including June 30, 1995, (iii) cash interest payments at 12 3/4% per annum paid semiannually in arrears thereafter, and (iv) the payment of $1,000 (representing the Accreted Value as of December 31, 1993 of approximately $830.77 plus the cumulative increase in Accreted Value from December 31, 1993 through and including June 30, 1995, totaling approximately $169.23) at maturity. The Accreted Value of each $1,000 face amount of Secured Notes at each June 30 and December 31 from December 31, 1993 through and including June 30, 1995 is shown in the table below. <TABLE> <CAPTION> ACCRETED VALUE -------------- <S> <C> December 31, 1993............................... $ 830.7709 June 30, 1994................................... 883.7326 December 31, 1994............................... 940.0705 June 30, 1995 and thereafter.................... 1,000.0000 </TABLE> Interest................... The Secured Notes do not bear interest through June 30, 1995. However, the Accreted Value of the Secured Notes will increase from December 31, 1993 through and including June 30, 1995 at a rate of 12 3/4% per annum, compounded semiannually on each June 30 and December 31. On July 1, 1995, each Secured Note will have a final Accreted Value of $1,000 (or an integral multiple thereof). From and after July 1, 1995 the Secured Notes will accrue interest at a rate of 12 3/4% per annum, payable only in cash. Such interest will be payable semiannually in arrears on June 30 and December 31 of each year, beginning December 31, 1995. Obligors................... The Secured Notes are the joint and several obligations of the Company, MOC and Capital. Security................... The obligations of the Obligors under the Secured Notes are secured by (i) a mortgage and security agreement granting a second lien on certain properties and related assets and contractual rights of MOC in the West Panhandle field of Texas and (ii) a pledge agreement granting a second lien and security interest in a 65% limited partnership interest in HCLP (which will be increased to approximately 77% upon issuance of all Secured Notes offered hereby), which is part of the limited partnership interest in HCLP owned by MOC. Such liens are subordinate to prior liens to secure the $69.5 million of First Lien Debt (as defined) outstanding under the Credit Agreement at December 31, 1993 and any future First Lien Debt, subject to the limitations described herein. In addition, the right of the Trustee for the Secured Notes to exercise rights with respect to the Collateral is subject to the terms of an Intercreditor Agreement with the collateral agent for the holders of such First Lien Debt. See "Description of the Secured Notes -- Security." Mandatory Retirement....... In the event that as of August 31, 1994 or August 31, 1995, the Obligors have Mandatory Retirement Funds (as defined), the Obligors will be required to redeem or make an offer to purchase Secured Notes with such funds on the terms described herein. The indenture for the Unsecured Notes contains a similar provision, and Mandatory Retirement Funds will first be applied to redeem or offer to purchase all outstanding Unsecured Notes and then to redeem or offer to purchase Secured Notes. Optional Redemption........ The Secured Notes may be redeemed at the option of the Obligors, in whole at any time or in part from time to time, at redemption prices ranging from a current price of 110.25% of the Accreted Value thereof at the redemption date and declining on a semiannual basis to 100% at July 1, 1996, as set forth herein, plus accrued interest thereon to the redemption date if such date is on or after July 1, 1995. Change in Control.......... In the event of a Change in Control (as defined), the Obligors will be required to make an offer to purchase all of the Secured Notes, (a) at a price equal to 101% of the Accreted Value thereof on the date of purchase if such date is on or prior to June 30, 1995, and (b) at a price equal to 101% of the face amount thereof plus accrued interest thereon to the date of purchase if such date is on or after July 1, 1995. See "Risk Factors -- Funding of Change in Control Offer."

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+PROSPECTUS SUMMARY This summary is qualified in its entirety, and should be read in conjunction with the detailed information and financial statements appearing elsewhere in this prospectus. This offering involves certain considerations to prospective investors which are set forth in "Description of Securities" and "Certain Investment Considerations-Risk Factors". The Company Summit Securities, Inc. (the "Company") was incorporated under the laws of the State of Idaho on July 25, 1990. Its Articles of Incorporation provide that its existence is perpetual. The Company is a wholly-owned subsidiary of Metropolitan Mortgage & Securities Co., Inc., a Washington corporation ("Metropolitan"). The Company is engaged, nationwide, in the business of acquiring, holding and selling real estate receivables (hereafter "Receivables"). The Company invests in Receivables using funds generated from Receivable cash flows, and the sale of Certificates and Preferred Stock. The Company's Receivable investments are acquired through its parent company, Metropolitan, which performs the underwriting and review procedures. Its Receivables are serviced through an affiliate, Spokane Mortgage Company, doing business under the trade name MetWest Services. The Company may also engage in other businesses or activities without restriction in accordance with the provisions of its Articles of Incorporation. The Company, its parent company and C. Paul Sandifur, Jr. (President and CEO of the Company and of Metropolitan) are currently negotiating a possible reorganization which would involve the sale of the Company to C. Paul Sandifur, Jr. See "Certain Transactions". The Company's principal offices are located at 929 West Sprague Avenue, Spokane, Washington 99204. Its telephone number is (509) 838-3111. The Company also maintains offices at 1000 Hubbard, Coeur d'Alene, Idaho. The Offering INVESTMENT CERTIFICATES: The Offering . . . . $40,000,000 of Certificates due from six months to one hundred twenty months after date of issue, as selected by the purchaser. See "Description of Certificates." There is no minimum amount which must be sold. The Certificates . . . . The Certificates are unsecured indebtedness of the Company which will rank equally with the Company's other unsecured obligations. At September 30, 1993, the Company had outstanding approximately $21,959,000 (principal and compounded and accrued interest) of certificates and similar obligations and approximately $23,000 (principal and accrued interest) of collateralized debt. The Certificates are not insured by any governmental or private agency nor are they guaranteed by the Company's parent corporation, Metropolitan. Use of Proceeds . . . . To provide funds for Receivable investments, other investments, retiring maturing certificates, preferred stock dividends and for general corporate purposes which may include acquisition of affiliates as part of a corporate reorganization. See "Use of Proceeds" and "Certain Transactions." Principal and Interest Payments . . . . Interest will be paid monthly, quarterly, semiannually or annually (without compounding) or if remaining with the Company to compound semiannually, as selected by the holder of the Certificates. Holders may elect to be paid equal monthly installments of principal and interest pursuant to an amortization schedule selected by the holder. The stated rates of interest on unissued Certificates offered hereby may be changed from time to time by the Company, but any such change shall not affect the rate of interest on any Certificates issued prior to the change. See "Description of Certificates." Trustee . . . . West One Bank, Idaho, N.A. See "Description of Certificates". PREFERRED STOCK: Offering . . . . 150,000 shares of Variable Rate Cumulative Preferred Stock, $10 par value, Series S-1, (the "Preferred Stock"), being offered on a continuous basis at $100 per share. Distributions. . . . Distributions (which may be classified as dividends or returns of capital for federal income tax purposes) on Preferred Stock offered hereunder are cumulative from the date of issue and, when and as declared, are payable monthly at the rates described on the cover page of the Prospectus based on the price of $100 per share. See "Description of Preferred Stock-Distributions". Liquidation Rights . . . . $100 per share of Preferred Stock, plus declared and unpaid dividends and junior to all debts of the Company. See "Description of Preferred Stock - Liquidation Rights". Redemption Upon Call by the Company . . . . The shares of Preferred Stock are redeemable, in whole or in part, at the option of the Company, upon not less than 30 nor more than 60 days' notice by mail, at a redemption price of $102 per share, if redeemed prior to January 1, 1995 and $100 per share if redeemed thereafter, plus, in each case, accrued and unpaid dividends to the date fixed for redemption. See "Description of Preferred Stock-Redemption of Shares". Discretionary Redemption Upon Request of Holder . . . . Subject to certain limitations, the Company may, in its sole discretion, accept shares of Preferred Stock for redemption upon the receipt of unsolicited written requests for redemption of blocks of shares from any holder. Redemption prices in such event will be $97 per share if the redemption occurs during the first year after the date of original issuance of the shares and $99 per share thereafter plus, in each case, any declared but unpaid dividends. The Company will not redeem shares at the holder's request during the first three years after the initial sale of such shares except in those cases involving the death or major medical emergency of the holder or any joint holder. Any such discretionary redemptions will also depend on the Company's financial condition, including its liquidity position. See "Description of Preferred Stock - Redemption of Shares". The Company, through its affiliated broker/dealer, intends to use its best efforts to maintain an in-house trading list for holders of Preferred Stock following the termination of the offering. See "Certain Investment Considerations-Risk Factors". Voting Rights . . . . The holders of Preferred Stock have no voting rights except (i) as expressly granted by the State of Idaho law and (ii) in the event distributions payable on Preferred Stock are in arrears in an amount equal to twenty-four or more full monthly distributions, or more per share. See "Description of Preferred Stock-Voting Rights". Use of Proceeds . . . . Provide funds for Receivables investments, other investments, retiring maturing certificates, preferred stock dividends and for general corporate purposes which may include the acquisition of affiliates as part of a corporate reorganization. See "Use of Proceeds" and "Certain Transactions". Federal Income Tax Considerations. . . . In the event the Company has earnings and profits for federal income tax purposes in any future year, the distributions paid in that year will constitute taxable income to the recipient to the extent of such earnings and profits. The Company is unable to predict the future character of its distributions. The Company will treat distributions made with respect to Preferred Stock in a manner similar to other dividends and distributions. Under current income tax law, such items are not deductible to the Company in computing taxable income. The Company believes that distributions made with respect to Preferred Stock will be characterized as tax free returns of capital for federal income tax purposes to the extent that the Company has no current or accumulated earnings and profits as computed for federal income tax purposes. Such distributions are tax free to both corporate and individual holders to the extent of their basis in the stock. Distributions in excess of the holder's basis are considered capital gain income. In the event a holder of Preferred Stock disposes of the stock in a taxable sale or exchange, taxable gain may be recognized by the holder to the extent prior distributions were a tax-free return of capital. Corporations generally can exclude 70% of taxable dividends received in any year (which may be reduced if it uses debt to acquire or continue to carry the Preferred Stock). Purchasers are advised to consult their own tax advisors with respect to the federal income tax treatment of distributions made. See "Description of Preferred Stock-Federal Income Tax Consequences of Distributions." <PAGE> <PAGE> SELECTED FINANCIAL DATA <TABLE> <CAPTION> The financial data shown below as of and for the years ended September 30, 1993, 1992, 1991 and for the period July 25, 1990 (date of incorporation) through September 30, 1990 (other than the Ratio of Earnings to Fixed Charges) have been derived from, and should be read in conjunction with, the Company's financial statements and related notes appearing elsewhere herein. The financial statements as of and for the year ended September 30, 1993 have been audited by Coopers & Lybrand. The financial statements as of and for the years ended September 30, 1992, and 1991 and for the period July 25, 1990 (date of incorporation) through September 30, 1990, have been audited by BDO Seidman. The financial data shown below as of December 31, 1993 and for the three month periods ended December 31, 1993 and 1992 (other than the Ratio of Earnings to fixed charges) have been derived from and should be read in conjunction with the Company's unaudited condensed financial statements and related notes appearing elsewhere herein. July 25, 1990 (Date of Three Months Ended Year Ended Year Ended Year Ended Incorporation) December 31, September 30, September 30, September 30, Through 1993 1992 September 30, 1993 1992 1991 1990 <S> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Revenues $743,156 $528,283 $ 2,815,624 $ 2,435,843 $1,026,405 $ 8,229 ======== ======== ========== ========== ========== ========== Income before extraordinary item $ 42,384 $ 13,157 $ 283,107 $ 611,595 $ 238,205 $ 5,345 Extraordinary item (1) -- -- -- 49,772 -- -- -------- -------- ---------- ---------- ---------- ---------- Net Income $ 42,384 $ 13,157 $ 283,107 $ 661,367 $ 238,205 $ 5,345 ======== ======== ========== ========== ========== ========== Weighted average number of common shares outstanding 20,000 20,000 20,000 20,000 20,000 20,000 Per Common Share Data: Income before extraordinary item $ 2.12 $ .66 $ 14.15 $ 30.58 $ 11.91 $ .27 Extraordinary item -- -- -- 2.49 -- -- ------- ------- ---------- ---------- ---------- ---------- Net income $ 2.12 $ .66 $ 14.15 $ 33.07 $ 11.91 $ .27 ======= ======= ========== ========== ========== ========== Ratio of Earnings to Fixed Charges: 1.11 1.05 1.24 1.53 1.37 -- BALANCE SHEET DATA: Due from/(to) Parent Company, net $ 1,115,081 $ 1,710,743 $ (400,365) $(5,528,617) $ (22,010) Total Assets $27,985,426 $25,441,605 $17,696,628 $16,718,823 $2,027,355 Debt Securities and Other Debt Payable $24,488,991 $21,982,078 $14,289,648 $ 8,451,106 -- Stockholder's Equity $ 3,230,408 $ 3,188,024 $ 2,904,917 $ 2,243,550 $2,005,345 <FN> (1) Benefit from utilization of net operating loss carryforwards. </TABLE> <PAGE> <PAGE> CERTAIN INVESTMENT CONSIDERATIONS - RISK FACTORS General 1. Limited Operating History: The Company was incorporated on July 25, 1990, and has been engaged in profitable business operations since December 1990. Due to such limited operating history no assurances can be given as to the continued profitability of the Company, nor are there any guarantees of performance of the Receivables described herein, although the Company's officers who are also officers and/or directors of Metropolitan have had extensive experience in the purchase and servicing of such Receivables. See "Business", "Management", and "Certain Transactions". The Company's ability to pay the principal and interest on the Certificates as they become due and dividends on Preferred Stock will depend on the Company's continued profitability, measured principally by its ability to maintain a positive interest spread between the rates on the Certificates and the returns on its investments. 2. Impact of Interest Rates and Economic Conditions: The results of operations for financial institutions, including the Company, may be materially and adversely affected by changes in prevailing economic conditions, including changes in interest rates. Rates paid on certificates tend to rise more quickly in a rising interest rate environment than do rates on Receivables. Presently, however, the Company's interest sensitive assets will reprice more quickly in 1994 than its interest sensitive liabilities. Additionally, the extent to which borrowers prepay loans is affected by prevailing interest rates. When interest rates increase, borrowers are less likely to prepay loans, whereas when interest rates decrease, borrowers are more likely to prepay loans. Prepayments may or may not adversely affect the levels of Receivables retained in the Company's portfolio, as well as its net interest income. See "Business - Real Estate Receivable Investments - Yield and Discount Considerations". Recently, the interest rate environment has been one of declining rates and a steep "yield curve". That is, long-term rates are significantly higher than short-term rates. This environment has had a positive effect on the Company's profitability. It is unlikely, however, that this favorable interest rate environment will continue indefinitely. The Company is exposed to the risk that its interest expense may rise more quickly than its interest income. Currently, the Company's assets reprice sooner than do its liabilities and, therefore, the Company's net interest margin may increase if interest rates increase. Conversely, if interest rates decrease, the Company's net interest income would likely decrease. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations - Asset/Liability Management." 3. Dependence Upon Parent Corporation and Management: All decisions with respect to the day-to-day management of the Company will be made exclusively by its officers, who are also officers and/or directors of Metropolitan, the Company's parent, which is responsible for the selection and acquisition of Receivables, the servicing and management of such Receivables, and other administrative services for the Company. These arrangements are expected to continue indefinitely. See "Certain Transactions." However, the Company is not contractually restricted from obtaining these services from outside sources. The Receivables acquired through Metropolitan consist of those considered acceptable by Metropolitan for its own portfolio but considered excess to Metropolitan's needs. See "Business". Through September 30, 1993, the Receivables were purchased by the Company at Metropolitan's cost of acquisition. Metropolitan may charge an underwriting fee to the Company for underwriting services in connection with such transactions in the future. 4. Conflicts of Interest: Since the Company and Metropolitan are affiliated and all of the Company's officers and directors are also officers and directors of Metropolitan, certain conflicts of interest may arise between the companies. The officers and directors expect to devote as much time as necessary to the affairs of the Company. See Note 7, Financial Statements. The Company may compete with Metropolitan in the acquisition of Receivables. Metropolitan will also be entitled to receive dividends from the Company except to the extent that applicable corporate law prohibits the payment of dividends if the effect would be the insolvency of the Company. There is otherwise no legal obligation for Metropolitan to maintain the Company's net worth or to support the Company's operations. Currently, the Company, its parent company and C. Paul Sandifur, Jr. are negotiating a reorganization which would involve the sale of the Company to C. Paul Sandifur, Jr. See "Certain Transactions." Currently, Mr. Sandifur has effective control over Metropolitan and through Metropolitan has effective control of its subsidiaries including the Company. Following this proposed reorganization, Mr. Sandifur would have direct control of the Company. If this transaction is consummated, it is anticipated that there would be no change in the directors. If this transaction is consummated, it is anticipated that the current officers of the Company would resign and new officers, who would not be officers of Metropolitan would be elected. It is anticipated that these newly elected officers would continue to be employees of Metropolitan. It is not anticipated that this proposed reorganization or change in officers would materially effect the management, or operations. If this proposed sale occurs, conflicts of interest, are not anticipated to be substantially different from those that currently exist, such as conflicts in the time available to devote to the Company and conflicts with respect to the selection of Receivables as described above. Other conflicts may arise in the normal course of business transactions. Such potential additional conflicts cannot currently be identified with any certainty and therefore cannot be quantified at this time. The purchasers of the Certificates and Preferred Stock must, to a great extent, rely on the integrity and corporate fiduciary responsibilities of the Company's current and future officers and directors to assure themselves that they will not abuse their discretion in selecting Receivables for purchase from Metropolitan, and in making other business decisions. 5. Use of Leverage and Related Indebtedness: The Company's primary sources of new financing for its operations are the sale of certificates and preferred stock. See Business - Method of Financing and Management's Discussion and Analysis of Financial Condition and Results of Operations. The Company's principal sources of cash flow include Receivable payments and proceeds from the sale of certificates and preferred stock. To the extent the Company's cash flow is insufficient or unavailable for the payoff of certificates which mature during the period ending January 31, 1995, portions of the net proceeds from this Certificate and Preferred Stock offering may be used for such purpose. See "Use of Proceeds". Approximately $1,918,000 in principal amount of Investment Certificates will mature between January 31, 1994 and January 31, 1995. It has been the Company's experience that the majority of the Investment Certificates are sold with a five year maturity. The Company was established less than five years ago. Therefore, it has not yet experienced significant levels of maturities of outstanding Investment Certificates. The cash flow from the existing assets has been adequate during the past three years to satisfy the demand for payment of maturing investment certificates. The Company's ability to repay its other outstanding obligations, including those created by the sale of the securities described herein, may be contingent upon the success of future public offerings of certificates and preferred stock. The Company, its parent company and C. Paul Sandifur, Jr. are currently negotiating a possible reorganization which would involve the sale of the Company to C. Paul Sandifur, Jr. followed by the sale of Old Standard to the Company. The proposed transaction is in formative stages, however, it is not currently anticipated that the sale of the Company to Mr. Sandifur would materially effect the leverage of the Company. It is currently anticipated that the second step in the proposed transaction, which involves the sale of Old Standard to the Company would approximately double the leverage of the Company on a consolidated basis. No assurance is made that the transaction will occur as currently proposed. See "Certain Transactions." 6. Concentration of Investments in Real Estate Receivables: Approximately 77% of the Company's assets at September 30, 1993 were invested in Receivables. As of that date approximately 67% of such investments were secured by first position liens with 33% secured by second or lower position liens. Although there exists a generally inherent greater risk of loss with respect to non-first position lien receivables, generally higher yields are required for such investments. See "Business - Investment in Real Estate Secured Receivables." As of September 30, 1993, approximately 21% of the Receivable portfolio was collateralized by real estate located in the Pacific Northwest (Washington, Oregon, Idaho and Montana) and approximately 9% by property located in California and approximately 27% by property located in Hawaii. The receivables located in Hawaii are principally timeshare receivables which were purchased from an affiliate in December, 1992. These receivables were subsequently sold to Metropolitan on February 18, 1994. The original purchase and subsequent sale were at a price equal to 100% of the face amount of the outstanding receivables at the respective sale dates. See Note 2, Financial Statements, and "Business-Plan of Operation-Method of Financing." All such Receivable investments are subject to a risk of the obligor's default on the obligation and loss in the event of foreclosure. The risk of default or loss on resale can be affected by changes in general or local economic conditions, property values, changes in zoning, land use, environmental laws and other legal restrictions including restriction and timing on methods of foreclosure. Relative to Certificates 1. Lack of Indenture Restrictions and Related Indebtedness: The Indenture pursuant to which the Certificates are issued does not restrict the Company's ability to issue additional certificates or to incur other debt. Neither does the Indenture require the Company to maintain any specified financial ratios, minimum net worth or minimum working capital. The Certificates are senior in liquidation to all outstanding equity securities of the Company, are subordinate only to the Company's collateralized debt and are on a parity with all other outstanding certificates, unsecured accounts payable and accrued liabilities. There are no limitations on the Company's ability to incur collateralized debt. As of September 30, 1993, the Company's collateralized debt and related accrued interest amounted to $23,000. There was $20,082,000 of principal plus compounded and accrued interest of $1,877,000 on outstanding certificates on September 30, 1993. 2. Absence of Insurance and Guarantees: The Certificates are neither insured by the Company's parent, nor any governmental agency (as are certain investments in financial institutions such as banks, savings and loans or credit unions) nor are they guaranteed by any public agency or private entity. It should also be noted that the Company is not subject to any generally applicable governmental limitations on its own borrowing. In these respects, the Company is similar to most other commercial enterprises which sell debt to public investors, but dissimilar to those financial institutions providing insurance against the risk of loss to investors. The investment risk in the Certificates is thus higher than the risk incurred by investors in such insured financial institutions. There are no provisions for a sinking fund for repayment of the Certificates. 3. Absence of Trading Market/Liquidity: It is not anticipated that a trading market for the Certificates will develop. The Certificates are not subject to redemption prior to maturity. Prepayments pursuant to the "prepayment on death" provision described in "Description of Certificates" or upon mutual agreement between the Company and the Certificateholders will not constitute redemptions. Prospective investors should carefully consider their needs for liquidity before investing in the Certificates and upon investing, should be prepared to hold the Certificates until maturity. See "Description of Securities". Relative to Preferred Stock 1. Effect of Certain Subordination and Liquidation Rights: The liquidation preference of Preferred Stock offered herein is $100 per share. In the event of liquidation of the Company, outstanding shares of Preferred Stock are at parity with the liquidation preference of all other series of preferred stock of the Company which may be outstanding, and are subordinate to all outstanding debt of the Company including its Certificates. Preferred Stock is preferred in liquidation to the Company's common stock. As of September 30, 1993, total assets of the Company were approximately $25,442,000 and the total liabilities of the Company ranking senior in liquidation preference to Preferred Stock were approximately $22,254,000. The preference in liquidation would not necessarily be applicable to terms afforded Preferred Stock in the event of other extraordinary corporate events such as the sale of substantially all its assets, capital restructuring, merger, reorganization and bankruptcy. The outcomes thereof could be subject to negotiation among all interested parties and/or court determinations and are not presently determinable. In such circumstances Preferred Stock would not necessarily enjoy any preference over terms available to common stock, or even be as favorable. 2. Federal Income Tax Considerations: To the extent that the Company may not have current or accumulated earnings and profits as computed for federal income tax purposes, the Company believes that distributions made with respect to Preferred Stock would be characterized as tax free returns of capital for federal income tax purposes. A tax free distribution reduces a shareholder's basis to the extent of the distribution received. Such distributions are tax free to both corporate and individual holders to the extent of their basis in the stock. Distributions in excess of the holder's basis are considered capital gain income. In the event a holder of Preferred Stock disposes of the stock in a taxable sale or exchange, taxable gain may be recognized by the holder to the extent prior distributions were a tax-free return of capital. In the event the Company has earnings and profits for federal income tax purposes in any future year, the distributions paid in that year will constitute taxable income to the recipient to the extent of such earnings and profits. Corporate holders generally can exclude 70% of taxable dividends received in any year (which will be reduced if it has debt that is directly attributable to the holder's investment in the Preferred Stock). The Company is unable to predict the future character of its distributions. Purchasers are advised to consult their own tax advisors with respect to the federal income tax treatment of distributions made. See "Description of Preferred Stock-Federal Income Tax Consequences of Distributions." 3. Limited Marketability of Shares: The Preferred Stock has no sinking fund, mandatory redemption or maturity date, nor any other provision for retirement or redemption or pay off apart from preference over common stock in a final liquidation of the Company. Also See "Limitations on Redemptions and Distributions".The Preferred Stock is not expected to be traded on any National or Regional Stock Exchange and no independent public market for Preferred Stock is anticipated. At present, management does not anticipate applying for a listing for such public trading. In order to provide the parent company's preferred shareholders with some liquidity, the Company's broker/dealer affiliate has operated an in-house trading list to match buyers and sellers of the parent company's preferred stock. The Company will use its best efforts to make this listing available for the Preferred Stock offered hereunder following completion of this offering. With limited exceptions, the Company has established a policy that all preferred shareholders must place their shares for sale on the in-house trading list for 60 consecutive days before the Company will entertain a request for redemption. There is no assurance that the shares will be sold within the 60 day period. There is no assurance that the Company will redeem the shares if they have not sold within the 60 day period. Therefore, a prospective purchaser should not rely on this in-house trading list or the Company's discretionary redemption provisions as assurance that such shares could ever be sold or redeemed. The Company may discontinue this system at anytime. There can be no assurance that this system will continue to operate, nor that it will provide liquidity comparable to securities traded on recognized public stock exchanges. See "Description of Preferred Stock-Redemption of Shares". 4. Control by Common Shareholders: The Common Stock is the only class of the Company's stock carrying voting rights. Common stockholders now hold, and upon completion of this offering will continue to hold, effective control of the Company except as described below. The Board resolution authorizing the Preferred Stock provides that in the event distributions payable on any shares of preferred stock, including the Preferred Stock offered hereunder, are in arrears in an amount equal to twenty four full monthly dividends or more per share, then the holders of Preferred Stock and all other outstanding preferred stock shall be entitled to elect a majority of the Board of Directors of the Company. Preferred Stock shareholders may also become entitled to certain other voting rights as required by law. See "Description of Preferred Stock-Voting Rights". 5. Limitations on Redemption and Restrictions on Distributions: Preferred Stock is designed as a long term investment in the equity of the Company, not as a short-term liquid investment. The Preferred Stock is redeemable solely at the option of the Company, and with limited exceptions is specifically not redeemable for 3 years following its purchase. In addition, the Company may not purchase or acquire any shares of Preferred Stock in the event that cumulative dividends thereon have not been paid in full except pursuant to a purchase or exchange offer made on the same terms to all holders of Preferred Stock. See "Description of Preferred Stock-Redemption of Shares". The Company is restricted from making distributions on Preferred Stock in the event that any distributions to which the holders of other series of preferred stock are entitled to have not been paid. See "Description of Preferred Stock-Distributions." <PAGE> <PAGE> DESCRIPTION OF SECURITIES Description of Certificates The Certificates will be issued under a Trust Indenture, as amended, dated as of November 15, 1990, between the Company and West One Bank, Idaho, N.A. as Trustee (the "Trustee"). The following statements under this caption relating to the Certificates and the Indenture are summaries and do not purport to be complete. Such summaries are subject to the detailed provisions of the Indenture and are qualified in their entirety by reference to the Indenture. A copy of the Indenture is filed as an exhibit to the Registration Statement of which this Prospectus is a part and is incorporated in this Prospectus by reference. General The Certificates will represent general unsecured obligations of the Company and will be issued in fully registered form without coupons, in fractional denominations of $0.01 or more. The Certificates will be sold at 100% of the principal amount, subject to the stated minimum investment amount requirements. The Certificates will have the maturities and the interest rates set forth on the cover page of this Prospectus. The stated interest rates, maturities, minimum investment amounts and incremental denominations of unissued Certificates may be changed at any time by the Company. Any such change will have no effect on the terms of the previously sold certificates. Certificates may be transferred or exchanged for other Certificates of the same series of a like aggregate principal amount, subject to the limitations provided in the Indenture. No service charge will be made for any transfer or exchange of Certificates. The Company may require payment of taxes or other governmental charges imposed in connection with any such transfer or exchange. Interest will accrue at the stated rate from date of issue until maturity. The Certificates are not convertible into capital stock or other securities of the Company. The Certificates are not subject to redemption prior to maturity, but may be prepaid pursuant to the prepayment on death provision described below or in limited circumstances involving an investor's demonstrated financed hardship, and subject to regulatory restrictions affecting redemptions and exchanges of securities during an offering, the Company may, in its sole discretion, entertain a request for an early payout of a Debenture upon terms mutually agreed to by the holder of the Debenture and the Company. Such early payout requests, when received, are reviewed on a first come first served basis and are subject to review by the Company's Executive Committee. Payment of Principal and Interest Interest will be payable in cash to the Certificateholder(s) under one of several plans of interest payment. The purchaser may elect to have interest paid on a monthly, quarterly, semiannual or annual basis, without compounding or elect to accumulate interest with compounding semiannually at the stated interest rate. Certificateholders make the interest payment election at the time of purchase of the Certificates. The interest payment election may be changed at any time by written notice to the Company. Under the compounding option, the Certificateholder(s), upon written notice to the Company, may withdraw the interest accumulated during the last two completed semiannual compounding periods as well as the interest accrued from the end of the last compounding period to the date the Company receives the notice. Amounts compounded prior to the last two compounding periods are available only at maturity. At the election of the Certificateholder at the time of investment, and subject to the minimum term and investment requirements set forth on the cover page of this Prospectus, level monthly installments comprised of principal and interest will be paid to the Certificateholder commencing 30 days from the issue date of the Certificate until maturity. The amount of each installment will be determined by the amortization term designated by the Certificateholder at the time the Certificate is purchased. The minimum amortization term is 60 months. Certificateholders will be notified in writing approximately 30 days prior to the date their Certificates will mature. The amounts due on maturity are placed in a separate non interest-bearing bank trust account until paid to the Certificateholder(s). Certificates do not earn interest after the maturity date. Unless otherwise requested by the Certificateholder, the Company will pay the principal and accumulated interest due on the matured certificate to the Certificateholder(s) in cash at the Company's main office, or by check mailed to the address of the Certificateholder(s). Prepayment on Death In the event of the death of a registered owner of a Certificate, any party entitled to receive some or all of the proceeds of the Certificate may elect to have his or her portion of the principal and any accrued but unpaid interest prepaid in full in five consecutive equal monthly installments. Interest will continue to accrue on the declining principal balance of such portion. No interest penalties will be assessed. Any request for prepayment shall be made to the Company in writing and shall be accompanied by the Certificate and evidence satisfactory to the Company of the death of the registered owner or joint registered owner. Before prepayment, the Company may require the submission of additional documents or other material which it may consider necessary to determine the portion of the proceeds the requesting party is entitled to receive, or assurances which, in the Company's discretion, it considers necessary to the fulfillment of its obligations. Related Indebtedness The Indenture pursuant to which the Certificates are issued does not restrict the Company's ability to issue additional Certificates or to incur other debt. The Indenture does not require the Company to maintain any specified financial ratios, minimum net worth or minimum working capital. Certificates will not be guaranteed or insured by any governmental or private agency. The Certificates offered hereby are senior in liquidation to all outstanding equity securities of the Company. They are subordinate to the Company's collateralized debt and are on a parity with all other outstanding certificates, unsecured accounts payable and accrued liabilities. The amount of outstanding certificates on September 30, 1993, (including compounded and accrued interest) was $21,959,000. There are no limitations on the Company's ability to incur collateralized debt. Collateralized debt outstanding on that date of $23,000 (principal and accrued interest) consisted primarily of senior liens on the real estate collateral for the Company's real estate receivables. West One Bank, the Trustee, is obligated under the Indenture to oversee and, if necessary, to take action to enforce fulfillment of the Company's obligations to Certificateholders. The Trustee is a national banking association headquartered in Boise, Idaho, with a combined capital and surplus in excess of $200,000,000. The Company and certain of its affiliates maintain deposit accounts with and expect to, from time to time, borrow money from the bank and conduct other banking transactions with it. At September 30, 1993 and as of the date of this Prospectus, no loans from the Trustee were outstanding. In the event of default, the Indenture permits the Trustee to become a creditor of the Company and does not preclude the Trustee from enforcing its rights as a creditor, including rights as a holder of collateralized indebtedness. Rights and Procedures in the Event of Default Events of Default include the failure of the Company to pay interest on any Certificate for a period of 30 days after it becomes due and payable; the failure to pay the principal or any required installment thereof of any Certificate when due; the failure to perform any other covenant in the Indenture for 60 days after notice; and certain events in bankruptcy, insolvency or reorganization with respect to the Company. Upon the occurrence of an Event of Default, either the Trustee or the holders of 25% or more in principal amount of Certificates then outstanding may declare the principal of all the Certificates to be due and payable immediately. The Trustee must give the Certificateholders notice by mail of any default within 90 days after the occurrence of the default, unless it has been cured or waived. The Trustee may withhold such notice if it determines in good faith that such withholding is in the best interest of the Certificateholders, except if the default consists of failure to pay principal or interest on any Certificate. Subject to certain conditions, any such default, except failure to pay principal or interest when due, may be waived by the holders of a majority (in aggregate principal amount) of the Certificates then outstanding. Such holders will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or of exercising any power conferred on the Trustee, except as otherwise provided in the Indenture. The Trustee may require reasonable indemnity from holders of Certificates before acting at their direction. Within 120 days after the end of each fiscal year the Company must furnish to the Trustee a statement of certain officers of the Company concerning their knowledge as to whether or not the Company is in default under the Indenture. Modification of the Trust Indenture Certificateholders' rights may be modified with the consent of the holders of 66 2/3% of the outstanding principal amounts of Certificates, and 66 2/3% of each series specially affected. In general, no adverse modification of the terms of payment and no modification reducing the percentage of Certificates required for modification is effective against any Certificateholder without his or her consent. Restrictions on Consolidation, Merger, etc. The Company may not consolidate with or merge into any other corporation or transfer substantially all its assets unless either the Company is the continuing corporation formed by such consolidation, or into which the Company is merged, or the person acquiring by conveyance or transfer of such assets shall be a corporation organized and existing under the laws of the United States or any state thereof which assumes the performance of every covenant of the Company under the Indenture and certain other conditions precedent are fulfilled. The Indenture contains no other provisions or covenants which afford holders of the Certificates special protection in the event of a highly leveraged buyout transaction.

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. Reference is made to the Index of Principal Terms for the location herein of the definitions of certain capitalized terms used herein. Title of Securities........... Series 1994-1, Floating Rate Auto Loan Asset Backed Certificates (the "Certificates" or "Series 1994-1"). Issuer........................ Ford Credit Auto Loan Master Trust (the "Trust"). Seller........................ Ford Credit Auto Receivables Corporation (the "Seller" or "FCAR"), a wholly-owned subsidiary of Ford Motor Credit Company. Servicer...................... Ford Motor Credit Company ("Ford Credit" or, together with, as applicable, a successor servicer, the "Servicer"), a wholly-owned subsidiary of Ford Motor Company ("Ford"). Trustee....................... Chemical Bank (the "Trustee"). The Trust..................... The Trust was formed pursuant to a Pooling and Servicing Agreement, dated as of December 31, 1991, among FCAR, as Seller, Ford Credit, as Servicer, and Manufacturers Hanover Trust Company, predecessor trustee to Chemical Bank, as supplemented by the Supplement relating to the Certificates (as supplemented and amended from time to time, the "Pooling and Servicing Agreement"). The assets of the Trust include (a) certain Receivables existing under the Accounts at the close of business on December 31, 1991 (the "Initial Cut-Off Date"), certain Receivables generated under the Accounts from time to time thereafter during the term of the Trust as well as certain Receivables generated under any Accounts added to the Trust from time to time (less Receivables paid or charged off and excluding Receivables generated in any Accounts removed from the Trust from time to time after the Initial Cut-Off Date), (b) all funds collected or to be collected in respect of such Receivables, (c) all funds on deposit in certain accounts of the Trust, including funds on deposit in the Excess Funding Account, the Principal Funding Account, the Interest Funding Account and the Reserve Fund, (d) the Interest Rate Swap, (e) any other Enhancement issued with respect to any other Series (the drawing on or payment of such Enhancement not being available to Certificateholders) and (f) a security interest in certain motor vehicles (the "Vehicles") and, in the case of certain Accounts, a security interest junior to that of Ford Credit in certain parts inventory, equipment, fixtures, service accounts, realty and/or a personal guarantee (collectively, the "Collateral Security") securing the Receivables. The term "Enhancement" shall mean, with respect to any Series, any letter of credit, surety bond, cash collateral account, guaranteed rate agreement, maturity liquidity facility, tax protection agreement, interest rate swap agreement or other similar arrangement for the benefit of certificateholders of such Series. The Accounts.................. The Accounts pursuant to which the Receivables have been or will be generated are revolving credit agreements entered into with Ford Credit by dealers to purchase or finance automobile and light duty truck inventory. The Accounts are selected from all such credit agreements of Ford Credit which meet the criteria provided in the Pooling and Servicing Agreement (the "Eligible Accounts"). Under certain circumstances Accounts may be added to, or removed from, the Trust. See "The Accounts", "Description of the Certificates -- Addition of Accounts" and "-- Removal of Accounts". The Receivables............... The Receivables have arisen or will arise in the Accounts. The Receivables consist of advances made directly or indirectly by Ford Credit to domestic automobile dealers franchised by Ford and/or other automobile manufacturers or automobile distributors (the "Dealers"). Such advances are used by the Dealers to purchase or finance the Vehicles, which consist of primarily new and some used automobiles, light duty trucks and certain other vehicles manufactured or distributed by such automobile manufacturers. Generally, the principal amount of an advance in respect of a new Vehicle is equal to the wholesale purchase price of the Vehicle and, subject to certain exceptions, is due upon the retail sale of the Vehicle. See "The Dealer Floorplan Financing Business -- Creation of Receivables" and "-- Payment Terms". Collections of principal under the Receivables are herein referred to as "Principal Collections", and collections of interest and other nonprincipal charges (including insurance service fees, amounts recovered with respect to Defaulted Receivables and insurance proceeds) are referred to herein as "Interest Collections". The Receivables bear interest at an adjustable rate described herein. See "The Dealer Floorplan Financing Business--Revenue Experience". FCAR has entered into a Receivables Purchase Agreement, dated as of the date of the Pooling and Servicing Agreement, between FCAR, as purchaser, and Ford Credit, as seller (the "Receivables Purchase Agreement"). Pursuant to the Receivables Purchase Agreement, Ford Credit (a) has sold and will sell to the Seller all of its right, title and interest in and to all Receivables meeting certain eligibility criteria contained in the Receivables Purchase Agreement and the Pooling and Servicing Agreement ("Eligible Receivables") and (b) has assigned and will assign its interests in the Vehicles and the Collateral Security to the Seller. The Seller in turn has transferred and will transfer such Receivables and Collateral Security to the Trust pursuant to the Pooling and Servicing Agreement. The Seller has also assigned to the Trust its rights with respect to the Receivables under the Receivables Purchase Agreement. See "Description of the Receivables Purchase Agreement". All new Receivables arising under the Accounts during the term of the Trust will be sold by Ford Credit to the Seller and transferred by the Seller to the Trust. Accordingly, the aggregate amount of Receivables in the Trust will fluctuate from day to day as new Receivables are generated and as existing Receivables are collected, charged off as uncollectible or otherwise adjusted. The Certificates.............. The Certificates will be issued in the aggregate initial principal amount of $1,000,000,000 (the "Initial Principal Amount"), in minimum denominations of $1,000 and in integral multiples thereof. Except in certain limited circumstances as described herein under "Description of the Certificates -- Definitive Certificates", the Certificates will only be available in book-entry form. The Trust's assets will be allocated in part to the Certificateholders (the "Certificateholders' Interest") and to the certificateholders of any other outstanding Series (such other certificateholders, together with the Certificateholders, are referred to as "certificateholders"), with the remainder allocated to the Seller (the "Seller's Interest"). A portion of the Seller's Interest will be subordinated to the Certificateholders' Interest, as described below. The Certificates will evidence an undivided beneficial interest in assets of the Trust allocated to the Certificateholders' Interest and will represent the right to receive from such assets funds up to (but not in excess of) the amounts required to make quarterly (or in some cases monthly) payments of interest on the Certificates and to make the payment of principal on the Expected Final Payment Date or earlier or later under certain limited circumstances in an amount up to the outstanding principal amount of the Certificates. Interest on the Certificates will be calculated at a per annum rate (the "Certificate Rate") equal to Three-Month LIBOR (calculated as provided herein) plus basis points ( %). See "Description of the Certificates -- Interest". On the date of the initial issuance of the Certificates (the "Closing Date") the Invested Amount will equal the Initial Principal Amount and represent the principal amount of Certificates invested in Receivables as of the Closing Date (the "Initial Invested Amount"). The Invested Amount is subject to reduction during the Accumulation Period, the Early Amortization Period and at such other times as deposits are made to the Excess Funding Account in connection with the payment of Receivables as described under "Description of the Certificates -- Excess Funding Account". The principal amount of the Seller's Interest may fluctuate as the aggregate amount of the Receivables balance changes from time to time and as new Series are issued. The Certificates will represent beneficial interests in the Trust only and will not represent interests in or obligations of Ford Credit, FCAR or any affiliate thereof. Neither the Certificates nor the Receivables are insured or guaranteed by Ford Credit, FCAR or any affiliate thereof. Registration of Certificates.................. The Certificates will initially be represented by one or more Certificates registered in the name of Cede & Co., as the nominee of DTC. No person acquiring an interest in the Certificates will be entitled to receive a definitive certificate representing such person's interest except in the event that Definitive Certificates are issued under the limited circumstances described herein. Certificateholders may elect to hold their interests through DTC, in the United States, or Centrale de Livraison de Valeurs Mobilieres S.A. ("CEDEL") or the Euroclear System ("Euroclear"), in Europe. Transfers within DTC, CEDEL or Euroclear, as the case may be, will be in accordance with the usual rules and operating procedures of the relevant system. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and counterparties holding directly or indirectly through CEDEL or Euroclear, on the other, will be effected in DTC through Citibank, N.A. ("Citibank") or Morgan Guaranty Trust Company of New York ("Morgan"), the relevant depositaries (collectively, the "Depositaries") of CEDEL or Euroclear, respectively, and each a participating member of DTC. See "Description of the Certificates -- Book-Entry Registration" and "-- Definitive Certificates". Issuance of New Series........ The Pooling and Servicing Agreement provides that, pursuant to any one or more supplements thereto (each, a "Supplement"), the Seller may cause the Trustee to issue one or more new Series of certificates (a "New Issuance"). However, at all times, the interest in the principal balances of Receivables ("Principal Receivables") represented by the Seller's Interest must equal or exceed a specified amount. The issuance of the Certificates pursuant to the Supplement related thereto will constitute a New Issuance. The Pooling and Servicing Agreement also provides that the Seller may specify, with respect to any Series, the Principal Terms of the Series. The Seller may offer any Series to the public or other investors under a prospectus or other disclosure document in transactions either registered under the Securities Act or exempt from registration thereunder, directly or through the Underwriters or one or more other underwriters or placement agents. Under the Pooling and Servicing Agreement and pursuant to a Supplement, a New Issuance may only occur upon delivery to the Trustee of the following: (a) a Supplement specifying the Principal Terms of such Series, (b) an opinion of counsel to the effect that, for United States federal income and Michigan income and single business tax purposes, (x) such issuance will not adversely affect the characterization of the certificates of any outstanding Series or class as debt, (y) such issuance will not cause a taxable event to any certificateholders and (z) such new Series will be characterized as debt, and (c) letters from the Rating Agencies confirming that the issuance of the new Series will not result in the reduction or withdrawal of the rating of the Certificates or any other Series or class of certificates then outstanding. See "Description of the Certificates -- New Issuances". Other Series Issuances........ As of the date hereof the Trust has issued three Series, the Series 1992-1, 6 7/8% Auto Loan Asset Backed Certificates ("Series 1992-1" and with respect to the certificates of such Series, the "Series 1992-1 Certificates"), the Series 1992-2, 7 3/8% Auto Loan Asset Backed Certificates ("Series 1992-2" and with respect to the certificates of such Series, the "Series 1992-2 Certificates") and the Series 1992-3, 5 5/8% Auto Loan Asset Backed Certificates ("Series 1992-3" and with respect to certificates of such Series, the "Series 1992-3 Certificates"). See "Annex 1: Other Issuances of Investor Certificates" for a summary of the Series 1992-1 Certificates, the Series 1992-2 Certificates and the Series 1992-3 Certificates. Allocations................... The Certificateholders' Interest will include the right to receive (but only to the extent needed to make required payments under the Pooling and Servicing Agreement) varying percentages of Interest Collections and Principal Collections collected during each calendar month (a "Collection Period"). Interest Collections, Principal Collections and Defaulted Receivables for any Collection Period will be allocated to the Certificateholders' Interest as described below and as more fully described under "Description of the Certificates -- Allocation Percentages". Interest Collections, Principal Collections and Defaulted Receivables not allocated to Series 1994-1 will be allocated to the Seller's Interest and the certificateholders' interests in other Series. Interest Collections and Defaulted Receivables will be allocated at all times to the Certificateholders' Interest based on the Floating Allocation Percentage applicable during the related Collection Period. The Floating Allocation Percentage for any Collection Period is the percentage obtained by dividing the Invested Amount on the last day of the immediately preceding Collection Period by the aggregate amount of the principal balances of the Receivables (the "Pool Balance") on the last day of the immediately preceding Collection Period. During the Revolving Period, subject to certain limitations, Principal Collections allocable to the Certificateholders' Interest will be allocated and paid to the Seller or allocated to any other Series in exchange for the allocation to the Certificateholders' Interest of an equal interest in the Receivables' balances that are new or that would otherwise be part of the Seller's Interest or the interest of the certificateholders of such other Series. During the Accumulation Period and any Early Amortization Period, Principal Collections will be allocated to the Certificateholders' Interest based on the Principal Allocation Percentage. The Principal Allocation Percentage for a Collection Period during the Accumulation Period and any Early Amortization Period is the percentage equivalent of a fraction, the numerator of which is the Invested Amount on the last day of the Revolving Period and the denominator of which is the Pool Balance on the last day of the immediately preceding Collection Period. Unless an Early Amortization Event shall have occurred, monthly deposits of principal with respect to the Certificates to the Principal Funding Account will not exceed the Controlled Distribution Amount and, subject to certain limitations, any Principal Collections allocated to but not paid to the Principal Funding Account will be paid to the Seller or allocated to any other Series as described herein. See "Description of the Certificates -- Allocation Percentages -- Principal Collections for all Series". Interest...................... Interest on the principal balance of the Certificates will accrue at the Certificate Rate and will be payable quarterly to Certificateholders on the fifteenth day of January, April, July and October (or, if such day is not a business day, on the next succeeding business day) (each, a "Quarterly Payment Date"), commencing in October 1994; provided, that, if an Early Amortization Event or an Asset Composition Event shall have occurred, interest will be distributed to the Certificateholders on the first Distribution Date following such Early Amortization Event or Asset Composition Event (but, in the case of an Asset Composition Event, only to the extent needed to cure such event) and, subject to certain exceptions, on each subsequent Distribution Date until the Certificates are retired. "Distribution Date" shall mean the fifteenth day of each month (or, if such date is not a business day, the next succeeding business day). Certificateholder Interest Collections will be deposited each month into a trust account (the "Interest Funding Account") and used to make interest payments to the Certificateholders on each Quarterly Payment Date. Interest payable on a Quarterly Payment Date will accrue from and including the preceding Quarterly Payment Date (or, in the case of the first Quarterly Payment Date, from and including the Closing Date) to but excluding such Quarterly Payment Date. Interest for any Quarterly Payment Date or Distribution Date will be calculated on the basis of the actual number of days elapsed during the related Interest Period and a year assumed to consist of 360 days, and interest due but not paid on any Quarterly Payment Date or Distribution Date will be due on the next Quarterly Payment Date or Distribution Date, as the case may be, together with, to the extent lawfully payable, interest on such amount at the Certificate Rate plus 200 basis points (2%). Interest payments on the Certificates will be derived from Certificateholder Interest Collections for the related Collection Period, withdrawals, if any, from the Reserve Fund, Investment Proceeds, if any, Net Trust Swap Receipts, if any, and, under certain circumstances, Available Seller's Collections to the extent of the Available Subordinated Amount. Principal..................... It is expected that the final principal payment with respect to the Certificates will be made on the July 1999 Distribution Date (the "Expected Final Payment Date"). The final principal payment with respect to the Certificates may be paid earlier than the applicable Expected Final Payment Date if an Early Amortization Event occurs, or later under certain circumstances described herein. Upon the occurrence of an Asset Composition Event described herein, certain principal amounts may be payable to the Certificateholders. Asset Composition Event....... An "Asset Composition Event" will occur if during the Revolving Period for any Series (a) the sum of all Eligible Investments and amounts on deposit in all of the deposit accounts of all Series (the "Series Accounts") represents more than 25% of the total assets of the Trust on each of twelve or more consecutive Determination Dates, after giving effect to all payments made or to be made on the Distribution Date next succeeding each such respective Determination Date; or (b) on each of two consecutive Determination Dates the sum of all Eligible Investments and amounts on deposit in all Series Accounts represents more than 45% of the total assets of the Trust, in each case after giving effect to all payments to be made on the next succeeding Distribution Date. Upon the occurrence of an Asset Composition Event during the Revolving Period for any Series, an amount equal to the Series 1994-1 Allocation Percentage of the Asset Correction Amount shall be distributed in respect of the Certificates on the next following Distribution Date. At any time, the "Asset Correction Amount" shall equal the amount which, if distributed, would result in compliance with the percentage limitation the violation of which gave rise to the Asset Composition Event. Revolving Period.............. During the Revolving Period, Principal Collections allocable to the Certificateholders' Interest generally will be paid to the Seller, deposited to the Excess Funding Account or allocated to another Series (in effect, in exchange for the allocation to the Certificateholders' Interest of an equal interest in the Receivables balances that are new or that would otherwise be part of the Seller's Interest or the interest of the certificateholders of such other Series) in order to maintain the sum of the Invested Amount and the amount, if any, in the Excess Funding Account at a constant level. The "Revolving Period" will be the period beginning on June 30, 1994 (the "Series Cut-Off Date") and ending on the earlier of (x) the day immediately preceding the Accumulation Period Commencement Date and (y) the business day immediately preceding the day on which an Early Amortization Event occurs. See "Description of the Certificates -- Early Amortization Events" for a discussion of certain events which might lead to the early termination of the Revolving Period and, in certain limited circumstances, the recommencement of the Revolving Period. Accumulation Period........... Unless an Early Amortization Period commences, the Certificates will have an accumulation period (the "Accumulation Period"), which will commence on the Accumulation Period Commencement Date, and continue until the earlier of (a) the commencement of an Early Amortization Period and (b) the Expected Final Payment Date. Unless an Early Amortization Event shall have occurred, the Accumulation Period will be one, two, three, four or five month(s) long as described in the following paragraph. During the Accumulation Period, Certificateholders' Principal Collections and certain other amounts allocable to the Certificateholders' Interest will be deposited on each Distribution Date in a trust account (the "Principal Funding Account") and, together with any amounts in the Excess Funding Account, used to make principal distributions to Certificateholders when due. The amount to be deposited in the Principal Funding Account on any Distribution Date will be limited to an amount equal to the Controlled Distribution Amount. See "Description of the Certificates -- Distributions from the Collection Account; Reserve Fund -- Principal Collections". On January 15, 1999, the Servicer shall determine the Accumulation Period Length. The "Accumulation Period Length" will be one, two, three, four or five month(s) and will be calculated as the product, rounded upwards to the nearest integer, of (a) five and (b) a fraction, the numerator of which is the Invested Amount as of January 15, 1999, (after giving effect to all changes therein on such date) and the denominator of which is the sum of such Invested Amount and the invested amounts as of January 15, 1999, (after giving effect to all changes therein on such date) of all other outstanding Series whose respective revolving periods are not scheduled to end before the last day of the June 1999 Collection Period. If the Accumulation Period Length is one month, two months, three months, four months or five months, the "Accumulation Period Commencement Date" shall be the first day of the June 1999 Collection Period, the May 1999 Collection Period, the April 1999 Collection Period, the March 1999 Collection Period or the February 1999 Collection Period, respectively. Notwithstanding the foregoing, the Accumulation Period Commencement Date shall be February 1, 1999, if, prior to such date, any other outstanding Series shall have entered into an early amortization period. In addition, if the Accumulation Period Length shall have been determined to be less than five months and, thereafter, any outstanding Series shall enter into an early amortization period, the Accumulation Period Commencement Date shall be the earlier of (i) the date that such outstanding Series shall have entered into its early amortization period and (ii) the Accumulation Period Commencement Date as previously determined. Other Series issued by the Trust may have either an accumulation period or an amortization period. Such accumulation periods or amortization periods may have different lengths and begin on different dates. Thus, certain Series may be in their revolving periods, while others are in periods during which Principal Collections are distributed to, or reserved for, such other Series. Under certain circumstances, one or more Series may be in their early amortization periods or accumulation periods, while other Series are not. Early Amortization Period..... During the period beginning on the day on which an Early Amortization Event has occurred and, except as described below, ending on the earlier of the payment in full of the outstanding principal balance of the Certificates and the Termination Date (the "Early Amortization Period"), the Revolving Period or the Accumulation Period, as the case may be, will terminate and Principal Collections and certain other amounts allocable to the Certificateholders' Interest will no longer be paid to the Seller or the holders of any other outstanding Series as described above but instead will be distributed to the Certificateholders monthly on each Distribution Date (each a "Special Payment Date") beginning with the Distribution Date following the Collection Period in which an Early Amortization Period commences. See "Description of the Certificates -- Early Amortization Events" for a description of events that might result in the commencement of an Early Amortization Period. During an Early Amortization Period, distributions of principal on the Certificates will not be subject to the Controlled Distribution Amount. See "Description of the Certificates -- Distributions from the Collection Account; Reserve Fund -- Principal Collections". In addition, on the first Special Payment Date (a) any amounts on deposit in the Interest Funding Account (as needed to pay accrued interest on the Certificates) will be paid to the Certificateholders and (b) any amounts on deposit in the Excess Funding Account, the Principal Funding Account and the Interest Funding Account (after the payment of accrued interest on such date) will be paid to the Certificateholders up to the outstanding principal balance of the Certificates. See "Description of the Certificates -- Distributions". The Seller is required to add Receivables to the Trust under certain circumstances described under "Description of the Certificates -- Addition of Accounts". The failure of the Seller to add Receivables when required will result in the occurrence of an Early Amortization Event. However, if no other Early Amortization Event has occurred, the Early Amortization Period resulting from such failure will terminate and the Revolving Period will recommence when the Seller would no longer be required to add Receivables to the Trust, so long as the scheduled termination date of the Revolving Period has not occurred. Subordination of the Seller's Interest...................... If the Interest Collections, Investment Proceeds, Net Trust Swap Receipts, if any, certain amounts in the Reserve Fund and certain other amounts allocable to the Certificateholders for any Collection Period are not sufficient to cover the interest payable on the Certificates on the next Distribution Date (plus any overdue interest and interest thereon), the Monthly Servicing Fee for such Distribution Date, any Investor Default Amount for such Distribution Date, Net Trust Swap Payments, if any, for such Distribution Date and certain other amounts, a portion of the Seller's Interest will be applied to make up such deficiency. Generally, the amount of the Seller's Interest subject to such subordination is the Available Subordinated Amount. The Available Subordinated Amount for the first Determination Date will be equal to the Required Subordinated Amount. The "Required Subordinated Amount" will mean, as of any date of determination, the sum of (i) the product of the Subordinated Percentage and the Invested Amount and (ii) the Incremental Subordinated Amount. The "Subordinated Percentage" will initially equal the percentage equivalent of a fraction, the numerator of which is 10% and the denominator of which will be the excess of 100% over 10%. The Available Subordinated Amount for subsequent Distribution Dates will be determined pursuant to the calculation described under "Description of the Certificates -- Allocation of Collections; Deposits in Collection Accounts; Limited Subordination of Seller's Interest". The Available Subordinated Amount will fluctuate based on the increase and decrease, if any, in the Invested Amount and the corresponding decrease and increase in the amount, if any, in the Excess Funding Account and the additions and subtractions specified in the calculation referred to above. The Seller may, but is not obligated to, increase at any time the Available Subordinated Amount so long as the cumulative amount of such increases does not exceed the lesser of (i) $11,111,111 or (ii) 1.11% of the Invested Amount on such date. Any such increase may have the effect of avoiding an Early Amortization Event. The Available Subordinated Amount, to the extent it was reduced because of any application of the Seller's Interest to cover a deficiency, will be reinstated by the amount, if any, for each Distribution Date of Excess Servicing allocated and available to be paid to the Seller as described under "Description of the Certificates -- Distributions from the Collection Account; Reserve Fund -- Excess Servicing". Servicing..................... The Servicer (initially, Ford Credit) is responsible for servicing, managing and making collections on the Receivables and will, except as provided below, deposit such collections in the Collection Account within two business days following the receipt thereof, generally up to the amount of such collections required to be distributed to Certificateholders with respect to the related Collection Period. In certain circumstances, the Servicer will be permitted to use for its own benefit and not segregate collections on the Receivables received by it during each Collection Period until no later than the business day prior to the related Distribution Date. See "Description of the Certificates -- Allocation of Collections; Deposits in Collection Account; Limited Subordination of Seller's Interest". On the second business day preceding each Distribution Date (each a "Determination Date"), the Servicer will calculate the amounts to be allocated as described herein in respect of collections on Receivables received with respect to the related Collection Period to the Certificateholders, to the holders of other outstanding Series or to the Seller as described herein. See "Description of the Certificates -- Allocation of Collections; Deposits in Collection Account; Limited Subordination of Seller's Interest" and "Special Considerations -- Certain Legal Aspects". In certain limited circumstances Ford Credit may resign or be removed as Servicer, in which event either the Trustee, or, so long as it meets certain eligibility standards set forth in the Pooling and Servicing Agreement, a third-party servicer may be appointed as successor servicer. Ford Credit is permitted to delegate any of its duties as Servicer to any of its affiliates, but any such delegation will not relieve the Servicer of its obligations under the Pooling and Servicing Agreement. The Servicer will receive a monthly servicing fee and certain other amounts as described herein as servicing compensation from the Trust. See "Description of the Certificates -- Servicing Compensation and Payment of Expenses". Mandatory Reassignment and Transfer of Certain Receivables................. The Seller has made certain representations and warranties in the Pooling and Servicing Agreement with respect to the Receivables in its capacity as Seller and Ford Credit has made certain representations and warranties in the Pooling and Servicing Agreement in its capacity as Servicer. If the Seller breaches certain of its representations and warranties with respect to any Receivables and such breach remains uncured for a specified period and has a materially adverse effect on the Certificateholders' Interest or the interests of the holders of other outstanding Series therein, the Certificateholders' Interest and such other certificateholders' interests in such Receivables will, subject to certain conditions specified herein, be reassigned to the Seller. If Ford Credit, as Servicer, fails to comply in all material respects with certain covenants or warranties with respect to any Receivables and such noncompliance is not cured within a specified period after Ford Credit becomes aware or receives notice thereof from the Trustee and such noncompliance has a materially adverse effect on the Certificateholders' Interest or such other certificateholders' interests therein, all Receivables affected will be purchased by Ford Credit. In the event of a transfer of servicing obligations to a successor Servicer, such successor Servicer, rather than Ford Credit, would be responsible for any failure to comply with the Servicer's covenants and warranties arising thereafter. Interest Rate Swap............ On the Closing Date, the Trustee, on behalf of the Trust, will enter into one or more interest rate swap agreements (collectively the "Interest Rate Swap") with Ford Credit (the "Swap Counterparty"). In accordance with the terms of the Interest Rate Swap, the Swap Counterparty will pay to the Trust, on each Quarterly Payment Date, interest at the Certificate Rate on the outstanding principal balance of the Certificates as of the preceding Quarterly Payment Date. In exchange for such payments, the Trust will pay to the Swap Counterparty, on each Distribution Date, interest at a per annum rate equal to the lesser of (x) One-Month LIBOR (calculated as described herein) and (y) the Prime Rate less 1.5%, on the outstanding principal balance of the Certificates as of the preceding Distribution Date, which rates will be reset on various dates in each month. With respect to each Distribution Date, any difference between the monthly obligation of the Swap Counterparty to the Trust and the monthly obligation of the Trust to the Swap Counterparty will be referred to herein as the "Net Trust Swap Receipt", if such difference is a positive number, and the "Net Trust Swap Payment", if such difference is a negative number. Net Trust Swap Receipts, if any, will be distributed in the same manner in which Certificateholder Interest Collections are distributed on each Distribution Date and Net Trust Swap Payments, if any, will be paid out of Certificateholder Interest Collections and Investment Proceeds on each Distribution Date. In the event that the Interest Rate Swap is terminated in accordance with its terms, any Deficiency Amount will be paid to the extent funds are available therefor by applying, in addition to any amounts allocated with respect to the Available Subordinated Amount, Interest Collections and Principal Collections allocated to the Seller to the extent of the Swap Available Subordinated Amount. See "Allocation of Collections; Deposits in Collection Account; Limited Subordination of Seller's Interest -- Swap Available Subordinated Amount". Tax Matters................... In the opinion of special tax counsel for the Seller and the Trust, the Certificates will be characterized as debt for United States federal income tax purposes and, in the opinion of Michigan counsel for the Seller and the Trust, the Certificates will be characterized as debt for Michigan income and single business tax purposes. Each Certificateholder, by the acceptance of a Certificate, will agree to treat the Certificates as debt for United States federal, state and local income and single business tax purposes. See "Certain Tax Matters" for additional information concerning the application of United States federal and Michigan tax laws. ERISA Considerations.......... An employee benefit plan subject to the requirements of the fiduciary responsibility provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the provisions of Section 4975 of the Code, contemplating the purchase of Certificates should consult its counsel before making a purchase and the fiduciary and such legal advisors should consider whether the Certificates will satisfy all of the requirements of the "publicly offered securities" exemption described herein or the possible application of other ERISA prohibited transaction exemptions described herein. See "ERISA Considerations". Certificate Ratings........... It is a condition to the issuance of the Certificates that they be rated in the highest long-term rating category by at least one nationally recognized rating agency. The rating of the Certificates addresses the likelihood of the ultimate payment of the principal and interest on the Certificates. However, a Rating Agency does not evaluate, and the rating of the Certificates will not address the likelihood of payment of the outstanding principal of the Certificates by the Expected Final Payment Date. A security rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal in the future by the assigning rating agency. See "Special Considerations -- Ratings of the Certificates".

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+SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus. Potential investors are urged to read the more detailed information set forth elsewhere in this Prospectus. A Glossary of frequently used capitalized and other specialized terms is attached as Annex A (located inside the back cover). MESA MESA Inc. is one of the largest independent natural gas producers in the United States. Mesa owns proved natural gas, natural gas liquids and oil reserves estimated as of December 31, 1992 at approximately 1.8 trillion cubic feet of natural gas equivalents. Over 70% of Mesa's total equivalent proved reserves are natural gas and almost all of its other reserves are natural gas liquids. Substantially all of Mesa's reserves are proved developed reserves. Mesa's principal producing properties are in the Hugoton field of southwest Kansas and the West Panhandle field of Texas, which together account for over 95% of Mesa's equivalent proved reserves at December 31, 1992. These two fields are in the same producing trend and contain shallow natural gas reserves that are expected to produce beyond the year 2020. The Hugoton field is the largest producing gas field in the continental United States. Mesa also owns and operates natural gas processing plants located in both of these fields which are capable of processing substantially all of Mesa's natural gas production in these fields. Mesa considers itself one of the most efficient operators of shallow natural gas properties in the United States. Mesa holds all of its assets and conducts its operations through its subsidiaries, all of which are wholly-owned following a January 1994 restructuring that converted the general partner interests in the subsidiaries to common stock of Mesa. The Company's direct corporate subsidiaries are: - Mesa Operating Co. ("MOC"), which owns all of Mesa's oil and gas properties, other than Mesa's Hugoton field natural gas properties, as well as an approximate 81% limited partnership interest in Hugoton Capital Limited Partnership ("HCLP") and certain other assets; - Mesa Midcontinent Co. ("MMC"), which owns principally cash and securities, as well as an approximate 19% limited partnership interest in HCLP; and - Mesa Holding Co. ("MHC"), which owns principally cash, as well as the outstanding capital stock of Mesa Environmental Ventures Co. ("Mesa Environmental"). The Company's other significant subsidiaries, owned indirectly, are: - HCLP, a limited partnership which owns substantially all of Mesa's Hugoton field natural gas properties; and - Mesa Environmental, which is engaged in promoting the use of natural gas as a motor vehicle fuel and developing and marketing natural gas fuel equipment for the transportation market. Capital is a wholly owned finance subsidiary of MOC. Mesa's business strategy includes (i) continuing its effort to strengthen its financial condition by raising equity capital and applying the proceeds thereof to retire debt, and issuing new lower cost debt to refinance its existing high cost debt securities, (ii) maximizing the value of its existing high-quality, long-life reserves through efficient operating and marketing practices, (iii) increasing its capability to process natural gas and to extract natural gas liquids and helium by expanding and modernizing processing facilities, (iv) conducting selective exploratory and development activities, principally in existing areas of operations, and (v) promoting the use of natural gas as a motor vehicle fuel and developing and marketing natural gas fuel equipment for the transportation market. See "Business." PURPOSE OF THE OFFERING The proceeds of the sale of the Secured Notes offered hereby will be used to fund all or a portion of Mesa's share of the payment to be made to Unocal Corporation to settle a lawsuit by Unocal against Mesa and other defendants. See "Unocal Litigation and Settlement." The Secured Notes will be issued pursuant to the same indenture (the "Secured Indenture") under which the Obligors currently have outstanding $569,277,000 face amount (at maturity) of Secured Notes, which Secured Notes were issued in connection with the Obligors' recently completed debt exchange offer. The Secured Notes offered hereby will be fungible with the currently outstanding Secured Notes. The issuance of the additional amount of Secured Notes offered hereby was expressly contemplated in the Secured Indenture for the purpose of settling or compromising the Unocal lawsuit. See "Description of the Secured Notes -- Provisions Relating to the Issuance of the Additional Secured Notes Offered Hereby." The Unocal lawsuit was originally filed in 1986 against Mesa Petroleum Co., a predecessor of the Company, certain subsidiaries of Mesa Petroleum Co. and certain other parties. The lawsuit alleged that the defendants had purchased and sold Unocal common shares within a six-month period in 1985 in transactions subject to Section 16(b) of the Securities Exchange Act of 1934, resulting in alleged short-swing profits of approximately $99 million that were recoverable by Unocal under Section 16(b). The plaintiffs also asked the Court to grant pre-judgment interest, which amount could currently exceed $50 million. Mesa and the other defendants contended that none of the transactions in Unocal shares were subject to Section 16(b) and, further, that no profit was realized. However, in light of the significant uncertainties relating to continuing the litigation and other relevant circumstances, Mesa determined that entering into a settlement agreement with Unocal (the "Settlement Agreement") would be in the best interests of Mesa and its stockholders. Pursuant to the Settlement Agreement, the Mesa and the other defendants have agreed to pay to Unocal an aggregate of $47.5 million, of which $42.75 million will be paid by Mesa and $4.75 million will be paid by certain other defendants not affiliated with Mesa. The Settlement Agreement is subject to approval of the Federal District Court for the Central District of California, following a hearing to determine the fairness, reasonableness and adequacy of the amounts to be paid pursuant to the Settlement Agreement and whether the Settlement Agreement should be approved by the Court. Such hearing is currently scheduled for February 28, 1994. The Secured Notes offered hereby will not be issued unless and until such final approval is received. The Court preliminarily approved the Settlement on January 18, 1994. See "Plan of Distribution." Both the Settlement Agreement and the Exchange Offer described below have or had as a principal goal the reduction of near term financial risk to Mesa so as to permit Mesa to undertake, subject to market conditions, an orderly recapitalization. Mesa will seek to deleverage its balance sheet principally through the public or private sale of equity securities and the application of the proceeds therefrom to repay debt, and by reducing the interest expense on its remaining debt by refinancing such debt at lower rates. Mesa believes that the combination of the Exchange Offer and the Settlement has removed the actual and potential requirement for large cash outflows from Mesa until at least December 1995, when Mesa will begin making semiannual cash interest payments on the Discount Notes, or until June 1996, when Mesa's unsecured discount notes mature. EXCHANGE OFFER On August 26, 1993, Mesa completed an exchange offer (the "Exchange Offer") for all of the outstanding 13 1/2% Subordinated Notes due May 1, 1999 (the "13 1/2% Subordinated Notes") and 12% Subordinated Notes due August 1, 1996 (the "12% Subordinated Notes" and, together with the 13 1/2% Subordinated Notes, the "Subordinated Notes") of the Obligors. Pursuant to the Exchange Offer, approximately $586.3 million aggregate principal amount of Subordinated Notes were tendered and accepted for exchange, and the Obligors issued approximately $569.3 million aggregate principal amount ($472.9 million accreted value at December 31, 1993) of Secured Notes, approximately $178.8 aggregate principal amount ($148.6 million accreted value at December 31, 1993) of 12 3/4% Discount Notes due June 30, 1996 (the "Unsecured Notes" and, together with the Secured Notes, the "Discount Notes") and approximately $29.3 million aggregate principal amount of 0% Convertible Notes due June 30, 1998 (the "Convertible Notes"). The terms and provisions of the Secured Notes and the Unsecured Notes are substantially similar, except with respect to security, maturity and redemption provisions. Pursuant to the terms of the indenture governing the Convertible Notes, all of the previously outstanding Convertible Notes have been converted into approximately 7.5 million shares of the Company's common stock (the "Common Stock"). The Exchange Offer reduced the Obligors' cash requirements through December 1995, which enhances the Obligors' ability to service their debt obligations and make capital expenditures from available cash and operating cash flows. Specifically, completion of the Exchange Offer enabled the Obligors to replace substantially all of their Subordinated Notes, which in the aggregate had cash interest requirements of $75 million per year through August 1996, with securities that do not require interest payments until December 1995. In exchange for accepting the deferral of interest payments, tendering Subordinated Noteholders obtained, among other things, second lien security interests in certain assets to collateralize the Secured Notes received in the Exchange Offer, improved ranking of their securities relative to non-tendering Subordinated Noteholders, better covenant protection and debt securities convertible into equity of the Company. The Exchange Offer also altered the timing of required principal repayments by the Obligors. The 12% Subordinated Notes mature in 1996 and the 13 1/2% Subordinated Notes mature in 1999. The Exchange Offer had the effect of moving approximately $115 million of scheduled principal payments from 1996 to 1998 and approximately $293 million of scheduled principal payments from 1999 to 1998. In addition, the Exchange Offer resulted in exchanging Subordinated Noteholders receiving Convertible Notes in exchange for a portion of their Subordinated Notes. The Convertible Notes were convertible into shares of Common Stock at the option of the holders at any time and by Mesa at any time after November 26, 1993. In December 1993, the Obligors converted all of the outstanding Convertible Notes into shares of Common Stock. As a result, a portion of each exchanging Subordinated Noteholder's debt securities was converted into equity. Concurrently with the Exchange Offer, Mesa's bank lenders agreed to amend Mesa's Credit Agreement in order to extend the payment of a portion of the outstanding principal, which otherwise would have matured in June 1994 (or earlier as a result of the then current default in the payment of interest on the Subordinated Notes, which default was cured upon completion of the Exchange Offer), and to amend certain covenants thereunder, including a reduction of Mesa's tangible adjusted equity requirement. In return, the banks received, among other things, additional security, earlier payment of a portion of the outstanding principal and an increase in the rate of interest payable on the Credit Agreement. Pursuant to the amendments, upon the completion of the Exchange Offer, Mesa repaid $20.6 million of borrowings under the Credit Agreement and made additional principal payments of $18.7 million in the fourth quarter of 1993. The Credit Agreement requires that Mesa make additional principal payments of $19.5 million in the first half of 1994 and $50 million (including cash collateralization of $10.4 million in letters of credit) on June 30, 1995. THE OFFERING Issue...................... 12 3/4% Secured Discount Notes due June 30, 1998. Aggregate Amount........... Consummation of the Offering is conditioned upon, among other things, the sale of an aggregate amount of Secured Notes that would result in net proceeds of at least $40 million, before deducting expenses of the Company, unless a Prospectus Supplement otherwise provides. The Obligors will not issue an amount of Secured Notes pursuant to this Offering that would result in net proceeds of more than $42.75 million, before deducting expenses of the Company. Yield...................... The yield to maturity of a Secured Note is 12 3/4%, based on the following terms of the Secured Notes (expressed per $1,000 face amount): (i) the Accreted Value of a Secured Note of approximately $830.77 at December 31, 1993, (ii) the increase in Accreted Value of a Secured Note to $1,000 from December 31, 1993 through and including June 30, 1995, (iii) cash interest payments at 12 3/4% per annum paid semiannually in arrears thereafter, and (iv) the payment of $1,000 (representing the Accreted Value as of December 31, 1993 of approximately $830.77 plus the cumulative increase in Accreted Value from December 31, 1993 through and including June 30, 1995, totaling approximately $169.23) at maturity. The Accreted Value of each $1,000 face amount of Secured Notes at each June 30 and December 31 from December 31, 1993 through and including June 30, 1995 is shown in the table below. <TABLE> <CAPTION> ACCRETED VALUE -------------- <S> <C> December 31, 1993............................... $ 830.7709 June 30, 1994................................... 883.7326 December 31, 1994............................... 940.0705 June 30, 1995 and thereafter.................... 1,000.0000 </TABLE> Interest................... The Secured Notes do not bear interest through June 30, 1995. However, the Accreted Value of the Secured Notes will increase from December 31, 1993 through and including June 30, 1995 at a rate of 12 3/4% per annum, compounded semiannually on each June 30 and December 31. On July 1, 1995, each Secured Note will have a final Accreted Value of $1,000 (or an integral multiple thereof). From and after July 1, 1995 the Secured Notes will accrue interest at a rate of 12 3/4% per annum, payable only in cash. Such interest will be payable semiannually in arrears on June 30 and December 31 of each year, beginning December 31, 1995. Obligors................... The Secured Notes are the joint and several obligations of the Company, MOC and Capital. Security................... The obligations of the Obligors under the Secured Notes are secured by (i) a mortgage and security agreement granting a second lien on certain properties and related assets and contractual rights of MOC in the West Panhandle field of Texas and (ii) a pledge agreement granting a second lien and security interest in a 65% limited partnership interest in HCLP (which will be increased to approximately 77% upon issuance of all Secured Notes offered hereby), which is part of the limited partnership interest in HCLP owned by MOC. Such liens are subordinate to prior liens to secure the $69.5 million of First Lien Debt (as defined) outstanding under the Credit Agreement at December 31, 1993 and any future First Lien Debt, subject to the limitations described herein. In addition, the right of the Trustee for the Secured Notes to exercise rights with respect to the Collateral is subject to the terms of an Intercreditor Agreement with the collateral agent for the holders of such First Lien Debt. See "Description of the Secured Notes -- Security." Mandatory Retirement....... In the event that as of August 31, 1994 or August 31, 1995, the Obligors have Mandatory Retirement Funds (as defined), the Obligors will be required to redeem or make an offer to purchase Secured Notes with such funds on the terms described herein. The indenture for the Unsecured Notes contains a similar provision, and Mandatory Retirement Funds will first be applied to redeem or offer to purchase all outstanding Unsecured Notes and then to redeem or offer to purchase Secured Notes. Optional Redemption........ The Secured Notes may be redeemed at the option of the Obligors, in whole at any time or in part from time to time, at redemption prices ranging from a current price of 110.25% of the Accreted Value thereof at the redemption date and declining on a semiannual basis to 100% at July 1, 1996, as set forth herein, plus accrued interest thereon to the redemption date if such date is on or after July 1, 1995. Change in Control.......... In the event of a Change in Control (as defined), the Obligors will be required to make an offer to purchase all of the Secured Notes, (a) at a price equal to 101% of the Accreted Value thereof on the date of purchase if such date is on or prior to June 30, 1995, and (b) at a price equal to 101% of the face amount thereof plus accrued interest thereon to the date of purchase if such date is on or after July 1, 1995. See "Risk Factors -- Funding of Change in Control Offer."

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. References to fiscal periods herein are references to the Company's fiscal periods which end on the last Sunday of the related calendar period (for example, December 26, 1993 or June 26, 1994). THE COMPANY Acme Metals Incorporated (the "Company"), based in Riverdale, Illinois, is a fully integrated manufacturer and marketer of steel, steel strapping and strapping tools, steel tubing and automotive and light truck jacks. The Company's operations are divided into two primary segments, the "Steel Making Segment" and the "Steel Fabricating Segment." Acme Steel Company ("Acme Steel"), which is the Company's sole Steel Making Segment operating subsidiary, accounted for 41% of the Company's consolidated net sales in 1993. The Steel Fabricating Segment, consisting of Acme Packaging Corporation ("Acme Packaging"), Alpha Tube Corporation ("Alpha Tube") and Universal Tool & Stamping Company, Inc. ("Universal"), accounted for the remaining 59% of the Company's consolidated net sales in 1993. Over the past eight years, the Company has pursued a downstream integration strategy, intended to enhance both the value and margins of its steel products. This strategy, which included the acquisition of Universal and Alpha Tube and of additional strapping facilities, has helped to moderate the impact of fluctuating steel demand on Acme Steel's operations by creating captive businesses that consume approximately 40% to 45% of Acme Steel's steel production. These businesses allow the Company to sell fabricated steel products that have a higher value added component. Having implemented its downstream integration strategy, the Company is now pursuing a business strategy consisting of the following key elements: reducing production costs, expanding shipping capability and product range, increasing sales of specialty products, and improving product quality and customer service. As the smallest integrated steel producer in the United States, with an annual shipping capability of approximately 720,000 tons of finished steel, Acme Steel manufactures and markets flat-rolled sheet and strip steel. Acme Steel attempts to utilize the flexibility of its small production quantities by focusing on niche markets and targeting customers with small order sizes and special metallurgical requirements such as high carbon, special alloy and high- strength steels. The principal markets served by Acme Steel include the agricultural equipment, automotive component, industrial equipment, industrial fastener, pipe and tube, processor and tool manufacturing industries. Acme Packaging, which represented 33% of the Company's 1993 consolidated net sales, is one of the two leading U.S. producers of steel strapping and strapping tools. The Company believes that Acme Packaging's strong market position is attributable to (i) a broad product line, (ii) high quality, low cost strapping produced in modern facilities, (iii) the location of its production facilities in close proximity to a broad customer base and (iv) the benefits of a close relationship with Acme Steel, which supplies virtually all of Acme Packaging's steel. Acme Packaging's strapping products are principally used to unitize (i.e., bind) products for the agricultural, automotive, brick, construction, fabricated and primary metals, forest products, paper and wholesale industries. Alpha Tube, which represented 16% of the Company's 1993 consolidated net sales, is a leading U.S. producer of high quality welded carbon steel tubing used for furniture, recreational, construction and automotive applications. Alpha Tube has developed expertise in certain applications demanding light gauge tubing and targets customers whose requirements match Alpha Tube's production capabilities. Universal, which accounted for 10% of the Company's 1993 consolidated net sales, produces automotive and light truck jacks, tire wrenches and accessories for the original equipment manufacturing ("OEM") market. Management estimates that Universal currently holds a 30% share of the OEM market for auto and light truck jacks in North America. The Company believes that Universal's strong market position with U.S. and foreign transplant automotive manufacturers is principally the result of its product development capability, high quality products and just-in-time delivery capabilities. MODERNIZATION AND EXPANSION PROJECT In 1990 the Company began a study of available business strategies and technological developments in light of its then operational and competitive opportunities. In July 1992, the Board of Directors of the Company authorized a study of the feasibility of constructing a continuous thin slab caster/hot strip mill complex. In connection with this study, the Company received reports from the management consulting firm of A.T. Kearney, Inc. Based on the feasibility study, the Kearney reports and extensive additional analysis performed by the Company of available technology, market opportunities and construction requirements, the Board of Directors of the Company has authorized construction of a new continuous thin slab caster/hot strip mill complex (the "Modernization Project") at Acme Steel's Riverdale, Illinois plant subject to the Note Offering. The Company believes that Acme Steel currently enjoys a position as a low cost producer of high quality liquid steel. Although Acme Steel sells many of its products for use in higher-priced specialty applications, its present ingot pouring and rolling process results in finished steel production costs significantly above those of certain of its competitors. The Company believes the Modernization Project will allow Acme Steel to build on its strengths as a low cost producer of liquid steel by significantly increasing its overall efficiency and reducing its finished steel production costs, thereby improving its gross margins. The Modernization Project should also result in finished steel products with improved physical and metallurgical properties. Based on the turnkey contract price of $364.2 million, without taking into account financing costs or changes that may be requested by Acme Steel during construction, management estimates that the cost of the Modernization Project, including equipment, ancillary facilities, construction, and general contractor fees, will not exceed $372 million. As a result of the Modernization Project, the Company expects shipping capability to increase from approximately 720,000 tons per year to approximately 925,000 tons per year within two years of start- up and to approximately 970,000 tons per year within four years of start-up. When the Modernization Project is completed, the Company estimates that it will provide savings in operating costs, based on full utilization of its expanded shipping capability of approximately 970,000 tons per year and certain other material assumptions, of approximately $77 per ton, resulting from the elimination of many of the production steps utilized in the existing ingot pouring and rolling process, lower energy consumption, higher labor productivity and increased production yields. See "Risk Factors--Modernization and Expansion Project" and "Modernization and Expansion Project--Estimated Costs and Savings." FINANCING PLAN The Company has adopted a plan of financing intended to provide the funds necessary to complete the Modernization Project, to repay certain indebtedness currently outstanding and to provide additional liquidity. The Company's plan of financing includes the following: (i) the Note Offering, (ii) the Special Warrant Offering, (iii) the Term Loan Facility and (iv) the securing of a working capital facility (the "Working Capital Facility"), which initially will be undrawn. The Special Warrant Offering occurred prior to the Note Offering, but the net proceeds of the Special Warrant Offering have been placed in escrow. The Note Offering is conditioned upon and is a condition to the release from escrow of the net proceeds of the Special Warrant Offering. The Term Loans will be funded concurrently with the closing of the Note Offering. For a more complete description of the material terms of the Notes and the Special Warrants, see "Financing Plan," "Description of Other Indebtedness" and "Description of Notes." The following table sets forth the Company's sources and immediate uses of funds as if the foregoing transactions were completed on June 26, 1994: <TABLE> <CAPTION> (DOLLARS IN THOUSANDS) ---------- <S> <C> Sources of Funds Senior Secured Notes......................................... $125,000 Senior Secured Discount Notes................................ 80,000 Term Loan Facility(1)........................................ 50,000 Special Warrant Offering(2).................................. 117,600 Working Capital Facility(3).................................. 0 -------- Total...................................................... $372,600 ======== Uses of Funds Increase in cash and cash equivalents(4)..................... $300,600 Repayment of 9.35% Senior Notes.............................. 50,000 Estimated fees and expenses(5)............................... 22,000 -------- Total...................................................... $372,600 ======== </TABLE> - -------- (1) The Term Loans to be made under the Term Loan Facility will be funded concurrently with the closing of the Note Offering. The Term Loans will be guaranteed by each of the Company's subsidiaries on a senior basis and will be secured equally and ratably by the collateral securing the Senior Secured Notes and Senior Secured Discount Notes. See "Description of Other Indebtedness--Term Loan Facility." (2) On or before September 14, 1994, the Special Warrants are exercisable on a one-for-one basis for 5,600,000 shares of the Company's common stock, $1.00 par value ("Common Stock"). Conditions for the Company's receipt of the proceeds of the sale of the Special Warrants include among other matters confirmation of the availability of not less than 85% of the remaining financing needed for construction of the Modernization Project. Successful completion of the Note Offering will satisfy this condition. (3) The Company has obtained commitments for an $80 million Working Capital Facility to provide for additional liquidity. The Working Capital Facility initially will be undrawn. See "Description of Other Indebtedness--Working Capital Facility." (4) The increase in cash and cash equivalents, together with cash currently on hand and cash flow from operations, will be used for the construction and integration of the Modernization Project. At June 26, 1994 the Company had cash and cash equivalents of $73.7 million. Sources and Uses of Funds above do not give effect to the proposed purchase by Raytheon Engineers & Constructors, Inc. ("Raytheon") of $9 million of newly issued shares of Common Stock. See "Modernization and Expansion Project--Engineering, Procurement and Construction Contract." (5) Estimated fees and expenses include financing fees for the Special Warrant Offering, the Note Offering, and the registration of 5,600,000 shares of Common Stock, related offering expenses and a prepayment penalty of $1.9 million, net of taxes, related to repayment of the 9.35% Senior Notes. NOTE OFFERING Notes Offered................. $125,000,000 principal amount of 12 1/2% Senior Secured Notes due 2002 (the "Senior Secured Notes"). $117,958,000 principal amount at maturity of 13 1/2% Senior Secured Discount Notes due 2004 (the "Senior Secured Discount Notes"). SENIOR SECURED NOTES Interest Rate................. 12 1/2% per annum. Interest Payment Dates........ February 1 and August 1, commencing February 1, 1995. Maturity Date................. August 1, 2002. Sinking Fund.................. None. Optional Redemption........... The Senior Secured Notes are redeemable at the option of the Company, in whole or in part, on or after August 1, 1998, at the redemption prices set forth herein, together with accrued and unpaid interest to the redemption date. SENIOR SECURED DISCOUNT NOTES Issue Price................... $678.21 per $1,000 principal amount at maturity (or 67.821% of the principal amount at maturity). Yield, Interest Rate and Interest Payment Dates....... 13 1/2% per annum (computed on a semi-annual bond equivalent basis) calculated from August 11, 1994. No cash interest will accrue on the Senior Secured Discount Notes prior to August 1, 1997. Thereafter, cash interest on the Senior Secured Discount Notes will accrue at the rate of 13 1/2% per annum and will be payable semi-annually on February 1 and August 1, commencing on February 1, 1998. Maturity Date................. August 1, 2004. Sinking Fund.................. None. Optional Redemption........... The Senior Secured Discount Notes are redeemable at the option of the Company, in whole or in part, on or after August 1, 1999, at the redemption prices set forth herein, together with accrued and unpaid interest to the redemption date. COMMON PROVISIONS OF THE NOTES Ranking....................... The Notes will be senior obligations of the Company. The Notes will be senior to all future subordinated indebtedness of the Company and will rank pari passu in right of payment with all future senior indebtedness of the Company. At June 26, 1994, on an adjusted basis after giving effect to the incurrence of the Term Loans and the Note Offering and the application of the proceeds therefrom, the Company and its subsidiaries would have had an aggregate of approximately $261.0 million of indebtedness (including the Notes and the Term Loans) outstanding. Guarantees.................... The Notes will be unconditionally guaranteed, jointly and severally, on a senior basis (the "Guarantees") by each of the Company's subsidiaries (the "Guarantors"). The Term Loans will be similarly guaranteed. Each of the Guarantees will be senior to all future subordinated indebtedness of each of the Guarantors and will rank pari passu with all existing and future senior indebtedness of each of the Guarantors including the guarantees of the Term Loans. Security...................... The Company's obligations under the Notes and the Term Loans will be secured by a pledge of all of the capital stock of the Company's direct subsidiaries. The Guarantee of the Notes and the Term Loans by Acme Steel will be secured by a first priority lien on substantially all existing and future real property and equipment of Acme Steel, including substantially all of the assets acquired in connection with the Modernization Project. The Guarantee of the Notes and the Term Loans by Acme Packaging will be secured by a pledge of all of the capital stock of its subsidiaries. Change of Control............. Upon the occurrence of a Change of Control (as defined herein), each holder of Notes will have the option to cause the Company and its subsidiaries to repurchase such holder's Notes, in whole or in part, at a repurchase price equal to (i) in the case of the Senior Secured Notes, 101% of the principal amount thereof, plus accrued interest to the date fixed for repurchase, or (ii) in the case of the Senior Secured Discount Notes, 101% of the Accreted Value thereof on the date fixed for repurchase if prior to August 1, 1997, and 101% of the principal amount thereof, plus accrued interest to the date fixed for repurchase, if thereafter. There can be no assurance that the Company and its subsidiaries would have sufficient funds to satisfy their obligations to repurchase Notes upon a Change of Control. See "Description of Notes--Certain Covenants-- Repurchase of Notes Upon Change of Control." Certain Covenants............. The Indentures under which the Notes will be issued will contain certain restrictive covenants that, among other things, will limit the ability of the Company and its subsidiaries to incur additional Indebtedness (as defined herein), create liens, pay dividends, repurchase capital stock, make certain other Restricted Payments (as defined herein), make Investments (as defined herein) engage in transactions with affiliates, sell assets, engage in sale and leaseback transactions and engage in mergers or consolidations. See "Description of Notes--Certain Covenants." Use of Proceeds............... The net proceeds of the Note Offering, together with the net proceeds of the incurrence of the Term Loans and the Special Warrant Offering, will be used principally to fund the construction and integration of the Modernization Project and for the repayment of debt. See "Financing Plan" and "Use of Proceeds." SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA The following table sets forth selected historical consolidated financial data and operating data for the Company for the periods indicated. The Consolidated Statements of Operations Data and Consolidated Balance Sheet Data for, and as of the end of, each of the five years in the period ended December 26, 1993 were derived from the consolidated financial statements of the Company, which have been audited by Price Waterhouse LLP, independent accountants. The selected historical consolidated financial data for, and as of the end of, the six months ended June 27, 1993 and June 26, 1994 were derived from unaudited financial statements for the Company which, in the opinion of management, reflect all adjustments which are of a normal recurring nature necessary for a fair presentation of the results of such periods. Results for interim periods are not necessarily indicative of the results to be expected for an entire fiscal year. The following table should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto appearing elsewhere herein. <TABLE> <CAPTION> (DOLLARS IN THOUSANDS, EXCEPT PER TON DATA) FISCAL YEAR FIRST HALF --------------------------------------------------- ------------------ 1989 1990 1991 1992 1993 1993 1994 -------- -------- -------- -------- -------- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Net sales................. $439,412 $446,042 $376,951 $391,562 $457,406 $225,032 $256,423 Cost of products sold..... 375,902 396,790 335,503 347,624 397,526 198,327 215,691 Depreciation expense...... 11,624 12,540 13,700 14,392 14,657 7,517 7,596 Selling and administrative expense.................. 25,751 27,916 29,219 28,901 30,633 13,800 15,304 Restructuring/nonrecurring charge................... -- -- -- 2,700(1) 1,925(2) -- -- -------- -------- -------- -------- -------- -------- -------- Operating income (loss)... 26,135 8,796 (1,471) (2,055) 12,665 5,388 17,832 Interest expense, net..... (2,116) (4,178) (4,211) (3,869) (3,813) (1,993) (1,620) Unusual income item....... -- 4,005 1,241 1,047 1,210 -- -- Other non-operating income................... 2,107 765 1,391 355 370 222 1,211 -------- -------- -------- -------- -------- -------- -------- Income (loss) before income taxes and cumulative effect of changes in accounting principles............... 26,126 9,388 (3,050) (4,522) 10,432 3,617 17,423 Income tax provision (credit)................. 9,926 3,755 (732) (1,673) 4,173 1,447 6,969 -------- -------- -------- -------- -------- -------- -------- Income (loss) before cumulative effect of changes in accounting principles............... 16,200 5,633 (2,318) (2,849) 6,259 2,170 10,454 Cumulative effect of changes in accounting principles, net of taxes. -- -- -- (50,323)(3) -- -- -- -------- -------- -------- -------- -------- -------- -------- Net income (loss)......... $ 16,200 $ 5,633 $ (2,318) $(53,172) $ 6,259 $ 2,170 $ 10,454 ======== ======== ======== ======== ======== ======== ======== OTHER DATA: CONSOLIDATED: Ratio of earnings to fixed charges(4)............... 7.5x 1.9x -- -- 2.5x 2.2x 6.9x EBITDA(5)................. $ 40,273 $ 22,592 $ 14,144 $ 15,705 $ 30,194 $ 13,441 $ 26,937 Pro forma total interest expense(6)............... 33,329 16,483 Pro forma cash interest expense(7)............... 20,484 10,243 Ratio of EBITDA to pro forma total interest expense.................. 0.9x 1.6x Ratio of EBITDA to pro forma cash interest expense.................. 1.5x 2.6x Capital expenditures...... $ 14,960 $ 28,604 $ 10,611 $ 7,557 $ 11,749 $ 4,305 $ 5,071 ACME STEEL COMPANY: Tons shipped-external customers................ 506,475 436,123 286,385 320,192 413,645 205,419 238,067 Tons shipped-intersegment. 233,374 259,243 273,177 289,946 284,361 154,219 144,063 -------- -------- -------- -------- -------- -------- -------- Total tons shipped........ 739,849 695,366 559,562 610,138 698,006 359,638 382,130 Average price per ton(8).. $ 417 $ 422 $ 423 $ 413 $ 426 $ 411 $ 444 Average production cost per ton(8)............... 339 355 354 338 349 338 338 Raw steel to finished product yield............ 76.1% 77.2% 78.0% 78.7% 78.6% 78.5% 78.6% </TABLE> <TABLE> <CAPTION> JUNE 26, 1994 ----------------------- ACTUAL AS ADJUSTED(9) -------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents............................... $ 73,651 $374,251 Total assets............................................ 350,628 658,104 Long-term debt (including current portion).............. 56,000 261,000 Stockholders' equity.................................... 96,209 200,909 </TABLE> (Footnotes on following page) - -------- (1) See Restructuring Charge in the notes to the consolidated financial statements. (2) See Nonrecurring Charge in the notes to the consolidated financial statements. (3) Cumulative effect of changes in account principles, net of taxes, includes the effects of adopting Financial Accounting Standard ("FAS") No. 106 "Accounting for Postretirement Benefits Other Than Pensions" and FAS No. 109 "Accounting for Income Taxes." See Postretirement Benefits Other Than Pensions and Income Taxes in the notes to the consolidated financial statements. (4) The ratio of earnings to fixed charges is computed by dividing (i) the sum of earnings from continuing operations before income taxes, interest expense (including amortization of debt issuance costs), the interest portion of rental expenses and the undistributed income of less than 50 percent owned persons accounted for by the equity method by (ii) fixed charges, which consist of interest expense (including amortization of debt issuance costs) and the interest portion of rental expenses. Earnings for 1992 and 1991 were insufficient to cover fixed charges by $4.5 million ($5.5 million if a non-recurring gain of $1 million before income taxes related to the sale of the Company's interests in coal producing property is excluded from earnings) and $4.3 million, respectively. Pro forma ratios of earnings to fixed charges, giving effect solely to the refinancing of the 9.35% Senior Notes (including the prepayment penalty) with a portion of the Note Offering would have been 5.3x and 2.0x for the first half of 1994 and the 1993 fiscal year, respectively. (5) EBITDA is defined as net income plus income taxes, net interest expense, depreciation and amortization, restructuring and nonrecurring items, cumulative effect of changes in accounting principles, and less unusual income. The Company believes EBITDA provides additional information for determining its ability to meet debt service requirements. EBITDA does not represent net income or cash flow from operations as determined by generally accepted accounting principles, and EBITDA is not necessarily an indication of whether cash flow will be sufficient to fund cash requirements. EBITDA does not give effect to any investment of the approximately $374.3 million of cash remaining after application of the net proceeds of the Note Offering and the Special Warrant Offering and the incurrence of the Term Loans to repay indebtedness and pay related expenses. (6) Pro forma total interest expense reflects the issuance of the Senior Secured Notes and the Senior Secured Discount Notes and the incurrence of the Term Loans, as follows: <TABLE> <CAPTION> YEAR ENDED SIX MONTHS ENDED DECEMBER 26, 1993 JUNE 26, 1994 ----------------- ---------------- <S> <C> <C> Senior Secured Notes.................... $15,625 $ 7,813 Senior Secured Discount Notes........... 11,165 5,400 Term Loans.............................. 4,406 2,203 Existing 6.5% to 6.75% Notes payable.... 453 227 Amortization of financing fees on Notes and Term Loans......................... 1,680 840 ------- ------- $33,329 $16,483 ======= ======= </TABLE> In calculating pro forma interest expense, the Company has utilized the interest rate of 12.5% on the Senior Secured Notes, the effective interest rate of 13.5% on the Senior Secured Discount Notes and an interest rate of 8.8% on the Term Loan Facility (based on LIBOR as of August 3, 1994). The Company has assumed that all interest is expensed in the period incurred. Interest on the Notes and the Term Loans and related financing fees will be capitalized as part of the Modernization Project when (i) the expenditures for the asset have been made, (ii) activities that are necessary to get the asset ready for its intended use are in progress and (iii) interest cost is being incurred. (7) Pro forma cash interest expense represents total interest expense, excluding the amortization of financing fees on the Notes and the Term Loans and the amortization of the discount of the Senior Secured Discount Notes. (8) Average price and average production costs per ton, which can be significantly affected by Acme Steel's product mix in a given period, include shipments made to external customers and intersegment shipments. (9) As adjusted to give effect to the transactions described under "Financing Plan."

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+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO THE "ISSUER" IN THIS PROSPECTUS REFER TO REEVES HOLDINGS, INC. TOGETHER WITH ITS SUBSIDIARIES AND REFERENCES TO "REEVES" OR THE "COMPANY" REFER TO REEVES INDUSTRIES, INC. TOGETHER WITH ITS SUBSIDIARIES. ALL OF THE OUTSTANDING CAPITAL STOCK OF REEVES WILL BE TRANSFERRED TO THE ISSUER PRIOR TO THE ISSUANCE OF THE DEBENTURES. SINCE REEVES WILL BE THE SOLE SUBSIDIARY OF THE ISSUER, THE CONSOLIDATED FINANCIAL DATA OF THE ISSUER ARE THOSE OF REEVES. THE ISSUER AND THE COMPANY The Issuer, through its subsidiary, Reeves, is a diversified industrial company with operations in two principal business segments, industrial coated fabrics, conducted through its Industrial Coated Fabrics Group ("ICF"), and apparel textiles, conducted through its Apparel Textile Group ("ATG"). In 1993, ICF contributed approximately 49.6% of the Company's net sales and approximately 73.6% of its operating income and ATG contributed approximately 50.4% of the Company's net sales and approximately 26.4% of its operating income (in each case, excluding unallocable corporate expenses). Throughout its businesses, the Company emphasizes specialty products, product quality, technological innovation, and rapid responses to the changing needs of its customers. ICF specializes in the coating of various substrate fabrics with a variety of products, such as synthetic rubber, vinyl, neoprene, urethane and other elastomers, to produce a diverse line of products for industrial applications. ICF's principal products include: (1) a complete line of printing blankets used in offset lithography, (2) coated automotive airbag materials, (3) specialty coated fabrics, including fluid control diaphragm materials, tank seals, ducting materials and coated fabric materials used for military and commercial life rafts and vests, aircraft escape slides, flexible fuel tanks and general aviation products, and (4) coated fabrics used in industrial coverings, including fabrics coated with rubber and vinyl which are used to make tarpaulins, loading dock shelters and other industrial products. The Company believes that ICF is one of the world's leading producers of offset printing blankets and that ICF has the leading share of the domestic market for coated automotive airbag materials. The Company also believes that ICF is a leading domestic producer of specialty coated fabrics used for a broad range of industrial applications. ICF's products generally involve significant amounts of technological expertise and precise production tolerances. The Company believes that ICF's product development, formulation and production methods are among the most sophisticated in the coated fabrics industry. ATG manufactures, processes and sells specialty textile fabrics to apparel and other manufacturers. Through its Greige Goods Division, ATG processes raw materials into greige goods (I.E., undyed woven fabrics). Through its Finished Goods Division, ATG functions as a converter and commission finisher, purchasing greige goods from the Greige Goods Division and others and contracting to have the goods dyed and finished for use in various end-products or dyeing and finishing the goods itself. The Company believes that ATG has developed strong positions in niche markets in the apparel textile industry by offering unique custom-designed fabrics to leading apparel and specialty garment manufacturers. ATG emphasizes "short-run" product orders and targets market segments in which its manufacturing flexibility, rapid response time, superior service and quality and ability to supply exclusive blends are key competitive factors. The Company's business strategy has focused on the sale of higher-margin niche products and the establishment of leading positions in its principal markets. The Company believes that this strategy, combined with its diverse product and customer base, the development of new products and substantial capital investment, has helped the Company increase its sales and profitability in spite of adverse economic conditions in its U.S. and European markets during 1990-1993. Since 1991, the Company has significantly increased its level of capital investment in its businesses to modernize and expand capacity, reduce its overall cost structure, increase productivity and enhance its competitive position. The Company intends to substantially increase its capital investment in its businesses to approximately $140 million during the 1994-1997 period. In addition, as opportunities arise, the Issuer may seek to augment its growth through strategic acquisitions, joint ventures and investments in other industrial companies where the Issuer believes that it can apply its professional management techniques to enhance a company's operating performance. The Company regularly reviews acquisition opportunities but is not currently a party to any agreement, or involved in negotiation of an agreement, with respect to any material acquisition, joint venture or investment. THE OFFERING <TABLE> <S> <C> Securities Offered............ $ aggregate principal amount of % Senior Discount Debentures due 2006. Maturity Date................. , 2006. Interest Rate................. The Debentures will accrete at a rate of %, compounded semi-annually, to an aggregate principal amount of $ by , 1999. Interest will not accrue on the Debentures prior to , 1999. Commencing , 1999, interest on the Debentures will accrue at the rate of % per annum, payable in cash semi-annually on and , commencing , 1999. Original Issue Discount....... For federal income tax purposes, the Debentures will be treated as having been issued with "original issue discount" equal to the difference between the issue price of the Debentures and the sum of all cash payments (whether denominated as principal or interest) to be made thereon. Each holder of a Debenture must include in gross income for federal income tax purposes a portion of such original issue discount for each day during each taxable year in which a Debenture is held, whether or not cash interest payments are made. See "Certain Federal Income Tax Considerations Concerning the Debentures." Optional Redemption........... The Debentures will not be redeemable prior to , 1999, except that during the first 36 months after the offering made hereby (the "Offering"), the Issuer may redeem up to one-half in aggregate face amount of the Debentures at % of Accreted Value with the net proceeds of public sales of common stock by the Issuer (or of its parent, Hart Holding Company Incorporated ("Hart Holding"), to the extent such net proceeds are contributed as a capital contribution in exchange for capital stock of the Issuer). The Debentures will be redeemable at the option of the Issuer, in whole or in part, after , 1999, at the premiums set forth herein, together with accrued interest, if any, to the date of redemption. </TABLE> <TABLE> <S> <C> Ranking....................... The Debentures will be senior unsecured indebtedness of the Issuer and will rank PARI PASSU in right of payment with all senior unsecured indebtedness which the Issuer may incur and senior to any subordinated indebtedness which the Issuer may incur. The Debentures will be effectively subordinated to claims of the creditors of the Issuer's subsidiaries, including the $122.5 million principal amount of 11% Senior Notes due 2002 of Reeves (the "11% Senior Notes"). As of April 3, 1994, after giving effect to the repayment of indebtedness with the proceeds of the Offering, consolidated obligations of the Issuer's subsidiaries, consisting of certain indebtedness, trade payables and accrued liabilities, but excluding intercompany obligations, would have been approximately $172.7 million. Change of Control............. Upon a Change of Control (as defined), holders of the Debentures will have the right to require the Issuer to purchase the Debentures at a price of 101% of the Accreted Value thereof, plus, if occurring after , 1999, accrued interest, if any, to the date of purchase. Certain Restrictions.......... The indenture pursuant to which the Debentures are issued (the "Indenture") will restrict the Issuer's ability to pledge subsidiary stock and, subject to certain exceptions, the ability of the Issuer and its subsidiaries to incur additional indebtedness, pay dividends, redeem capital stock, make certain investments, enter into transactions with affiliates, merge or consolidate with any other person, or sell, transfer or lease all or substantially all of their assets. See "Description of Debentures -- Certain Covenants." Use of Proceeds............... Proceeds of the Offering will be used to redeem Reeves' outstanding 13 3/4% Subordinated Debentures due 2001 (the "Subordinated Debentures") in the approximate aggregate principal amount of $11 million. The Issuer intends to use the balance of the proceeds to fund anticipated capital expenditures and make investments in other businesses which may include strategic acquisitions, joint ventures and investments in other industrial companies. The Company regularly reviews acquisition opportunities but is not currently a party to any agreement, or involved in negotiation of an agreement, with respect to any material acquisition, joint venture or investment. A portion of the proceeds may be used from time to time to repay bank debt of the Company. See "Use of Proceeds." </TABLE> REEVES HOLDINGS, INC. SUMMARY CONSOLIDATED FINANCIAL DATA <TABLE> <CAPTION> QUARTER ENDED YEAR ENDED DECEMBER 31, ---------------------- ----------------------------------------------------------- MARCH 28, APRIL 3, 1989(1) 1990 1991 1992 1993 1993 1994 <S> <C> <C> <C> <C> <C> <C> <C> (IN THOUSANDS, EXCEPT RATIOS) STATEMENT OF OPERATIONS DATA: Net sales............ $ 257,348 $ 257,859 $ 269,559 $ 271,104 $ 283,653 $ 63,780 $ 72,997 Operating income..... 29,810 24,666 25,626 25,767 28,094 5,810 7,428 Interest expense, net (2)................. 17,227 18,199 20,709 17,198 16,236 4,122 4,067 Income from continuing operations.......... 6,100 5,757 4,544 5,976 7,857 1,388 2,237 Ratio of earnings to fixed charges (3)... 1.6x 1.3x 1.2x 1.5x 1.7 x 1.4 x 1.8x OTHER DATA: EBITDA (4)........... $ 36,040 $ 31,303 $ 32,734 $ 33,883 $ 38,125 $ 8,000 $ 9,736 Capital expenditures (5)................. 6,718 7,007 11,015 15,788 16,506 2,051 5,686 Depreciation......... 5,090 5,497 5,951 6,776 7,204 1,855 1,973 Ratio of EBITDA to interest expense, net................. 2.1x 1.7x 1.6x 2.0x 2.3 x 1.9 x 2.4x PRO FORMA DATA: (6) Cash interest expense, net (7).... $ 10,390 $ 2,599 Interest expense, net (7)................. 24,001 5,917 Ratio of EBITDA to cash interest expense, net........ 3.7 x 3.7x Ratio of EBITDA to interest expense, net................. 1.6 x 1.6x Ratio of net debt to EBITDA (8).......... 3.3 x 3.4x </TABLE> <TABLE> <CAPTION> APRIL 3, 1994 -------------------------- ACTUAL AS ADJUSTED(9) <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents...................................... $ 4,829 $ 90,056 Total assets................................................... 208,487 296,899 Total debt (10)................................................ 138,402 227,475 Stockholder's equity........................................... 24,865 24,455 <FN> - ------------------------ (1) The year ended December 31, 1989 has been restated to reflect the exclusion of the discontinued operations of the ARA Automotive Group. See Note 3 to the Consolidated Financial Statements. </TABLE> <TABLE> <S> <C> (2) Interest expense, net deducts interest income but includes amortization of financing costs and debt discounts of $1,382, $1,227, $1,280, $1,031 and $728 for the years ended December 31, 1989, 1990, 1991, 1992 and 1993, respectively, and $181 and $188 for the quarters ended March 28, 1993 and April 3, 1994, respectively. (3) For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of income from continuing operations before income taxes, plus fixed charges. Fixed charges consist of interest on all indebtedness, which includes amortization of financing costs and debt discounts, and one-third of all rentals, which is considered representative of the interest portion included therein, after adjustments for amounts related to discontinued operations. (4) EBITDA is income from continuing operations before interest expense, net, income taxes, depreciation, amortization, and, in 1993, facility restructuring charges of $1,003 and a reserve for costs related to a discontinued plant included in corporate expenses of $484. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Issuer has included information concerning EBITDA herein because it understands that such information is used by certain investors as one measure of an issuer's historical ability to service debt. EBITDA should not be considered as an alternative to, or more meaningful than, earnings from operations or other traditional indications of the Issuer's operating performance. (5) Does not include the cost of equipment (leased under operating leases) of $3.0 million and $5.8 million in 1992 and 1993, respectively. (6) As adjusted to give effect to the sale of the Debentures offered hereby and the application of the proceeds to redeem the Subordinated Debentures, pay related premiums and reinvest the balance of such proceeds in three-month U. S. Treasury bills (at 4.23%, the rate borne by such instruments as of May 23, 1994) as if such transactions had occurred as of January 1, 1993 and January 1, 1994. (7) The following table presents a reconciliation of pro forma interest expense, net and cash interest expense, net: </TABLE> <TABLE> <CAPTION> YEAR ENDED QUARTER ENDED DECEMBER 31, APRIL 3, 1993 1994 <S> <C> <C> Historical interest expense and amortization of financing costs and debt discounts................................................................ $ 16,394 $ 4,085 Historical interest income................................................. (158) (18) ------------- ------- Interest expense, net...................................................... 16,236 4,067 ------------- ------- Plus: Amortization of original issue discount and financing costs on the Debentures......................................................... 12,945 3,145 Less: Interest expense and amortization of financing costs and debt discount on the Subordinated Debentures............................ (1,575) (394) Less: Interest income on reinvestment of excess proceeds from the sale of the Debentures..................................................... (3,605) (901) ------------- ------- Total pro forma adjustments.......................................... 7,765 1,850 ------------- ------- Pro forma interest expense, net............................................ $ 24,001 $ 5,917 ------------- ------- ------------- ------- Less: Amortization of original issue discount and financing costs on the Debentures......................................................... (12,945) (3,145) Less: Amortization of financing costs and debt discounts on existing debt.................................................................... (666) (173) ------------- ------- Pro forma cash interest expense, net....................................... $ 10,390 $ 2,599 ------------- ------- ------------- ------- <FN> (8) Net debt is defined as total debt less cash and cash equivalents, in each case, as adjusted for the use of proceeds from the Offering. For the period ended April 3, 1994, EBITDA is calculated using the four quarters ended as of such date. The Issuer has included information concerning the ratio of EBITDA to net debt herein because it understands that such information is used by certain </TABLE> <TABLE> <S> <C> investors as another measure of an issuer's liquidity and its ability to repay its debt obligations. This ratio should not be considered as an alternative to, or more meaningful than, other measures of leverage or liquidity. (9) As adjusted to give effect to the sale of the Debentures offered hereby, and the application of the proceeds to redeem the Subordinated Debentures and pay related premiums as if such transactions had occurred as of April 3, 1994. The adjustments to stockholder's equity consist of the payment of premiums of $303 and the write-off of financing costs and debt discounts of $358, net of an income tax benefit of $251 related to the redemption of the Subordinated Debentures. (10) Total debt consists of long-term debt, including current portion and borrowings under the Company's bank loan agreement, as amended (the "Bank Credit Agreement"). </TABLE>

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and historical and pro forma financial statements appearing elsewhere in this Prospectus and should be read only in conjunction with the entire Prospectus. For ease of reference, a glossary of certain terms used in this Prospectus is included as Appendix A to this Prospectus. FERRELLGAS, L.P. Ferrellgas, L.P. (the "Partnership") is a Delaware limited partnership recently formed to acquire and operate the propane business and assets of Ferrellgas, Inc. (the "Company" or "Ferrellgas"). Ferrellgas is the general partner (the "General Partner") of the Partnership and a wholly owned subsidiary of Ferrell Companies, Inc. ("Ferrell"). Ferrell was founded in 1939 as a single retail propane outlet in Atchison, Kansas, and has grown principally through the acquisition of retail propane operations throughout the United States. The Company believes that it is the third largest retail marketer of propane in the United States, based on gallons sold, serving more than 600,000 residential, industrial/commercial and agricultural customers in 45 states and the District of Columbia through approximately 416 retail outlets and 226 satellite locations in 36 states (some outlets serve an interstate market). The Company's largest market concentrations are in the Midwest, Great Lakes and Southeast regions of the United States. The Company operates in areas of strong retail market competition, which has required it to develop and implement strict capital expenditure and operating standards in its existing and acquired retail propane operations in order to control operating costs. This effort has resulted in upgrades in the quality of its field managers, the application of strong return on asset benchmarks and improved productivity methodologies. The Company's retail propane sales volumes were approximately 553 million, 496 million and 482 million gallons during the fiscal years ended July 31, 1993, 1992 and 1991, respectively. Earnings before depreciation, amortization, interest and taxes ("EBITDA") were $89.4 million, $87.6 million and $99.2 million for the fiscal years ended July 31, 1993, 1992 and 1991, respectively. EBITDA for the twelve months ended April 30, 1994 was $98.6 million. The Company's net losses for the fiscal years ended July 31, 1993 and 1992 were $0.8 million and $11.7 million, respectively, and its net earnings for the fiscal year ended July 31, 1991 were $2.0 million. Net earnings for the nine month periods ended April 30, 1994 and 1993 were $19.5 million and $12.8 million, respectively. For a discussion of the seasonality of the Company's operations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--General." BUSINESS STRATEGY The retail propane industry is a mature one, in which the Company foresees only limited growth in total demand for the product. Based on information available from the Energy Information Administration, the Company believes the overall demand for propane has remained relatively constant over the past several years, with year to year industry volumes being impacted primarily by weather patterns. As a result, growth in this industry is accomplished primarily through acquisitions. Except for a few large competitors, the propane industry is highly fragmented and principally composed of over 3,000 local and regional companies. Historically, the Company has been successful in acquiring independent propane retailers and integrating them into the Company's operations at what it believes to be attractive returns. In July 1984, the Company acquired propane operations with annual retail sales volumes of approximately 33 million gallons at a cost of approximately $13.0 million, and in December 1986, the Company acquired propane operations with annual retail sales volumes of approximately 395 million gallons at a cost of approximately $457.5 million. Since December 1986, and as of April 30, 1994, the Company has acquired 67 smaller independent propane retailers which the Company believes were not individually material. These acquisitions have significantly expanded and diversified the Company's geographic presence. The Partnership plans to continue to expand its business principally through acquisitions in areas in close proximity to the Company's existing operations so that such newly acquired operations can be efficiently combined with existing operations and savings can be achieved through the elimination of certain overlapping functions. An additional goal of these acquisitions will be to improve the operations and profitability of the businesses the Partnership acquires by integrating them into its established propane supply network and by improving customer service. The Partnership also plans to pursue acquisitions which broaden its geographic coverage. The Company has historically increased its existing customer base and retained the customers of acquired operations through marketing efforts that focus on providing quality service to customers. The General Partner believes that there are numerous local retail propane distribution companies that are possible candidates for acquisition by the Partnership and that the Partnership's geographic diversity of operations helps to create many attractive acquisition opportunities for the Partnership. The General Partner is unable to predict the amount or timing of future capital expenditures for acquisitions. Prior to the closing of this Offering, however, the Partnership will enter into a bank credit facility (the "Credit Facility") providing a maximum $185 million commitment for borrowings and letters of credit. Under the terms of the Credit Facility, at least $60 million will be available solely to finance acquisitions and growth capital expenditures. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Pro Forma Financial Condition--Credit Facility." In addition to borrowings under the Credit Facility, the Partnership may fund future acquisitions from internal cash flow or proceeds from the issuance by the Master Partnership of additional partnership interests. Under the Indenture for the Senior Notes, the Partnership is prohibited from making distributions to its partners and other Restricted Payments (as defined in the Indenture) unless certain specified targets for capital expenditures and expenditures for permitted acquisitions have been met. In addition to growth through acquisitions, the General Partner believes that the Partnership may also achieve growth within its existing propane operations. Historically, the Company has experienced modest internal growth in its customer base. As a result of its experience in responding to competition and in implementing more efficient operating standards, the General Partner believes that it has positioned the Partnership to be more successful in direct competition for customers. The Company currently has marketing programs underway which focus specific resources toward this effort. See "Business-- Retail Operations--Business Strategy." GENERAL Propane, a byproduct of natural gas processing and petroleum refining, is a clean-burning energy source recognized for its transportability and ease of use relative to alternative forms of stand alone energy sources. In the residential and commercial markets, propane is primarily used for space heating, water heating and cooking. In the agricultural market propane is primarily used for crop drying, space heating, irrigation and weed control. In addition, propane is used for certain industrial applications, including use as an engine fuel which is burned in internal combustion engines that power vehicles and forklifts and as a heating or energy source in manufacturing and drying processes. Consumption of propane as a heating fuel peaks sharply in winter months. The Company sells propane primarily to four specific markets: residential, industrial/commercial, agricultural and other (principally to other propane retailers and as an engine fuel). During the fiscal year ended July 31, 1993, sales to residential customers accounted for 61% of the Company's retail gross profits, sales to industrial/commercial customers accounted for 26% of the Company's retail gross profits, sales to agricultural customers accounted for 6% of the Company's retail gross profits and sales to other customers accounted for 7% of the Company's retail gross profits. Residential sales have a greater profit margin and a more stable customer base and tend to be less sensitive to price changes than the other markets served by the Company. While the propane distribution business is seasonal in nature and historically sensitive to variations in weather, management believes that the Company's geographical diversity of the Company's areas of operations helps to minimize the Company's exposure to regional weather or economic patterns. Furthermore, long-term historic weather data from the National Climatic Data Center indicate that average annual temperatures have remained relatively constant over the last 30 years, with fluctuations occurring on a year-to-year basis only. Profits in the retail propane industry are primarily based on the cents-per- gallon difference between the purchase price and the sales price of propane. The Company generally purchases propane on a short-term basis; therefore, its supply costs generally fluctuate with market price fluctuations. Should the wholesale cost of propane decline in the future, the Company believes that the Partnership's margins on its retail propane distribution business should increase in the short-term because retail prices tend to change less rapidly than wholesale prices. Should the wholesale cost of propane increase, for similar reasons retail margins and profitability would likely be reduced at least for the short-term until retail prices can be increased. Historically, the Company has been able to maintain margins on an annual basis following changes in the wholesale cost of propane. The Company's success in maintaining its margins is evidenced by the fact that since fiscal 1989 average annual retail gross margins, measured on a cents-per-gallon basis, have generally varied by a relatively low percentage. The General Partner is unable to predict, however, how and to what extent a substantial increase or decrease in the wholesale cost of propane would affect the Partnership's margins and profitability. Propane competes primarily with natural gas, electricity and fuel oil as an energy source, principally on the basis of price, availability and portability. Propane serves as an alternative to natural gas in rural and suburban areas where natural gas is unavailable or portability of product is required. Propane is generally more expensive than natural gas on an equivalent BTU basis in locations served by natural gas, although propane is sold in such areas as a standby fuel for use during peak demand periods and during interruption in natural gas service. Propane is generally less expensive to use than electricity for space heating, water heating and cooking. Although propane is similar to fuel oil in application, market demand and price, propane and fuel oil have generally developed their own distinct geographic markets, lessening competition between such fuels. The retail propane business of the Company consists principally of transporting propane to its retail distribution outlets and then to tanks located on its customers' premises. Propane supplies are purchased in the contract and spot markets, primarily from natural gas processing plants and major oil companies. In addition, retail propane customers typically lease their stationary storage tanks from their propane distributors. Approximately 70% of the Company's customers lease their tank from the Company. The lease terms and, in most states, certain fire safety regulations, restrict the refilling of a leased tank solely to the propane supplier that owns the tank. The cost and inconvenience of switching tanks minimizes a customer's tendency to switch among suppliers of propane on the basis of minor variations in price. The Company is also engaged in the trading of propane and other natural gas liquids, chemical feedstocks marketing and wholesale propane marketing. In fiscal year 1993, the Company's annual wholesale and trading sales volume was approximately 1.2 billion gallons of propane and other natural gas liquids, approximately 64% of which was propane. Because the Partnership will possess a large distribution system, underground storage capacity and the ability to buy large volumes of propane, the General Partner believes that the Partnership will be in a position to achieve product cost savings and avoid shortages during periods of tight supply to an extent not generally available to other retail propane distributors. PARTNERSHIP STRUCTURE AND MANAGEMENT Concurrently with the closing of this Offering, the sole limited partner of the Partnership, Ferrellgas Partners, L.P., a Delaware limited partnership (the "Master Partnership"), will offer to the public 13,100,000 Common Units representing limited partnership interests in the Master Partnership (the "MLP Offering"). See "The Transactions." The General Partner will serve as general partner of the Partnership and the Master Partnership. Following this Offering, the officers and employees of Ferrellgas who currently manage and operate the propane business and assets to be owned by the Partnership will continue to manage and operate the Partnership's business as officers and employees of the General Partner. See "Management." Unless the context otherwise requires, references herein to the Partnership include the Partnership and the Master Partnership. The General Partner will receive no management fee in connection with its management of the Partnership and will receive no remuneration for its services as General Partner of the Partnership other than reimbursement for all direct and indirect expenses incurred in connection with the Partnership's operations and all other necessary or appropriate expenses allocable to the Partnership or otherwise reasonably incurred by the General Partner in connection with the operation of the Partnership's business. The Partnership Agreement provides that the General Partner shall determine the fees and expenses that are allocable to the Partnership in any reasonable manner determined by the General Partner in its sole discretion. Because of the broad authority granted to the General Partner to determine the fees and expenses allocable to the Partnership, including compensation of the General Partner's officers and other employees, certain conflicts of interest could arise between the General Partner and its affiliates, on the one hand, and the Partnership and its limited partners, on the other, and the limited partners and holders of Senior Notes will have no ability to control the expenses allocated by the General Partner to the Partnership. The principal executive offices of the Partnership are located at One Liberty Plaza, Liberty, Missouri 64068, and its telephone number is (816) 792-1600. TRANSACTIONS AT CLOSING Concurrently with the closing of this Offering, Ferrellgas will contribute all of its propane business and assets to the Partnership in exchange for 1,000,000 Common Units, 16,118,559 Subordinated Units and certain rights to receive incentive distributions (the "Incentive Distribution Rights") if distributions of Available Cash exceed certain target levels, as well as a 2% general partner interest in the Partnership and the Master Partnership on a combined basis (see "The Partnership--Incentive Distribution Rights"). In connection with the contribution of such business and assets by Ferrellgas, the Partnership will assume substantially all of the liabilities, whether known or unknown, associated with such business and assets (other than income tax liabilities). The Partnership intends to maintain insurance and reserves at levels that it believes will be adequate to satisfy such liabilities. In addition, the Partnership will assume the payment obligations of Ferrellgas under its Series A and Series C Floating Rate Notes due 1996 (the "Existing Floating Rate Notes"), the Series B and Series D Fixed Rate Notes due 1996 (the "Existing Fixed Rate Notes" and, together with the Existing Floating Rate Notes, the "Existing Senior Notes") and its 11 5/8% Senior Subordinated Debentures (the "Existing Subordinated Debentures"). All of the Existing Senior Notes and Existing Subordinated Debentures will be retired with the net proceeds from the sale by the Master Partnership of the Common Units in the MLP Offering (estimated to be approximately $260.3 million at an assumed initial offering price of $21.375 per Common Unit) and the net proceeds from the issuance of $250 million in aggregate principal amount of Senior Notes offered hereby (estimated to be approximately $245.3 million). The book value of the assets being contributed to the Partnership will be approximately $83 million less than the liabilities to be assumed by the Partnership. Immediately prior to the closing of this Offering, the Partnership expects to enter into the $185 million Credit Facility. The Credit Facility will permit borrowings of up to $100 million on a senior unsecured revolving line of credit basis to fund working capital and general partnership requirements (of which $50 million will be available to support letters of credit). In addition, up to $85 million of borrowings will be permitted on a senior unsecured basis, at least $60 million of which will be available solely to finance acquisitions and growth capital expenditures. Ferrellgas will retain and will not contribute to the Partnership approximately $39 million in cash, approximately $17 million in receivables from affiliates of its parent, Ferrell, and Class B redeemable common stock of Ferrell ("the Ferrell Class B Stock") with a book value of approximately $36 million. It is anticipated that following the closing of this Offering, Ferrellgas will loan approximately $25 million to Ferrell and will dividend to Ferrell the remainder of the cash, receivables and Ferrell Class B Stock retained by Ferrellgas, as well as the Common Units, Subordinated Units and Incentive Distribution Rights received by Ferrellgas in exchange for the contribution of its propane business and assets to the Partnership. Concurrently with the closing of this Offering, the Company will consummate a tender offer and consent solicitation with respect to its Existing Subordinated Debentures. The consent solicitation is necessary to modify the indenture related to the Existing Subordinated Debentures in order to permit the Company to consummate the transactions contemplated by this Prospectus. As of the date of this Prospectus, all of the outstanding Existing Subordinated Debentures have been tendered to and will be retired by the Partnership, as described above. Concurrently with the closing of this Offering, the Company will mail to the holders of the Existing Senior Notes a notice of redemption of all outstanding Existing Senior Notes, pursuant to the optional redemption provisions of the indenture governing the Existing Senior Notes (the "Existing Senior Notes Indenture"). The redemption date will be 30 days after the date of mailing of such notice. The Existing Senior Notes Indenture provides for a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, if any, to the redemption date plus a premium which is based on certain yield information for U.S. Treasury securities as of three business days prior to the redemption date. The Partnership will deposit with the trustee on the date of closing of this Offering an amount expected to be more than sufficient to pay the redemption price. As a result of the transactions contemplated hereby, during the 30-day period prior to the redemption date, an event of default will exist under the Existing Senior Notes Indenture. The holders of at least 25% of the principal amount of Existing Senior Notes, therefore, will be entitled, by notice to the Company and the trustee, to declare the unpaid principal of, and accrued and unpaid interest and the applicable premium on, the Existing Senior Notes to be immediately due and payable. The trustee under the Existing Senior Notes Indenture has advised the Company that it intends to notify the holders of the Existing Senior Notes of this right. In the event of such a declaration, the amount already deposited by the Partnership in payment of the redemption price would be applied to pay the amount so declared immediately due and payable. The Partnership will incur an extraordinary loss of approximately $20.4 million related to the retirement of the Existing Senior Notes, approximately $31.2 million relating to the Existing Subordinated Debentures resulting from consent and tender offer fees and approximately $11.2 million relating to the write-off of unamortized financing costs, all in accordance with generally accepted accounting principles ("GAAP"). At the closing of this Offering, it is anticipated that the Partnership will borrow approximately $10 million under the Credit Facility which will enable the Partnership to commence operations with an initial cash balance of at least $20 million. To the extent that the initial public offering price per Common Unit in the MLP Offering is less than $21.375, the Partnership may need to borrow additional funds under the Credit Facility in order to commence operations with an initial cash balance of at least $20 million. For a description of the Credit Facility, see "Management's Discussion and Analysis of Financial Condition and Results of Operation--Pro Forma Financial Condition--Credit Facility." The foregoing description assumes that the Underwriters' overallotment option with respect to the MLP Offering is not exercised. If the Underwriters' overallotment option is exercised in full, the Master Partnership will issue 1,965,000 additional Common Units. The Partnership will use the net proceeds from any exercise of the Underwriters' overallotment option to repay any amounts borrowed under the Credit Facility or, if no such borrowings have been made, to establish an initial cash balance of up to $20 million. Any remaining net proceeds from the exercise of such Underwriters' overallotment option will be used by the Master Partnership to repurchase for retirement up to 1,000,000 Common Units held by Ferrell at a price per Unit equal to the initial public offering price less the underwriting discounts and commissions. Any net proceeds remaining after such repurchase will be retained by the Partnership for general partnership purposes. Immediately following this Offering, Ferrellgas will own an effective 2% general partner interest in the Master Partnership and the Partnership on a combined basis, and Ferrell will own 1,000,000 Common Units (if the Underwriters' overallotment option with respect to the MLP Offering is exercised in full all of such Common Units will be repurchased and retired by the Master Partnership) and 16,118,559 Subordinated Units representing an aggregate 55.5% limited partner interest in the Master Partnership (50.7% if such Underwriters' overallotment option is exercised in full) and the Incentive Distribution Rights. See "The Transactions." FERRELLGAS FINANCE CORP. Ferrellgas Finance Corp., a Delaware corporation ("Finance Corp."), a wholly owned subsidiary of the Partnership which has nominal assets and will not conduct any operations, is acting as co-obligor for the Senior Notes. Certain institutional investors that might otherwise be limited in their ability to invest in securities issued by partnerships by reason of the legal investment laws of their states of organization or their charter documents, may be able to invest in the Senior Notes because Finance Corp. is a co-obligor. The following chart depicts the organization and ownership of the Partnership and the Master Partnership after giving effect to the MLP Offering and related transactions. The percentages reflected below represent the approximate ownership interest in each of the Partnership and the Master Partnership, individually. Except in the following chart, the ownership percentages referred to in this Prospectus reflect the approximate effective ownership interest of the holder in the Partnership and the Master Partnership on a combined basis. [GRAPHIC APPEARS HERE] SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA The following tables set forth for the periods and the dates indicated, summary historical financial and operating data for the Company and pro forma financial and operating data for the Partnership after giving effect to the transactions contemplated by this Prospectus. The summary historical financial data for the three years ended July 31, 1993 and the nine-month periods ended April 30, 1993 and 1994, are derived from the audited and unaudited consolidated financial statements contained elsewhere in this Prospectus. The historical financial data for the interim period ended April 30, 1993 and the Partnership's summary pro forma financial data are derived from unaudited financial information. The Partnership's summary pro forma financial data should be read in conjunction with the financial statements and the pro forma consolidated financial information and notes thereto included elsewhere in this Prospectus. In addition, the propane business is seasonal in nature with its peak activity during the winter months. Therefore, the results for the interim periods are not indicative of the results that can be expected for a full year. See also "Management's Discussion and Analysis of Financial Condition and Results of Operations." <TABLE> <CAPTION> PARTNERSHIP HISTORICAL PRO FORMA -------------------------------------------------- -------------- YEAR ENDED JULY 31, YEAR ENDED -------------------------------------------------- JULY 31, 1989 1990 1991 1992 1993 1993 (IN THOUSANDS, EXCEPT RATIOS) <S> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Total revenues......... $409,953 $467,641 $543,933 $501,129 $541,945 $541,945 Depreciation and amortization.......... 32,528 33,521 36,151 31,196 30,840 30,840 Operating income....... 53,425 54,388 63,045 56,408 58,553 58,053 Interest expense....... 54,572 55,095 60,507 61,219 60,071 29,029 Earnings (loss) from continuing operations. (1,506) (347) 1,979 (1,700)(1) 109 28,750 Ratio of earnings to fixed charges(2)...... -- -- 1.1x -- 1.0x 1.9x BALANCE SHEET DATA (AT END OF PERIOD): Working capital........ $(39,708) $ 50,456 $ 53,403 $ 67,973 $ 74,408 Total assets........... 487,631 554,580 580,260 598,613 573,376 Payable to (receivable from) parent and affiliates............ 13,109 10,743 3,763 2,236 (916) Long-term debt......... 354,626 465,644 466,585 501,614 489,589 Stockholder's equity... 6,616 11,463 21,687 8,808 11,359 OPERATING DATA: Retail propane sales volumes (in gallons).. 498,395 499,042 482,211 495,707 553,413 553,413 Capital expenditures(3): Maintenance............ $ 7,271 $ 5,428 $ 7,958 $ 10,250 $ 10,527 $ 10,527 Growth................. 10,062 10,447 2,478 3,342 2,851 2,851 Acquisition............ 14,668 18,005 25,305 10,112 897 897 -------- -------- -------- -------- -------- -------- Total................. $ 32,001 $ 33,880 $ 35,741 $ 23,704 $ 14,275 $ 14,275 ======== ======== ======== ======== ======== ======== SUPPLEMENTAL DATA: EBITDA(4).............. $ 85,953 $ 87,909 $ 99,196 $ 87,604 $ 89,393 $ 88,893 Fixed charge coverage ratio (5)............. 3.0x </TABLE> <TABLE> <CAPTION> PARTNERSHIP HISTORICAL PRO FORMA -------------------- ----------------- NINE MONTHS ENDED NINE MONTHS ENDED APRIL 30, APRIL 30, -------------------- 1994 1993 1994 (IN THOUSANDS, EXCEPT RATIOS) <S> <C> <C> <C> INCOME STATEMENT DATA: Total revenues...................... $468,302 $450,477 $450,477 Depreciation and amortization....... 23,238 21,688 21,688 Operating income.................... 64,708 75,445 75,070 Interest expense.................... 45,056 44,233 21,187 Earnings from continuing operations. 12,785 20,356 53,892 Ratio of earnings to fixed charges(2)......................... 1.4x 1.7x 3.2x BALANCE SHEET DATA (AT END OF PERIOD): Working capital..................... $100,645 $104,164 $ 54,304 Total assets........................ 602,063 600,113 478,254 Payable to (receivable from) parent and affiliates..................... 2,076 (3,909) 91 Long-term debt...................... 500,227 476,471 267,441 Stockholder's equity................ 21,855 30,848 Partners' capital: Limited partner..................... 143,022 General partner..................... 1,459 OPERATING DATA: Retail propane sales volume (in gallons)........................... 483,489 490,254 490,254 Capital Expenditures(3): Maintenance......................... $ 9,232(6) $ 3,377(6) $ 3,377 Growth.............................. 2,597 2,568 2,568 Acquisition......................... 0 2,472 2,472 -------- -------- -------- Total.............................. $ 11,829 $ 8,417 $ 8,417 ======== ======== ======== SUPPLEMENTAL DATA: EBITDA(4)........................... $ 87,946 $ 97,133 $ 96,758 Fixed charge coverage ratio(5)...... 3.3x </TABLE> - -------------------- (1) In August 1991, the Company revised the estimated useful lives of storage tanks from 20 to 30 years in order to more closely reflect the expected useful lives of these assets. The effect of the change in accounting estimates resulted in a favorable impact on net loss from continuing operations of approximately $3.7 million for the fiscal year ended July 31, 1992. (2) For purposes of determining the ratio of earnings to fixed charges, earnings are defined as earnings (loss) from continuing operations before income taxes, plus fixed charges. Fixed charges consist of interest expense on all indebtedness (including amortization of deferred debt issuance costs) and the portion of operating lease rental expense that is representative of the interest factor. For the fiscal years ended July 31, 1989, 1990 and 1992, earnings were inadequate to cover fixed charges by $2.4 million, $0.1 million and $2.4 million, respectively. Earnings before fixed charges for the periods presented were reduced by certain non-cash expenses, consisting principally of depreciation and amortization. Such non-cash charges totaled $34.7 million, $35.8 million, $38.5 million, $33.5 million and $33.0 million for the fiscal years ended July 31, 1989, 1990, 1991, 1992 and 1993, respectively, and totaled $24.8 million and $23.7 million for the nine months ended April 30, 1993 and 1994, respectively. (3) The Company's capital expenditures fall generally into three categories: (i) maintenance capital expenditures, which include expenditures for repair and replacement of property, plant and equipment; (ii) growth capital expenditures, which include expenditures for purchases of new propane tanks and other equipment to facilitate expansion of the Company's retail customer base; and (iii) acquisition capital expenditures, which include expenditures related to the acquisition of retail propane operations. Acquisition capital expenditures include a portion of the purchase price allocated to intangibles associated with the acquired businesses. (4) EBITDA is calculated as operating income plus depreciation and amortization. EBITDA is not intended to represent cash flow and does not represent the measure of cash available for distribution. EBITDA is a non- GAAP measure, but provides additional information for evaluating the Partnership's ability to make payments in respect of the Senior Notes. EBITDA is not intended as an alternative to earnings from continuing operations or net income. (5) The term fixed charge coverage ratio is defined in the Indenture as the ratio of the Partnership's consolidated cash flow for the immediately preceding four fiscal quarters to fixed charges for such period. Consolidated cash flow is defined in the Indenture as earnings from continuing operations before income taxes, plus interest expenses (including amortization of original issue discount) and depreciation and amortization (excluding amortization of prepaid cash expenses). The term fixed charges is defined in the Indenture as interest expense (including amortization of original issue discount). The Partnership will be prohibited from making any distribution to the Master Partnership if the fixed charge coverage ratio for the preceding four fiscal quarters does not exceed 2.25 to 1 after giving effect to such distribution. (6) The decrease in maintenance capital expenditures from the nine months ended April 30, 1993 to the nine months ended April 30, 1994 is primarily due to the purchase of the Company's corporate headquarters in Liberty, Missouri for its fair market value of $4.1 million in the first nine months of fiscal 1993. THE OFFERING Securities Offered.......... $250 million aggregate principal amount of % Senior Notes due 2001 (the "Senior Notes"). Maturity Date............... , 2001. Interest Payment Dates...... The Senior Notes will bear interest at the rate of % per annum, payable semi-annually on and of each year, commencing on , 1994. Optional Redemption......... The Senior Notes will be redeemable, in whole or in part, at the option of the Issuers, at any time on or after , 1998, at the redemption prices set forth herein plus accrued and unpaid interest thereon to the redemption date. Mandatory Redemption........ The Issuers are not required to make mandatory redemption or sinking fund payments with respect to the Senior Notes. Ranking..................... The Senior Notes will be general unsecured joint and several obligations of the Issuers. The Senior Notes will rank on an equal basis in right of payment to all existing and future senior indebtedness of the Issuers, including borrowings under the Credit Facility, and senior in right of payment to all existing and future subordinated indebtedness of the Issuers. At April 30, 1994, after giving effect to the Offering of the Senior Notes and the transactions described herein, see "The Transactions," the Partnership and its subsidiaries would have had outstanding approximately $268.9 million in aggregate principal amount of indebtedness on a consolidated basis (excluding trade payables and other accrued liabilities) which includes, in addition to certain other indebtedness, the Senior Notes in the aggregate principal amount of $250 million and borrowings under the Credit Facility in the aggregate principal amount of $15.0 million, all of which would have ranked on an equal basis in right of payment. Actual borrowings under the Credit Facility at closing are estimated to be approximately $10 million, assuming that the Underwriters' overallotment option in the MLP Offering is not exercised. To the extent that the initial public offering price per Common Unit in the MLP Offering is less than $21.375, the Partnership may need to borrow additional funds under the Credit Facility in order to commence operations with an initial cash balance of $20 million. Change of Control........... Upon a Change of Control (as defined herein), each Holder of Senior Notes shall have the right to require the Issuers to repurchase all or any part of such Holder's Senior Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of purchase. There can be no assurance that the Issuers would have adequate funds available to repurchase the Senior Notes. Asset Sales................. If the aggregate amount of Excess Proceeds (as defined herein) received by the Partnership or any of its Subsidiaries (as defined herein) from Asset Sales (as defined herein) exceeds $15 million, the Issuers shall make an offer to all Holders of Senior Notes to purchase the Senior Notes with such Excess Proceeds at a purchase price equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon to the date of purchase. Certain Covenants........... The Indenture contains covenants restricting or limiting the ability of the Partnership and its Subsidiaries to, among other things, (i) pay distributions or make other restricted payments, (ii) incur additional indebtedness and issue preferred stock, (iii) enter into sale and leaseback transactions, (iv) create liens, (v) incur dividend and other payment restrictions affecting Subsidiaries, (vi) enter into mergers, consolidations or sales of all or substantially all assets, (vii) enter into transactions with affiliates or (viii) engage in other lines of business. Use of Proceeds............. The net proceeds from the Offering of the Senior Notes (estimated to be approximately $245.3 million after deducting the underwriting discounts and commissions and the expenses of this Offering) will be used by the Partnership to repay certain outstanding indebtedness of the Company. See "Use of Proceeds."

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and historical and pro forma financial statements appearing elsewhere in this Prospectus and should be read only in conjunction with the entire Prospectus. For ease of reference, a glossary of certain terms used in this Prospectus is included as Appendix A to this Prospectus. FERRELLGAS, L.P. Ferrellgas, L.P. (the "Partnership") is a Delaware limited partnership recently formed to acquire and operate the propane business and assets of Ferrellgas, Inc. (the "Company" or "Ferrellgas"). Ferrellgas is the general partner (the "General Partner") of the Partnership and a wholly owned subsidiary of Ferrell Companies, Inc. ("Ferrell"). Ferrell was founded in 1939 as a single retail propane outlet in Atchison, Kansas, and has grown principally through the acquisition of retail propane operations throughout the United States. The Company believes that it is the third largest retail marketer of propane in the United States, based on gallons sold, serving more than 600,000 residential, industrial/commercial and agricultural customers in 45 states and the District of Columbia through approximately 416 retail outlets and 226 satellite locations in 36 states (some outlets serve an interstate market). The Company's largest market concentrations are in the Midwest, Great Lakes and Southeast regions of the United States. The Company operates in areas of strong retail market competition, which has required it to develop and implement strict capital expenditure and operating standards in its existing and acquired retail propane operations in order to control operating costs. This effort has resulted in upgrades in the quality of its field managers, the application of strong return on asset benchmarks and improved productivity methodologies. The Company's retail propane sales volumes were approximately 553 million, 496 million and 482 million gallons during the fiscal years ended July 31, 1993, 1992 and 1991, respectively. Earnings before depreciation, amortization, interest and taxes ("EBITDA") were $89.4 million, $87.6 million and $99.2 million for the fiscal years ended July 31, 1993, 1992 and 1991, respectively. EBITDA for the twelve months ended April 30, 1994 was $98.6 million. The Company's net losses for the fiscal years ended July 31, 1993 and 1992 were $0.8 million and $11.7 million, respectively, and its net earnings for the fiscal year ended July 31, 1991 were $2.0 million. Net earnings for the nine month periods ended April 30, 1994 and 1993 were $19.5 million and $12.8 million, respectively. For a discussion of the seasonality of the Company's operations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--General." BUSINESS STRATEGY The retail propane industry is a mature one, in which the Company foresees only limited growth in total demand for the product. Based on information available from the Energy Information Administration, the Company believes the overall demand for propane has remained relatively constant over the past several years, with year to year industry volumes being impacted primarily by weather patterns. As a result, growth in this industry is accomplished primarily through acquisitions. Except for a few large competitors, the propane industry is highly fragmented and principally composed of over 3,000 local and regional companies. Historically, the Company has been successful in acquiring independent propane retailers and integrating them into the Company's operations at what it believes to be attractive returns. In July 1984, the Company acquired propane operations with annual retail sales volumes of approximately 33 million gallons at a cost of approximately $13.0 million, and in December 1986, the Company acquired propane operations with annual retail sales volumes of approximately 395 million gallons at a cost of approximately $457.5 million. Since December 1986, and as of April 30, 1994, the Company has acquired 67 smaller independent propane retailers which the Company believes were not individually material. These acquisitions have significantly expanded and diversified the Company's geographic presence. The Partnership plans to continue to expand its business principally through acquisitions in areas in close proximity to the Company's existing operations so that such newly acquired operations can be efficiently combined with existing operations and savings can be achieved through the elimination of certain overlapping functions. An additional goal of these acquisitions will be to improve the operations and profitability of the businesses the Partnership acquires by integrating them into its established propane supply network and by improving customer service. The Partnership also plans to pursue acquisitions which broaden its geographic coverage. The Company has historically increased its existing customer base and retained the customers of acquired operations through marketing efforts that focus on providing quality service to customers. The General Partner believes that there are numerous local retail propane distribution companies that are possible candidates for acquisition by the Partnership and that the Partnership's geographic diversity of operations helps to create many attractive acquisition opportunities for the Partnership. The General Partner is unable to predict the amount or timing of future capital expenditures for acquisitions. Prior to the closing of this Offering, however, the Partnership will enter into a bank credit facility (the "Credit Facility") providing a maximum $185 million commitment for borrowings and letters of credit. Under the terms of the Credit Facility, at least $60 million will be available solely to finance acquisitions and growth capital expenditures. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Pro Forma Financial Condition--Credit Facility." In addition to borrowings under the Credit Facility, the Partnership may fund future acquisitions from internal cash flow or proceeds from the issuance by the Master Partnership of additional partnership interests. Under the Indenture for the Senior Notes, the Partnership is prohibited from making distributions to its partners and other Restricted Payments (as defined in the Indenture) unless certain specified targets for capital expenditures and expenditures for permitted acquisitions have been met. In addition to growth through acquisitions, the General Partner believes that the Partnership may also achieve growth within its existing propane operations. Historically, the Company has experienced modest internal growth in its customer base. As a result of its experience in responding to competition and in implementing more efficient operating standards, the General Partner believes that it has positioned the Partnership to be more successful in direct competition for customers. The Company currently has marketing programs underway which focus specific resources toward this effort. See "Business-- Retail Operations--Business Strategy." GENERAL Propane, a byproduct of natural gas processing and petroleum refining, is a clean-burning energy source recognized for its transportability and ease of use relative to alternative forms of stand alone energy sources. In the residential and commercial markets, propane is primarily used for space heating, water heating and cooking. In the agricultural market propane is primarily used for crop drying, space heating, irrigation and weed control. In addition, propane is used for certain industrial applications, including use as an engine fuel which is burned in internal combustion engines that power vehicles and forklifts and as a heating or energy source in manufacturing and drying processes. Consumption of propane as a heating fuel peaks sharply in winter months. The Company sells propane primarily to four specific markets: residential, industrial/commercial, agricultural and other (principally to other propane retailers and as an engine fuel). During the fiscal year ended July 31, 1993, sales to residential customers accounted for 61% of the Company's retail gross profits, sales to industrial/commercial customers accounted for 26% of the Company's retail gross profits, sales to agricultural customers accounted for 6% of the Company's retail gross profits and sales to other customers accounted for 7% of the Company's retail gross profits. Residential sales have a greater profit margin and a more stable customer base and tend to be less sensitive to price changes than the other markets served by the Company. While the propane distribution business is seasonal in nature and historically sensitive to variations in weather, management believes that the Company's geographical diversity of the Company's areas of operations helps to minimize the Company's exposure to regional weather or economic patterns. Furthermore, long-term historic weather data from the National Climatic Data Center indicate that average annual temperatures have remained relatively constant over the last 30 years, with fluctuations occurring on a year-to-year basis only. Profits in the retail propane industry are primarily based on the cents-per- gallon difference between the purchase price and the sales price of propane. The Company generally purchases propane on a short-term basis; therefore, its supply costs generally fluctuate with market price fluctuations. Should the wholesale cost of propane decline in the future, the Company believes that the Partnership's margins on its retail propane distribution business should increase in the short-term because retail prices tend to change less rapidly than wholesale prices. Should the wholesale cost of propane increase, for similar reasons retail margins and profitability would likely be reduced at least for the short-term until retail prices can be increased. Historically, the Company has been able to maintain margins on an annual basis following changes in the wholesale cost of propane. The Company's success in maintaining its margins is evidenced by the fact that since fiscal 1989 average annual retail gross margins, measured on a cents-per-gallon basis, have generally varied by a relatively low percentage. The General Partner is unable to predict, however, how and to what extent a substantial increase or decrease in the wholesale cost of propane would affect the Partnership's margins and profitability. Propane competes primarily with natural gas, electricity and fuel oil as an energy source, principally on the basis of price, availability and portability. Propane serves as an alternative to natural gas in rural and suburban areas where natural gas is unavailable or portability of product is required. Propane is generally more expensive than natural gas on an equivalent BTU basis in locations served by natural gas, although propane is sold in such areas as a standby fuel for use during peak demand periods and during interruption in natural gas service. Propane is generally less expensive to use than electricity for space heating, water heating and cooking. Although propane is similar to fuel oil in application, market demand and price, propane and fuel oil have generally developed their own distinct geographic markets, lessening competition between such fuels. The retail propane business of the Company consists principally of transporting propane to its retail distribution outlets and then to tanks located on its customers' premises. Propane supplies are purchased in the contract and spot markets, primarily from natural gas processing plants and major oil companies. In addition, retail propane customers typically lease their stationary storage tanks from their propane distributors. Approximately 70% of the Company's customers lease their tank from the Company. The lease terms and, in most states, certain fire safety regulations, restrict the refilling of a leased tank solely to the propane supplier that owns the tank. The cost and inconvenience of switching tanks minimizes a customer's tendency to switch among suppliers of propane on the basis of minor variations in price. The Company is also engaged in the trading of propane and other natural gas liquids, chemical feedstocks marketing and wholesale propane marketing. In fiscal year 1993, the Company's annual wholesale and trading sales volume was approximately 1.2 billion gallons of propane and other natural gas liquids, approximately 64% of which was propane. Because the Partnership will possess a large distribution system, underground storage capacity and the ability to buy large volumes of propane, the General Partner believes that the Partnership will be in a position to achieve product cost savings and avoid shortages during periods of tight supply to an extent not generally available to other retail propane distributors. PARTNERSHIP STRUCTURE AND MANAGEMENT Concurrently with the closing of this Offering, the sole limited partner of the Partnership, Ferrellgas Partners, L.P., a Delaware limited partnership (the "Master Partnership"), will offer to the public 13,100,000 Common Units representing limited partnership interests in the Master Partnership (the "MLP Offering"). See "The Transactions." The General Partner will serve as general partner of the Partnership and the Master Partnership. Following this Offering, the officers and employees of Ferrellgas who currently manage and operate the propane business and assets to be owned by the Partnership will continue to manage and operate the Partnership's business as officers and employees of the General Partner. See "Management." Unless the context otherwise requires, references herein to the Partnership include the Partnership and the Master Partnership. The General Partner will receive no management fee in connection with its management of the Partnership and will receive no remuneration for its services as General Partner of the Partnership other than reimbursement for all direct and indirect expenses incurred in connection with the Partnership's operations and all other necessary or appropriate expenses allocable to the Partnership or otherwise reasonably incurred by the General Partner in connection with the operation of the Partnership's business. The Partnership Agreement provides that the General Partner shall determine the fees and expenses that are allocable to the Partnership in any reasonable manner determined by the General Partner in its sole discretion. Because of the broad authority granted to the General Partner to determine the fees and expenses allocable to the Partnership, including compensation of the General Partner's officers and other employees, certain conflicts of interest could arise between the General Partner and its affiliates, on the one hand, and the Partnership and its limited partners, on the other, and the limited partners and holders of Senior Notes will have no ability to control the expenses allocated by the General Partner to the Partnership. The principal executive offices of the Partnership are located at One Liberty Plaza, Liberty, Missouri 64068, and its telephone number is (816) 792-1600. TRANSACTIONS AT CLOSING Concurrently with the closing of this Offering, Ferrellgas will contribute all of its propane business and assets to the Partnership in exchange for 1,000,000 Common Units, 16,118,559 Subordinated Units and certain rights to receive incentive distributions (the "Incentive Distribution Rights") if distributions of Available Cash exceed certain target levels, as well as a 2% general partner interest in the Partnership and the Master Partnership on a combined basis (see "The Partnership--Incentive Distribution Rights"). In connection with the contribution of such business and assets by Ferrellgas, the Partnership will assume substantially all of the liabilities, whether known or unknown, associated with such business and assets (other than income tax liabilities). The Partnership intends to maintain insurance and reserves at levels that it believes will be adequate to satisfy such liabilities. In addition, the Partnership will assume the payment obligations of Ferrellgas under its Series A and Series C Floating Rate Notes due 1996 (the "Existing Floating Rate Notes"), the Series B and Series D Fixed Rate Notes due 1996 (the "Existing Fixed Rate Notes" and, together with the Existing Floating Rate Notes, the "Existing Senior Notes") and its 11 5/8% Senior Subordinated Debentures (the "Existing Subordinated Debentures"). All of the Existing Senior Notes and Existing Subordinated Debentures will be retired with the net proceeds from the sale by the Master Partnership of the Common Units in the MLP Offering (estimated to be approximately $260.3 million at an assumed initial offering price of $21.375 per Common Unit) and the net proceeds from the issuance of $250 million in aggregate principal amount of Senior Notes offered hereby (estimated to be approximately $245.3 million). The book value of the assets being contributed to the Partnership will be approximately $83 million less than the liabilities to be assumed by the Partnership. Immediately prior to the closing of this Offering, the Partnership expects to enter into the $185 million Credit Facility. The Credit Facility will permit borrowings of up to $100 million on a senior unsecured revolving line of credit basis to fund working capital and general partnership requirements (of which $50 million will be available to support letters of credit). In addition, up to $85 million of borrowings will be permitted on a senior unsecured basis, at least $60 million of which will be available solely to finance acquisitions and growth capital expenditures. Ferrellgas will retain and will not contribute to the Partnership approximately $39 million in cash, approximately $17 million in receivables from affiliates of its parent, Ferrell, and Class B redeemable common stock of Ferrell ("the Ferrell Class B Stock") with a book value of approximately $36 million. It is anticipated that following the closing of this Offering, Ferrellgas will loan approximately $25 million to Ferrell and will dividend to Ferrell the remainder of the cash, receivables and Ferrell Class B Stock retained by Ferrellgas, as well as the Common Units, Subordinated Units and Incentive Distribution Rights received by Ferrellgas in exchange for the contribution of its propane business and assets to the Partnership. Concurrently with the closing of this Offering, the Company will consummate a tender offer and consent solicitation with respect to its Existing Subordinated Debentures. The consent solicitation is necessary to modify the indenture related to the Existing Subordinated Debentures in order to permit the Company to consummate the transactions contemplated by this Prospectus. As of the date of this Prospectus, all of the outstanding Existing Subordinated Debentures have been tendered to and will be retired by the Partnership, as described above. Concurrently with the closing of this Offering, the Company will mail to the holders of the Existing Senior Notes a notice of redemption of all outstanding Existing Senior Notes, pursuant to the optional redemption provisions of the indenture governing the Existing Senior Notes (the "Existing Senior Notes Indenture"). The redemption date will be 30 days after the date of mailing of such notice. The Existing Senior Notes Indenture provides for a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, if any, to the redemption date plus a premium which is based on certain yield information for U.S. Treasury securities as of three business days prior to the redemption date. The Partnership will deposit with the trustee on the date of closing of this Offering an amount expected to be more than sufficient to pay the redemption price. As a result of the transactions contemplated hereby, during the 30-day period prior to the redemption date, an event of default will exist under the Existing Senior Notes Indenture. The holders of at least 25% of the principal amount of Existing Senior Notes, therefore, will be entitled, by notice to the Company and the trustee, to declare the unpaid principal of, and accrued and unpaid interest and the applicable premium on, the Existing Senior Notes to be immediately due and payable. The trustee under the Existing Senior Notes Indenture has advised the Company that it intends to notify the holders of the Existing Senior Notes of this right. In the event of such a declaration, the amount already deposited by the Partnership in payment of the redemption price would be applied to pay the amount so declared immediately due and payable. The Partnership will incur an extraordinary loss of approximately $20.4 million related to the retirement of the Existing Senior Notes, approximately $31.2 million relating to the Existing Subordinated Debentures resulting from consent and tender offer fees and approximately $11.2 million relating to the write-off of unamortized financing costs, all in accordance with generally accepted accounting principles ("GAAP"). At the closing of this Offering, it is anticipated that the Partnership will borrow approximately $10 million under the Credit Facility which will enable the Partnership to commence operations with an initial cash balance of at least $20 million. To the extent that the initial public offering price per Common Unit in the MLP Offering is less than $21.375, the Partnership may need to borrow additional funds under the Credit Facility in order to commence operations with an initial cash balance of at least $20 million. For a description of the Credit Facility, see "Management's Discussion and Analysis of Financial Condition and Results of Operation--Pro Forma Financial Condition--Credit Facility." The foregoing description assumes that the Underwriters' overallotment option with respect to the MLP Offering is not exercised. If the Underwriters' overallotment option is exercised in full, the Master Partnership will issue 1,965,000 additional Common Units. The Partnership will use the net proceeds from any exercise of the Underwriters' overallotment option to repay any amounts borrowed under the Credit Facility or, if no such borrowings have been made, to establish an initial cash balance of up to $20 million. Any remaining net proceeds from the exercise of such Underwriters' overallotment option will be used by the Master Partnership to repurchase for retirement up to 1,000,000 Common Units held by Ferrell at a price per Unit equal to the initial public offering price less the underwriting discounts and commissions. Any net proceeds remaining after such repurchase will be retained by the Partnership for general partnership purposes. Immediately following this Offering, Ferrellgas will own an effective 2% general partner interest in the Master Partnership and the Partnership on a combined basis, and Ferrell will own 1,000,000 Common Units (if the Underwriters' overallotment option with respect to the MLP Offering is exercised in full all of such Common Units will be repurchased and retired by the Master Partnership) and 16,118,559 Subordinated Units representing an aggregate 55.5% limited partner interest in the Master Partnership (50.7% if such Underwriters' overallotment option is exercised in full) and the Incentive Distribution Rights. See "The Transactions." FERRELLGAS FINANCE CORP. Ferrellgas Finance Corp., a Delaware corporation ("Finance Corp."), a wholly owned subsidiary of the Partnership which has nominal assets and will not conduct any operations, is acting as co-obligor for the Senior Notes. Certain institutional investors that might otherwise be limited in their ability to invest in securities issued by partnerships by reason of the legal investment laws of their states of organization or their charter documents, may be able to invest in the Senior Notes because Finance Corp. is a co-obligor. The following chart depicts the organization and ownership of the Partnership and the Master Partnership after giving effect to the MLP Offering and related transactions. The percentages reflected below represent the approximate ownership interest in each of the Partnership and the Master Partnership, individually. Except in the following chart, the ownership percentages referred to in this Prospectus reflect the approximate effective ownership interest of the holder in the Partnership and the Master Partnership on a combined basis. [GRAPHIC APPEARS HERE] SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA The following tables set forth for the periods and the dates indicated, summary historical financial and operating data for the Company and pro forma financial and operating data for the Partnership after giving effect to the transactions contemplated by this Prospectus. The summary historical financial data for the three years ended July 31, 1993 and the nine-month periods ended April 30, 1993 and 1994, are derived from the audited and unaudited consolidated financial statements contained elsewhere in this Prospectus. The historical financial data for the interim period ended April 30, 1993 and the Partnership's summary pro forma financial data are derived from unaudited financial information. The Partnership's summary pro forma financial data should be read in conjunction with the financial statements and the pro forma consolidated financial information and notes thereto included elsewhere in this Prospectus. In addition, the propane business is seasonal in nature with its peak activity during the winter months. Therefore, the results for the interim periods are not indicative of the results that can be expected for a full year. See also "Management's Discussion and Analysis of Financial Condition and Results of Operations." <TABLE> <CAPTION> PARTNERSHIP HISTORICAL PRO FORMA -------------------------------------------------- -------------- YEAR ENDED JULY 31, YEAR ENDED -------------------------------------------------- JULY 31, 1989 1990 1991 1992 1993 1993 (IN THOUSANDS, EXCEPT RATIOS) <S> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Total revenues......... $409,953 $467,641 $543,933 $501,129 $541,945 $541,945 Depreciation and amortization.......... 32,528 33,521 36,151 31,196 30,840 30,840 Operating income....... 53,425 54,388 63,045 56,408 58,553 58,053 Interest expense....... 54,572 55,095 60,507 61,219 60,071 29,029 Earnings (loss) from continuing operations. (1,506) (347) 1,979 (1,700)(1) 109 28,750 Ratio of earnings to fixed charges(2)...... -- -- 1.1x -- 1.0x 1.9x BALANCE SHEET DATA (AT END OF PERIOD): Working capital........ $(39,708) $ 50,456 $ 53,403 $ 67,973 $ 74,408 Total assets........... 487,631 554,580 580,260 598,613 573,376 Payable to (receivable from) parent and affiliates............ 13,109 10,743 3,763 2,236 (916) Long-term debt......... 354,626 465,644 466,585 501,614 489,589 Stockholder's equity... 6,616 11,463 21,687 8,808 11,359 OPERATING DATA: Retail propane sales volumes (in gallons).. 498,395 499,042 482,211 495,707 553,413 553,413 Capital expenditures(3): Maintenance............ $ 7,271 $ 5,428 $ 7,958 $ 10,250 $ 10,527 $ 10,527 Growth................. 10,062 10,447 2,478 3,342 2,851 2,851 Acquisition............ 14,668 18,005 25,305 10,112 897 897 -------- -------- -------- -------- -------- -------- Total................. $ 32,001 $ 33,880 $ 35,741 $ 23,704 $ 14,275 $ 14,275 ======== ======== ======== ======== ======== ======== SUPPLEMENTAL DATA: EBITDA(4).............. $ 85,953 $ 87,909 $ 99,196 $ 87,604 $ 89,393 $ 88,893 Fixed charge coverage ratio (5)............. 3.0x </TABLE> <TABLE> <CAPTION> PARTNERSHIP HISTORICAL PRO FORMA -------------------- ----------------- NINE MONTHS ENDED NINE MONTHS ENDED APRIL 30, APRIL 30, -------------------- 1994 1993 1994 (IN THOUSANDS, EXCEPT RATIOS) <S> <C> <C> <C> INCOME STATEMENT DATA: Total revenues...................... $468,302 $450,477 $450,477 Depreciation and amortization....... 23,238 21,688 21,688 Operating income.................... 64,708 75,445 75,070 Interest expense.................... 45,056 44,233 21,187 Earnings from continuing operations. 12,785 20,356 53,892 Ratio of earnings to fixed charges(2)......................... 1.4x 1.7x 3.2x BALANCE SHEET DATA (AT END OF PERIOD): Working capital..................... $100,645 $104,164 $ 54,304 Total assets........................ 602,063 600,113 478,254 Payable to (receivable from) parent and affiliates..................... 2,076 (3,909) 91 Long-term debt...................... 500,227 476,471 267,441 Stockholder's equity................ 21,855 30,848 Partners' capital: Limited partner..................... 143,022 General partner..................... 1,459 OPERATING DATA: Retail propane sales volume (in gallons)........................... 483,489 490,254 490,254 Capital Expenditures(3): Maintenance......................... $ 9,232(6) $ 3,377(6) $ 3,377 Growth.............................. 2,597 2,568 2,568 Acquisition......................... 0 2,472 2,472 -------- -------- -------- Total.............................. $ 11,829 $ 8,417 $ 8,417 ======== ======== ======== SUPPLEMENTAL DATA: EBITDA(4)........................... $ 87,946 $ 97,133 $ 96,758 Fixed charge coverage ratio(5)...... 3.3x </TABLE> - -------------------- (1) In August 1991, the Company revised the estimated useful lives of storage tanks from 20 to 30 years in order to more closely reflect the expected useful lives of these assets. The effect of the change in accounting estimates resulted in a favorable impact on net loss from continuing operations of approximately $3.7 million for the fiscal year ended July 31, 1992. (2) For purposes of determining the ratio of earnings to fixed charges, earnings are defined as earnings (loss) from continuing operations before income taxes, plus fixed charges. Fixed charges consist of interest expense on all indebtedness (including amortization of deferred debt issuance costs) and the portion of operating lease rental expense that is representative of the interest factor. For the fiscal years ended July 31, 1989, 1990 and 1992, earnings were inadequate to cover fixed charges by $2.4 million, $0.1 million and $2.4 million, respectively. Earnings before fixed charges for the periods presented were reduced by certain non-cash expenses, consisting principally of depreciation and amortization. Such non-cash charges totaled $34.7 million, $35.8 million, $38.5 million, $33.5 million and $33.0 million for the fiscal years ended July 31, 1989, 1990, 1991, 1992 and 1993, respectively, and totaled $24.8 million and $23.7 million for the nine months ended April 30, 1993 and 1994, respectively. (3) The Company's capital expenditures fall generally into three categories: (i) maintenance capital expenditures, which include expenditures for repair and replacement of property, plant and equipment; (ii) growth capital expenditures, which include expenditures for purchases of new propane tanks and other equipment to facilitate expansion of the Company's retail customer base; and (iii) acquisition capital expenditures, which include expenditures related to the acquisition of retail propane operations. Acquisition capital expenditures include a portion of the purchase price allocated to intangibles associated with the acquired businesses. (4) EBITDA is calculated as operating income plus depreciation and amortization. EBITDA is not intended to represent cash flow and does not represent the measure of cash available for distribution. EBITDA is a non- GAAP measure, but provides additional information for evaluating the Partnership's ability to make payments in respect of the Senior Notes. EBITDA is not intended as an alternative to earnings from continuing operations or net income. (5) The term fixed charge coverage ratio is defined in the Indenture as the ratio of the Partnership's consolidated cash flow for the immediately preceding four fiscal quarters to fixed charges for such period. Consolidated cash flow is defined in the Indenture as earnings from continuing operations before income taxes, plus interest expenses (including amortization of original issue discount) and depreciation and amortization (excluding amortization of prepaid cash expenses). The term fixed charges is defined in the Indenture as interest expense (including amortization of original issue discount). The Partnership will be prohibited from making any distribution to the Master Partnership if the fixed charge coverage ratio for the preceding four fiscal quarters does not exceed 2.25 to 1 after giving effect to such distribution. (6) The decrease in maintenance capital expenditures from the nine months ended April 30, 1993 to the nine months ended April 30, 1994 is primarily due to the purchase of the Company's corporate headquarters in Liberty, Missouri for its fair market value of $4.1 million in the first nine months of fiscal 1993. THE OFFERING Securities Offered.......... $250 million aggregate principal amount of % Senior Notes due 2001 (the "Senior Notes"). Maturity Date............... , 2001. Interest Payment Dates...... The Senior Notes will bear interest at the rate of % per annum, payable semi-annually on and of each year, commencing on , 1994. Optional Redemption......... The Senior Notes will be redeemable, in whole or in part, at the option of the Issuers, at any time on or after , 1998, at the redemption prices set forth herein plus accrued and unpaid interest thereon to the redemption date. Mandatory Redemption........ The Issuers are not required to make mandatory redemption or sinking fund payments with respect to the Senior Notes. Ranking..................... The Senior Notes will be general unsecured joint and several obligations of the Issuers. The Senior Notes will rank on an equal basis in right of payment to all existing and future senior indebtedness of the Issuers, including borrowings under the Credit Facility, and senior in right of payment to all existing and future subordinated indebtedness of the Issuers. At April 30, 1994, after giving effect to the Offering of the Senior Notes and the transactions described herein, see "The Transactions," the Partnership and its subsidiaries would have had outstanding approximately $268.9 million in aggregate principal amount of indebtedness on a consolidated basis (excluding trade payables and other accrued liabilities) which includes, in addition to certain other indebtedness, the Senior Notes in the aggregate principal amount of $250 million and borrowings under the Credit Facility in the aggregate principal amount of $15.0 million, all of which would have ranked on an equal basis in right of payment. Actual borrowings under the Credit Facility at closing are estimated to be approximately $10 million, assuming that the Underwriters' overallotment option in the MLP Offering is not exercised. To the extent that the initial public offering price per Common Unit in the MLP Offering is less than $21.375, the Partnership may need to borrow additional funds under the Credit Facility in order to commence operations with an initial cash balance of $20 million. Change of Control........... Upon a Change of Control (as defined herein), each Holder of Senior Notes shall have the right to require the Issuers to repurchase all or any part of such Holder's Senior Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of purchase. There can be no assurance that the Issuers would have adequate funds available to repurchase the Senior Notes. Asset Sales................. If the aggregate amount of Excess Proceeds (as defined herein) received by the Partnership or any of its Subsidiaries (as defined herein) from Asset Sales (as defined herein) exceeds $15 million, the Issuers shall make an offer to all Holders of Senior Notes to purchase the Senior Notes with such Excess Proceeds at a purchase price equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon to the date of purchase. Certain Covenants........... The Indenture contains covenants restricting or limiting the ability of the Partnership and its Subsidiaries to, among other things, (i) pay distributions or make other restricted payments, (ii) incur additional indebtedness and issue preferred stock, (iii) enter into sale and leaseback transactions, (iv) create liens, (v) incur dividend and other payment restrictions affecting Subsidiaries, (vi) enter into mergers, consolidations or sales of all or substantially all assets, (vii) enter into transactions with affiliates or (viii) engage in other lines of business. Use of Proceeds............. The net proceeds from the Offering of the Senior Notes (estimated to be approximately $245.3 million after deducting the underwriting discounts and commissions and the expenses of this Offering) will be used by the Partnership to repay certain outstanding indebtedness of the Company. See "Use of Proceeds."

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+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. AS USED HEREIN, UNLESS THE CONTEXT REQUIRES OTHERWISE, THE TERMS "EMPIRE GAS" AND THE "COMPANY" REFER TO EMPIRE GAS CORPORATION AND ITS SUBSIDIARIES ASSUMING CONSUMMATION OF THE TRANSACTION, WHICH WILL OCCUR SIMULTANEOUSLY WITH THIS OFFERING. ALL REFERENCES IN THE PROSPECTUS TO FISCAL YEARS ARE TO THE COMPANY'S FISCAL YEAR WHICH ENDS ON JUNE 30. THE COMPANY Empire Gas is one of the largest retail distributors of propane in the United States and, through its subsidiaries, has been engaged in the retail distribution of propane since 1963. During the fiscal year ended June 30, 1993, without giving effect to the Transaction, Empire Gas supplied propane to approximately 200,000 customers in 27 states from 284 retail service centers and sold approximately 142.1 million gallons of propane, accounting for approximately 91.4% of its operating revenue. The Company also sells related gas-burning appliances and equipment and rents customer storage tanks. The Company will implement a change in ownership and management contemporaneously with this Offering by repurchasing shares of its common stock from its controlling shareholder, Mr. Robert W. Plaster, and certain other departing officers (the "Stock Purchase") in exchange for all of the shares of common stock of a subsidiary that owns 133 retail service centers located primarily in the Southeast. Mr. Paul S. Lindsey, Jr., who has been with the Company for 26 years and currently serves as the Company's Chief Operating Officer and Vice Chairman of the Board, will become the Company's controlling shareholder, Chief Executive Officer, and President. The change in ownership and management will enable the Company to pursue a growth strategy focused on acquiring propane operating companies. Contemporaneously with the Offering, the Company will acquire the assets of PSNC Propane Corporation, a company located in North Carolina that has six retail service centers and five additional bulk storage facilities with annual volume of approximately 9.5 million gallons (the "Acquisition," and together with the Stock Purchase, the "Transaction"), for an aggregate purchase price of approximately $14.0 million (which includes payment for inventory and accounts receivable). The Company also recently completed the acquisition of a retail propane company in Colorado with annual volume of approximately 700,000 gallons, and has entered into a contract to purchase a retail propane company in Missouri with annual volume of approximately 690,000 gallons. Following the Transaction, Empire Gas' operations will consist of 158 retail service centers with 22 additional bulk storage facilities. During the fiscal year ended June 30, 1993, Empire Gas, after giving effect to the Transaction, sold approximately 84.8 million gallons of propane (approximately 40% less than prior to the Transaction) to approximately 112,000 customers in 20 states, which (based on retail gallons sold) makes it one of the 11 largest retail distributors of propane in the United States. The impact on the Company's operations of weather fluctuations in a particular region will be reduced as a result of the substantial geographic diversification of the Company after the Transaction, with operations in the west, the southwest, Colorado, the upper midwest, the Mississippi Valley and the southeast. Propane, a hydrocarbon with properties similar to natural gas, is separated from natural gas at gas processing plants and refined from crude oil at refineries. It is stored and transported in a liquid state and vaporizes into a clean-burning energy source that is used for a variety of residential, commercial, and agricultural purposes. Residential and commercial uses include heating, cooking, water heating, refrigeration, clothes drying, and incineration. Commercial uses also include metal cutting, drying, container pressurization, and charring, as well as use as a fuel for internal combustion engines. As of December 31, 1991, the propane industry had grown, as measured by the gallons of retail residential/commercial propane sold, at the rate of 3.7% per annum since 1984. The Company believes the highly fragmented retail propane market presents substantial opportunities for growth through consolidation. As of December 31, 1991, there were approximately 8,000 propane retail marketing companies in the continental United States with approximately 13,500 retail distribution points. In addition, Empire Gas believes growth can be achieved by the conversion to propane of homes that currently use either electricity or fuel oil products because of the price advantage propane has over electricity and because propane is a cleaner source of energy than fuel oil products. As of December 31, 1990, there were approximately 23.7 million homes that used electricity for heating, water heating, cooking and other household purposes, approximately 11.2 million homes that used fuel oil products, and approximately 5.7 million homes that used propane for such purposes. Empire Gas focuses on propane distribution to retail customers, including residential, commercial, and agricultural users, emphasizing, in particular, sales to residential customers, a stable segment of the retail propane market that traditionally has generated higher gross margins per gallon than other retail segments. Sales to residential customers, giving effect to the Transaction, accounted for approximately 65.5% of the Company's aggregate propane sales revenue and 74.3% of its aggregate gross margin from propane sales in fiscal year 1993. Empire Gas attracts and retains its residential customers by supplying them storage tanks, by offering them superior service and by strategically locating visible and accessible retail service centers on or near major highways. Empire Gas focuses its operations on sales to customers to which it also leases tanks, as sales to this segment of the retail propane market tend to be more stable and typically provide higher gross margins than sales to customers who own tanks. After the Transaction, Empire Gas will own approximately 109,000 storage tanks that it leases to approximately 83% of its customers. Empire Gas' residential customer base is relatively stable, because (i) fire safety regulations and state container laws restrict the filling of a leased tank solely to the propane supplier that leases the tank, (ii) rental agreements for its tanks restrict the customers from using any other supplier, and (iii) the cost and inconvenience of switching tanks minimizes a customer's tendency to change suppliers. Historically, the Company has retained 90% of all its customers from year to year, with the average customer remaining with Empire Gas for approximately 10 years. The change in ownership and management of the Company will enable it to pursue a business strategy to increase its revenues and profitability through (i) expansion by acquisitions and start-ups, (ii) expansion of its existing residential customer base, and (iii) geographic rationalization and the reduction of operating expenses. Empire Gas will seek opportunities to acquire retail service centers in areas where it already has a strong presence and to develop new retail service centers in new markets. Efforts to expand the existing residential customer base will focus primarily on conversion of customers currently using electricity for heating, conversion of customers currently using fuel oil and wood due to environmental impact, and soliciting customers created by the new home construction market in growth areas. Empire Gas intends to dispose of a limited number of retail service centers that are located in markets in which it does not have, and does not desire to develop, a strong presence or that do not have the potential for long-term growth. Empire Gas believes it will be able to reduce its operating expenses through a program of consolidating a number of retail service centers where such consolidations will yield operating efficiencies. The Company's principal executive offices are located at 1700 South Jefferson Street, Lebanon, Missouri 65536. The Company's telephone number is (417) 532-3101. THE OFFERING THE UNITS <TABLE> <S> <C> Securities Offered................ Units (the "Units") consisting of % Senior Secured Notes due 2004 (the "Senior Secured Notes"), each having an initial accreted value of $ , and Warrants. Each Warrant entitles the holder thereof to purchase one share of Common Stock , par value $.001 per share, of the Company (the "Common Stock") at an exercise price of $7.00 per share. See "Description of the Units." Separability...................... The Senior Secured Notes and the Warrants will become separately transferrable on , 1994 (the "Separation Date"). </TABLE> <TABLE> <CAPTION> THE SENIOR SECURED NOTES <S> <C> Notes Offered..................... $ estimated aggregate principal amount ($100,000,000 initial accreted value) of % Senior Secured Notes due 2004. See "Description of the Senior Secured Notes." Maturity Date..................... , 2004 Interest.......................... Cash interest on the Senior Secured Notes will be payable at the rate of % per annum of their principal amount at maturity through and including , 1999, and after such date will be payable at the rate of % per annum of their principal amount at maturity. See "Original Issue Discount" below. In- terest on the Senior Secured Notes is payable semiannually on and , commencing , 1994. The price to the public of the Senior Secured Notes represents a yield to maturity of % per annum, computed on the basis of semiannual compounding. Optional Redemption............... The Senior Secured Notes will be redeemable at the option of the Company, in whole or in part, on or after , 1999 at the redemption prices set forth herein, plus accrued interest. In addition, up to $ million aggregate principal amount at maturity (35%) of the Senior Secured Notes are redeemable, in whole or in part, at the option of the Company, from the proceeds of one or more Public Equity Offerings following which there is a Public Market, at the redemption prices set forth herein, plus accrued interest. Change of Control................. Upon a Change of Control (as defined herein), holders of the Senior Secured Notes will have the right to require the Company to purchase the Senior Secured Notes at a purchase price of 101% of the accreted value thereof, plus accrued and unpaid interest, if any, to the date of purchase. The Company may not have sufficient funds or the financing to satisfy its obligations to repurchase the Senior Secured Notes and other debt that may come due upon a Change of Control. Security.......................... The Senior Secured Notes will be secured by a pledge of all of the capital stock of the Company's present and future subsidiaries, subject to certain exceptions. Subsidiary Guarantees............. The Senior Secured Notes will be guaranteed (each a "Subsidiary Guarantee") by all of the wholly owned subsidiaries of the Company, which carry on the retail business of the Company (collectively, the "Subsidiary Guarantors"). The Subsidiary Guarantees will be senior indebtedness of the respective Subsidiary Guarantors and will rank PARI PASSU with the guarantees by the Subsidiary Guarantors of other senior indebtedness, including indebtedness under the New Credit Facility (as hereinafter defined). Ranking........................... The Senior Secured Notes will be senior obligations of the Company and will rank PARI PASSU in right of payment with the Company's existing and future senior indebtedness. On a pro forma basis as of March 31, 1994, after giving effect to the application of the net proceeds of the Offering and the Transaction, the Company would have had no senior indebtedness </TABLE> <TABLE> <S> <C> outstanding, excluding the Senior Secured Notes. In addition, because the Company is a holding company, the Senior Secured Notes will be effectively subordinated to all existing and future liabilities of the Company's subsidiaries (except to the extent the Subsidiary Guarantees represent direct claims against such subsidiaries). On a pro forma basis as of March 31, 1994, after giving effect to the application of the net proceeds of the Offering and the Transaction, the aggregate liabilities (excluding guarantees) of the Company's subsidiaries would have been approximately $530,000, including trade payables, accrued expenses, and taxes payable. On a pro forma basis, as of March 31, 1994, after giving effect to the application of the net proceeds of the Offering and the Transaction, the Senior Secured Notes would be senior to approximately $6.4 million of 9% Subordinated Debentures due 2007. Certain Covenants................. The Indenture governing the Senior Secured Notes (the "Indenture") will contain covenants, including, but not limited to, covenants with respect to the following matters: (i) limitations on the incurrence of additional indebtedness; (ii) limitations on restricted payments; (iii) limitations on incurrence of additional indebtedness by subsidiaries; (iv) limitations on the sale and issuance of capital stock by subsidiaries; (v) limitations on dividends and other payments; (vi) limitations on transactions with affiliates; (vii) limitations on liens; (viii) limitations on mergers, consolidations, or asset sales; and (ix) limitations on subsidiary investments. Events of Default................. Events of default under the Senior Secured Notes include: (i) non-payment of interest for 30 days; (ii) non-payment of principal when due or failure to redeem when required; (iii) default in performance of other covenants or agreements for 30 days after written notice to the Company; (iv) default on other indebtedness of the Company or its subsidiaries having a principal amount of $2,000,000 singly or $5,000,000 in the aggregate; (v) a final judgment or order for the payment of money in the amount of $2,000,000 singly or $5,000,000 in the aggregate that is not discharged or appealed within 30 days; (vi) certain events of bankruptcy, insolvency and reorganization of the Company; (vii) except as permitted by the Inden- ture, the Trustee's failure to have a perfected security interest in the Collateral; and (viii) except as permitted by the Indenture and the Senior Secured Notes, the cessation of effectiveness of any Subsidiary Guarantee as against any Subsidiary Guarantor. Actions by Noteholders............ Holders of the Senior Secured Notes may not pursue any remedy with respect to the Indenture (except actions for payment of overdue principal or interest) unless: (i) the Holder has given notice to the Trustee of a continuing Event of Default: (ii) Holders of at least 25% in principal amount of the Senior Secured Notes have made a written request to the Trustee to pursue such remedy and offered the Trustee security or indem- nity reasonably satisfactory to the Trustee; (iii) the Trustee has not complied with such request within 60 days; and (iv) the </TABLE> <TABLE> <S> <C> Holders of a majority in principal amount of the Senior Secured Notes have not given the Trustee an inconsistent direction during such 60-day period. Original Issue Discount........... The Senior Secured Notes are being issued with original issue discount. For Federal income tax purposes, holders of the Senior Secured Notes will be required to include amounts in gross income in advance of receipt of cash to which the income is attributable. See "Certain Federal Income Tax Considerations." Use of Proceeds................... The net proceeds to the Company from this Offering will be used to repay certain indebtedness of the Company, to complete the Acquisition, to repay certain amounts due in connection with the Stock Purchase, and for general corporate purposes. Governing Law..................... State of New York. <CAPTION> THE WARRANTS <S> <C> Warrants Offered.................. Warrants to purchase Common Stock. The aggregate number of shares of Common Stock issuable upon exercise of the Warrants is equal to approximately 10% of the outstanding shares of Common Stock on a fully diluted basis, subject to certain exceptions. See "Description of the Warrants."

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+SUMMARY The following information is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements contained elsewhere in this Prospectus. As used in this Prospectus, the "Company" or "Peters" refers to J.M. Peters Company, Inc., a Delaware corporation, and its subsidiaries and consolidated partnerships (including the Guarantors), unless the context requires otherwise. THE COMPANY The Company is one of the leading single family homebuilders in Orange County, California and Las Vegas, Nevada, where it builds and sells homes targeted to entry level and move-up buyers. Since 1975, the Company has built and sold nearly 8,000 homes, principally in Orange County, but also in the adjacent counties of Riverside, San Diego and Los Angeles. Since 1969, Durable Homes, Inc. ("Durable"), a wholly-owned subsidiary that was acquired by the Company in 1993, has built and sold nearly 7,000 homes, principally in Las Vegas. The Company believes that in 1993 it was the 10th largest homebuilder in Orange County and Durable was the 8th largest homebuilder in Las Vegas (in each case, based on unit sales). During the fiscal year ended February 28, 1994, the Company (including Durable's results on a pro forma basis for the full fiscal year) closed 644 home sales at an average sales price of $159,000 (including 205 homes closed in California at an average sales price of $293,000 and 439 homes closed in Nevada at an average sales price of $96,000). During the fiscal quarter ended May 31, 1994, the Company closed 193 homes at an average price of $158,500 and 6 custom lots at an average price of $192,000. Recent market information indicates that the Orange County housing market is improving and that the Las Vegas housing market remains quite strong. The number of sales of new homes in Orange County was 15% higher during 1993 than during 1992, and the overall inventory of unsold completed new homes in Orange County decreased from an approximately 40 week supply in September 1990 to an approximately 14 week supply in June 1994. The percentage of households in the Orange County area that can afford a median priced home increased from 14% in December 1989 to 42% in May 1994. Las Vegas, with an expanding job base and relatively low median housing prices, was one of the fastest growing markets in the United States for new home sales in 1993, with annual unit sales of 15,800, 40% greater than the 1992 level. The U.S. Census Bureau ranked Las Vegas as the number one metropolitan area in percentage population growth between 1990 and 1992, with a 14% gain to 971,200 people. During the same period, Orange County gained 106,000 new residents, an increase of over 4%. While the Company believes that the housing market in California is recovering and that the housing market in Nevada is holding strong, the Company will continue to be affected by real estate market conditions in areas where its development projects are located and in areas where its potential customers reside. The residential homebuilding industry is cyclical and sensitive to changes in general national and regional economic conditions, such as: levels of employment; consumer confidence and income; availability of financing to homebuilders for acquisitions, development and construction; availability of financing to homebuyers for permanent mortgages; interest rate levels; the condition of the resale market for used homes; and the general demand for housing. Housing demand is particularly sensitive to changes in interest rates. If mortgage interest rates increase significantly, thus affecting prospective buyers' ability to obtain affordable financing for their home purchases, the Company's sales and operating results may be adversely affected. In August 1992, Capital Pacific Homes, Inc., a Delaware corporation ("CPH") that is wholly owned by Hadi Makarechian, Chairman of the Board and Chief Executive Officer of the Company, and Dale Dowers, President and Chief Operating Officer of the Company (who have 35 years of combined financial, construction, homebuilding and design experience), acquired control of the Company in a $47.25 million purchase (the "Acquisition") from The Resolution Trust Corporation (the "RTC"). At the time of the Acquisition, the Company had an experienced management team in place and almost 2,000 entitled lots in California (a majority of which were still held by the Company as of May 31, 1994). The Acquisition (and the Company's results of operations for the first six months of fiscal year 1993) allowed the Company to significantly improve its balance sheet, as debt was reduced by $215 million (from $263 million to $48 million), stockholders' equity increased by $76 million to $51 million and the book value of residential real Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED SEPTEMBER 21, 1994 PROSPECTUS OFFER FOR ALL OUTSTANDING 12 3/4% SENIOR NOTES DUE 2002 IN EXCHANGE FOR 12 3/4% SENIOR NOTES DUE MAY 1, 2002 OF J.M. PETERS COMPANY, INC. FULLY AND UNCONDITIONALLY GUARANTEED BY DURABLE HOMES, INC. PETERS RANCHLAND COMPANY, INC. AND J.M. PETERS NEVADA, INC. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1994, UNLESS EXTENDED J.M. Peters Company, Inc., a Delaware corporation (the "Company"), hereby offers to exchange an aggregate principal amount of up to $100,000,000 of its 12 3/4% Senior Notes Due May 1, 2002 (the "New Notes") for a like principal amount of its 12 3/4% Senior Notes Due 2002 (the "Old Notes") outstanding on the date hereof upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"). The New Notes and Old Notes are collectively hereinafter referred to as the "Notes." The terms of the New Notes are identical in all material respects to those of the Old Notes except (i) for certain transfer restrictions and registration rights relating to the Old Notes and (ii) that, if by November 14, 1994, neither an Exchange Offer with respect to the Old Notes has been consummated nor a Shelf Registration Statement (as defined) with respect to such Notes has been declared effective, the interest rate on each Old Note from and after November 14, 1994 shall be permanently increased to a rate of 13 1/4% per annum. The New Notes will be issued pursuant to, and entitled to the benefits of, the Indenture (as defined) governing the Old Notes. The Old Notes and the New Notes are jointly, severally, fully and unconditionally guaranteed by Durable Homes, Inc., Peters Ranchland Company, Inc. and J.M. Peters Nevada, Inc. (collectively, the "Guarantors"), each of which is a wholly-owned subsidiary of the Company. The New Notes will be senior unsecured indebtedness of the Company, ranking pari passu in right of payment with the Company's other unsecured indebtedness. At May 31, 1994, the Company had no indebtedness junior to the Old Notes and $10 million of secured indebtedness senior to Old Notes. Holders of future secured indebtedness will be entitled to payment out of the proceeds of their collateral prior to any holders of general unsecured indebtedness, including holders of the Notes. See "Description of the Notes." The New Notes will bear interest from and including the date of consummation of the Exchange Offer. Interest on the New Notes will be payable in arrears on May 1 and November 1 of each year commencing November 1, 1994. Additionally, interest on the New Notes will accrue from the last interest payment date on which interest was paid on the Old Notes surrendered in exchange therefor or, if no interest has been paid on the Old Notes, from the date of original issue of the Old Notes. The New Notes are being offered hereunder in order to satisfy certain obligations of the Company contained in the Notes Registration Rights Agreement dated May 13, 1994 (the "Registration Agreement"), between the Company and Morgan Stanley & Co. Incorporated, as the initial purchaser, with respect to the initial sale of the Old Notes. The Company will not receive any proceeds from the Exchange Offer. The Company will pay all the expenses incident to the Exchange Offer. Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date for the Exchange Offer. In the event the Company terminates the Exchange Offer and does not accept for exchange any Old Notes with respect to the Exchange Offer, the Company will promptly return such Old Notes to the holders thereof. See "The Exchange Offer." ------------------------ Prior to the Exchange Offer, there has been no public market for the Old Notes. If a market for the New Notes should develop, such New Notes could trade at a discount from their principal amount. The Company currently does not intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotation system and no active public market for the New Notes is currently anticipated. There can be no assurance that an active public market for the New Notes will develop. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange pursuant to the Exchange Offer. SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH 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 , 1994. estate inventories was written down 51% from $225 million to $111 million. Prior to the Acquisition, the Company had already taken significant writedowns to its land inventory. Such writedowns aggregated approximately $140.3 million during fiscal years 1991 and 1992. During much of the period of RTC control, new construction and acquisition activity was halted in California as the RTC followed a strategy essentially limited to liquidating inventory. Closings in California decreased from 775 homes in fiscal year 1990 (the year prior to RTC control) to 115 homes in fiscal year 1993 (the last year that included any period of RTC control). At the time of the Acquisition, construction activity had virtually ceased and there were only 13 completed and 15 partially completed homes remaining at the Company. Because of the time required to recommence active building operations after the Acquisition, the Company did not begin closing a significant number of homes in California until the third and fourth quarters of fiscal year 1994. Because of the 22 months of RTC control, the period required to recommence California operations and the acquisition of Durable in the middle of fiscal year 1994, management of the Company does not believe that its historical operating results prior to the third and fourth quarters of fiscal year 1994 are meaningful indicators of its future performance. Since the Acquisition, the Company has focused on: (i) recommencing California building operations; (ii) diversifying its geographic markets to include areas outside of Southern California; (iii) diversifying its product offerings to include both entry level and move-up homes in order to appeal to a broad customer base; (iv) improving and broadening its capital base and sources of financial liquidity; (v) controlling costs while increasing operational efficiency; and (vi) reducing land and inventory risk by avoiding speculative building, constraining project sizes, avoiding entitlement risks and acquiring land through the use of options, purchase contracts, development agreements and joint ventures. The Company believes that it has made progress in implementing the strategic goals described above. Since the Acquisition, the Company has: (i) recommenced active building operations in Southern California; (ii) become a significant participant in the Las Vegas, Nevada residential housing market through its acquisition of Durable (the "Durable Acquisition"); (iii) reduced prices, largely as a result of its reduced land basis, on its California products without adversely affecting its product design or quality; (iv) obtained approximately $120 million of construction financing commitments, which includes approximately $66 million from IHP Investment Fund I, L.P. (the "CalPERS LP"), the limited partner in four California partnerships with the Company (the "CalPERS Partnerships"), which amounts the Company has utilized in the past but are presently not available to the Company as a result of restrictions contained in the Indenture; (v) established new management control systems and reduced overhead; and (vi) completed the sale and issuance of the Old Notes and the Warrants. While the Company believes that it has made progress in achieving its strategic goals, the Company had significant operating losses during the 1991, 1992 and 1993 fiscal years, which included the 22-month period of RTC control (November 1990 to August 1992). During much of the period of RTC control, the operations of the Company essentially were limited to liquidating standing inventory and, at the direction of its RTC-controlled board of directors, the Company did not start any new projects or acquire land or options for land for new projects. The Company was profitable during the 1994 fiscal year, but it did incur losses during the first two quarters of such fiscal year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." At May 31, 1994, the Company was in various stages of development with respect to 21 active projects, including 11 projects located in the Orange and Riverside Counties of Southern California and in 10 projects located in Las Vegas and Laughlin, Nevada. The Company is actively selling homes in 18 of these projects. At May 31, 1994, the Company owned approximately 1,515 building sites (946 in California and 569 in Nevada) and controlled an additional 1,396 building sites (639 in California and 757 in Nevada) through options and purchase contracts. The Company expects to start construction on approximately 14 new projects during fiscal year 1995 and also expects that substantially all of the projects that generated closings during the third and fourth quarters of fiscal year 1994 will be generating closings throughout fiscal year 1995. At May 31, 1994, the Company had a total backlog of 279 homes sold with an aggregate sales value of $55.1 million, which is moderately lower than the backlog at the start of the third and fourth quarters of fiscal year 1994. The backlog at May 31, 1994 included 132 homes sold with an aggregate sales value of $40.0 million in California and 147 homes sold with an aggregate sales value of $15.1 million in Nevada. The Company was originally incorporated in California in 1975, reincorporated in Nevada in 1987 and reincorporated in Delaware in 1993. Durable was incorporated in Nevada in 1975. Peters Ranchland Company, Inc. was incorporated in Delaware in 1992. J.M. Peters Nevada, Inc. was incorporated in Delaware in 1993. The principal executive offices of the Company and each of the Guarantors are located at 3501 Jamboree Road, Suite 200, Newport Beach, California, 92660, and the telephone number is (714) 854-2500. STRUCTURE OF THE COMPANY The Company conducts its business directly and through its subsidiaries and consolidated partnerships. As of May 31, 1994, approximately 76.0% of the Company's assets were held directly at J.M. Peters Company, Inc, approximately 10.6% were held directly at Durable and approximately 13.4% were held through Peters Ranchland, Inc. The following chart sets forth the structure of the Company: <TABLE> <S> <C> <C> <C> <C> ------------------------------ J.M. PETERS COMPANY, INC. a Delaware corporation ------------------------------ - ------------------------ ------------------------ ------------------------ J.M. PETERS NEVADA, DURABLE HOMES, INC.* PETERS RANCHLAND INC. a Nevada corporation COMPANY, INC. a Delaware corporation Wholly Owned Subsidiary a Delaware corporation Wholly Owned Subsidiary Wholly Owned Subsidiary - ------------------------ ------------------------ ------------------------ - ------------------------ ------------------------ ------------------------ General Partner of: General Partner of: General Partner of: Taos Estates, L.P. Las Hadas, L.P. Ranchland Alicanta Development, L.P. Plateau Venture, L.P. Ranchland Montilla, Development, L.P. Portraits Venture, L.P. Ranchland Fairway Estates Development, L.P. Taos Estates, L.P. Ranchland Portola Development, L.P. - ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ P.B. PARTNERS BAYHILL ESCORW, INC. NEWPORT DESIGN CAPITAL PACIFIC DURABLE HOMES OF a California a California corporation CENTER, INC. COMMUNITIES, INC. CALIFORNIA, INC., general partnership 50% the Company a California corporation a Delaware corporation a Delaware corporation 50% the Company 50% Bernard Selz Wholly Owned Subsidiary Wholly Owned Subsidiary Wholly Owned Subsidiary 50% Bramalea California, Inc. - ------------------------ ------------------------ ------------------------ ------------------------ ----------------------- * Joint, several, full and unconditional guarantors of the Notes. </TABLE> See "Business -- Joint Ventures" for additional information regarding each subsidiary's interest in the joint ventures for which it acts as the general partner. RECENT DEVELOPMENTS The Company's backlog of sold but unclosed homes stood at 222 homes at August 31, 1994 versus 297 homes at August 31, 1993. The lower backlog is the result of a temporary lack of inventory for sale in California and Nevada and the effect of increased interest rates on the entry-level buyer of Durable homes in Nevada. In the quarter ended August 31, 1994, the Company closed 172 homes, up from 15 homes closed in the comparable period ended August 31, 1993. The Company has recently formed two new subsidiaries. J.M. Peters Arizona, Inc. will concentrate on homebuilding in the Arizona market. Capital Pacific Mortgage, Inc. was formed for the purpose of entering into a joint venture with a Nevada mortgage broker for the purpose of financing sales of the Company's homes. The joint venture will be accounted for by the equity method. Neither the new subsidiaries nor the joint venture have any operating results to date. THE EXCHANGE OFFER SECURITIES OFFERED... Up to $100,000,000 aggregate principal amount of 12 3/4% Senior Notes Due May 1, 2002. The terms of the New Notes and Old Notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the Old Notes and except for certain interest provisions relating to the Old Notes described below under "-- Terms of the New Notes." THE EXCHANGE OFFER... The New Notes are being offered in exchange for a like principal amount of Old Notes. Old Notes may be exchanged only in integral multiples of $1,000. The issuance of the New Notes is intended to satisfy obligations of the Company contained in the Registration Agreement. EXPIRATION DATE; WITHDRAWAL OF TENDER............. The Exchange Offer will expire 5:00 p.m. New York City time, on , 1994, or such later date and time to which it is extended by the Company. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. CERTAIN CONDITIONS TO THE EXCHANGE OFFERS............ The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. The Company currently expects that each of the conditions will be satisfied and that no waivers will be necessary. See "The Exchange Offer -- Certain Conditions to the Exchange Offer." PROCEDURES FOR TENDERING OLD NOTES Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with such Old Notes and any other required documentation, to the Exchange Agent (as defined) at the address set forth herein. See "The Exchange Offer -- Procedures for Tendering Old Notes." USE OF PROCEEDS...... There will be no proceeds to the Company from the exchange of Notes pursuant to the Exchange Offer. EXCHANGE AGENT....... United States Trust Company of New York is serving as the Exchange Agent in connection with the Exchange Offer. FEDERAL INCOME TAX CONSEQUENCES....... The exchange of Notes pursuant to the Exchange Offer will not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE EXCHANGE OFFER Based on certain interpretive letters issued by the staff of the Commission to third parties in unrelated transactions, holders of Old Notes (other than any holder who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who exchange their Old Notes for New Notes pursuant to the Exchange Offer generally may offer such New Notes for resale, resell such New Notes, and otherwise transfer such New Notes without compliance with the registration and prospectus delivery provisions of the Securities Act provided such New Notes are acquired in the ordinary course of the holder's business and such holders have no arrangement with any person to participate in a distribution of such New Notes. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution". In addition, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdiction or an exemption from registration or qualification is available and is complied with. The Company has agreed, pursuant to the Registration Agreement and subject to certain specified limitations therein, to register or qualify the New Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Notes reasonably requests in writing. If a holder of Old Notes does not exchange such Old Notes for New Notes pursuant to the Exchange Offer, such Old Notes will continue to be subject to the restrictions on transfer contained in the legend thereon. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. See "The Exchange Offer -- Consequences of Failure to Exchange; Resales of New Notes." The Old Notes were initially issued in units consisting of ten Old Notes and 79 Warrants to purchase Company Common Stock (the "Warrants"). Upon commencement of the Exchange Offer, the Old Notes and the Warrants will become separately transferable. Following commencement of the Exchange Offer but prior to its consummation, the Old Notes and the Warrants may be traded separately in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market. Following consummation of the Exchange Offer, the Warrants will remain eligible for PORTAL trading, but the New Notes will not be eligible for PORTAL trading. TERMS OF NEW NOTES The terms of the New Notes are identical in all material respects to the Old Notes, except (i) for certain transfer restrictions and registration rights relating to the Old Notes and (ii) that, if by November 14, 1994, neither the Exchange Offer has been consummated nor a Shelf Registration Statement with respect to such Notes has been declared effective, the interest rate on each Old Note from and after November 14, 1994 shall be permanently increased to a rate of 13 1/4% per annum. AGGREGATE PRINCIPAL AMOUNT..............$100,000,000. For a discussion of the federal income tax treatment of the New Notes, see "Certain Federal Income Tax Considerations." INTEREST PAYMENT DATES...............May 1 and November 1 of each year, commencing November 1, 1994. MATURITY..............May 1, 2002. GUARANTEES The New Notes will be fully and unconditionally guaranteed by Durable and certain of the Company's other subsidiaries. Each of the guarantees will be a senior unsecured obligation of such subsidiary and will rank pari passu in right of payment with all existing and future senior unsecured indebtedness of such subsidiary. See "Description of the Notes -- The Subsidiary Guarantees." OPTIONAL REDEMPTION Prior to May 1, 1997, the Company may use the proceeds of one or more Public Equity Offerings (as defined) to redeem up to 35% of the aggregate principal amount of the Notes at 112.75% of their principal amount, plus accrued interest. The New Notes will not otherwise be redeemable at the option of the Company prior to May 1, 1999. Thereafter, the New Notes will be redeemable at 106.375% of their principal amount, declining ratably to par on and after May 1, 2001, plus accrued interest. OFFERS TO PURCHASE In the event of a Change of Control, holders of the New Notes will have the right to require the Company to purchase the New Notes then outstanding at a purchase price equal to 101% of the principal amount of the New Notes, plus accrued interest to the date of purchase. In the event that for two consecutive fiscal quarters the Company's Consolidated Tangible Net Worth (as defined) is less than $37 million, the Company will be required to offer to purchase 10% of the then outstanding principal amount of the Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued interest to the date of purchase. At February 28, 1994, after giving effect to the issuance of the Old Notes and the Warrants and the application of the estimated net proceeds thereof, the Consolidated Tangible Net Worth of the Company would have been $57.1 million. In addition, under certain circumstances the Company will be required to offer to purchase New Notes with the proceeds of certain Asset Sales (as defined). For more complete information regarding mandatory offers to purchase the New Notes, see "Description of the Notes -- Certain Covenants -- Maintenance of Consolidated Tangible Net Worth," "Description of the Notes -- Certain Covenants -- Limitation on Asset Sales" and "Description of the Notes -- Repurchase of Notes upon a Change of Control." RANKING; SECURED INDEBTEDNESS....... The New Notes will be senior unsecured indebtedness of the Company, ranking pari passu in right of payment with all existing and future unsecured indebtedness of the Company that is not, by its terms, expressly subordinated in right of payment to the Notes. At May 31, 1994, the Company had no indebtedness junior to the Old Notes and $10 million of secured indebtedness senior to the Old Notes. The Company may Incur (as defined) each and all of the following: (i) Indebtedness (as defined) outstanding at any time in an aggregate principal amount not to exceed the greater of (A) $15 million or (B)(1) 10% of the Adjusted Consolidated Net Tangible Assets (as defined) if Adjusted Consolidated Net Tangible Assets are less than $200 million, or (2) 15% of Adjusted Consolidated Net Tangible Assets if Adjusted Consolidated Net Tangible Assets are equal to or greater than $200 million, in the case of each of clauses (A) and (B), less any amount of Indebtedness permanently repaid as provided under the heading "Description of the Notes -- Covenants -- Limitation on Asset Sales," (ii) Indebtedness to any Restricted Subsidiary (as defined) that is a Wholly Owned Subsidiary (as defined) of the Company; (iii) Non-Recourse Indebtedness (as defined); (iv) Refinancing Indebtedness (as defined), other than with respect to Indebtedness Incurred under clause (i) of this paragraph; and (v) Indebtedness under Interest Rate Agreements (as defined). The Indenture also permits the Company to grant liens to secure additional Indebtedness permitted by the Indenture so long as the amount of such secured Indebtedness (other than Non-Recourse Indebtedness) does not exceed 40% of the Adjusted Consolidated Net Tangible Assets (as defined) of the Company and also permits certain other liens. See "Description of the Notes -- Certain Covenants -- Limitation on Liens." Holders of such secured indebtedness will be entitled to payment out of the proceeds of their collateral prior to any holders of general unsecured indebtedness, including the holders of Notes. CERTAIN COVENANTS.... The Indenture contains certain covenants that, among other things, limit the incurrence of additional indebtedness by the Company and its Restricted Subsidiaries (as defined); the payment of dividends; the repurchase of capital stock and subordinated indebtedness; the making of certain other distributions and of certain loans and investments; the ability to create certain liens; the creation of restrictions on the ability of Restricted Subsidiaries to pay dividends or make other payments to the Company; and the ability to enter into certain transactions with affiliates or merge, consolidate or transfer substantially all assets. See "Description of the Notes -- Certain Covenants."

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+SUMMARY The following information is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements contained elsewhere in this Prospectus. As used in this Prospectus, the "Company" or "Peters" refers to J.M. Peters Company, Inc., a Delaware corporation, and its subsidiaries and consolidated partnerships (including the Guarantors), unless the context requires otherwise. THE COMPANY The Company is one of the leading single family homebuilders in Orange County, California and Las Vegas, Nevada, where it builds and sells homes targeted to entry level and move-up buyers. Since 1975, the Company has built and sold nearly 8,000 homes, principally in Orange County, but also in the adjacent counties of Riverside, San Diego and Los Angeles. Since 1969, Durable Homes, Inc. ("Durable"), a wholly-owned subsidiary that was acquired by the Company in 1993, has built and sold nearly 7,000 homes, principally in Las Vegas. The Company believes that in 1993 it was the 10th largest homebuilder in Orange County and Durable was the 8th largest homebuilder in Las Vegas (in each case, based on unit sales). During the fiscal year ended February 28, 1994, the Company (including Durable's results on a pro forma basis for the full fiscal year) closed 644 home sales at an average sales price of $159,000 (including 205 homes closed in California at an average sales price of $293,000 and 439 homes closed in Nevada at an average sales price of $96,000). During the fiscal quarter ended May 31, 1994, the Company closed 193 homes at an average price of $158,500 and 6 custom lots at an average price of $192,000. Recent market information indicates that the Orange County housing market is improving and that the Las Vegas housing market remains quite strong. The number of sales of new homes in Orange County was 15% higher during 1993 than during 1992, and the overall inventory of unsold completed new homes in Orange County decreased from an approximately 40 week supply in September 1990 to an approximately 14 week supply in June 1994. The percentage of households in the Orange County area that can afford a median priced home increased from 14% in December 1989 to 42% in May 1994. Las Vegas, with an expanding job base and relatively low median housing prices, was one of the fastest growing markets in the United States for new home sales in 1993, with annual unit sales of 15,800, 40% greater than the 1992 level. The U.S. Census Bureau ranked Las Vegas as the number one metropolitan area in percentage population growth between 1990 and 1992, with a 14% gain to 971,200 people. During the same period, Orange County gained 106,000 new residents, an increase of over 4%. While the Company believes that the housing market in California is recovering and that the housing market in Nevada is holding strong, the Company will continue to be affected by real estate market conditions in areas where its development projects are located and in areas where its potential customers reside. The residential homebuilding industry is cyclical and sensitive to changes in general national and regional economic conditions, such as: levels of employment; consumer confidence and income; availability of financing to homebuilders for acquisitions, development and construction; availability of financing to homebuyers for permanent mortgages; interest rate levels; the condition of the resale market for used homes; and the general demand for housing. Housing demand is particularly sensitive to changes in interest rates. If mortgage interest rates increase significantly, thus affecting prospective buyers' ability to obtain affordable financing for their home purchases, the Company's sales and operating results may be adversely affected. In August 1992, Capital Pacific Homes, Inc., a Delaware corporation ("CPH") that is wholly owned by Hadi Makarechian, Chairman of the Board and Chief Executive Officer of the Company, and Dale Dowers, President and Chief Operating Officer of the Company (who have 35 years of combined financial, construction, homebuilding and design experience), acquired control of the Company in a $47.25 million purchase (the "Acquisition") from The Resolution Trust Corporation (the "RTC"). At the time of the Acquisition, the Company had an experienced management team in place and almost 2,000 entitled lots in California (a majority of which were still held by the Company as of May 31, 1994). The Acquisition (and the Company's results of operations for the first six months of fiscal year 1993) allowed the Company to significantly improve its balance sheet, as debt was reduced by $215 million (from $263 million to $48 million), stockholders' equity increased by $76 million to $51 million and the book value of residential real Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED SEPTEMBER 21, 1994 PROSPECTUS OFFER FOR ALL OUTSTANDING 12 3/4% SENIOR NOTES DUE 2002 IN EXCHANGE FOR 12 3/4% SENIOR NOTES DUE MAY 1, 2002 OF J.M. PETERS COMPANY, INC. FULLY AND UNCONDITIONALLY GUARANTEED BY DURABLE HOMES, INC. PETERS RANCHLAND COMPANY, INC. AND J.M. PETERS NEVADA, INC. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1994, UNLESS EXTENDED J.M. Peters Company, Inc., a Delaware corporation (the "Company"), hereby offers to exchange an aggregate principal amount of up to $100,000,000 of its 12 3/4% Senior Notes Due May 1, 2002 (the "New Notes") for a like principal amount of its 12 3/4% Senior Notes Due 2002 (the "Old Notes") outstanding on the date hereof upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"). The New Notes and Old Notes are collectively hereinafter referred to as the "Notes." The terms of the New Notes are identical in all material respects to those of the Old Notes except (i) for certain transfer restrictions and registration rights relating to the Old Notes and (ii) that, if by November 14, 1994, neither an Exchange Offer with respect to the Old Notes has been consummated nor a Shelf Registration Statement (as defined) with respect to such Notes has been declared effective, the interest rate on each Old Note from and after November 14, 1994 shall be permanently increased to a rate of 13 1/4% per annum. The New Notes will be issued pursuant to, and entitled to the benefits of, the Indenture (as defined) governing the Old Notes. The Old Notes and the New Notes are jointly, severally, fully and unconditionally guaranteed by Durable Homes, Inc., Peters Ranchland Company, Inc. and J.M. Peters Nevada, Inc. (collectively, the "Guarantors"), each of which is a wholly-owned subsidiary of the Company. The New Notes will be senior unsecured indebtedness of the Company, ranking pari passu in right of payment with the Company's other unsecured indebtedness. At May 31, 1994, the Company had no indebtedness junior to the Old Notes and $10 million of secured indebtedness senior to Old Notes. Holders of future secured indebtedness will be entitled to payment out of the proceeds of their collateral prior to any holders of general unsecured indebtedness, including holders of the Notes. See "Description of the Notes." The New Notes will bear interest from and including the date of consummation of the Exchange Offer. Interest on the New Notes will be payable in arrears on May 1 and November 1 of each year commencing November 1, 1994. Additionally, interest on the New Notes will accrue from the last interest payment date on which interest was paid on the Old Notes surrendered in exchange therefor or, if no interest has been paid on the Old Notes, from the date of original issue of the Old Notes. The New Notes are being offered hereunder in order to satisfy certain obligations of the Company contained in the Notes Registration Rights Agreement dated May 13, 1994 (the "Registration Agreement"), between the Company and Morgan Stanley & Co. Incorporated, as the initial purchaser, with respect to the initial sale of the Old Notes. The Company will not receive any proceeds from the Exchange Offer. The Company will pay all the expenses incident to the Exchange Offer. Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date for the Exchange Offer. In the event the Company terminates the Exchange Offer and does not accept for exchange any Old Notes with respect to the Exchange Offer, the Company will promptly return such Old Notes to the holders thereof. See "The Exchange Offer." ------------------------ Prior to the Exchange Offer, there has been no public market for the Old Notes. If a market for the New Notes should develop, such New Notes could trade at a discount from their principal amount. The Company currently does not intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotation system and no active public market for the New Notes is currently anticipated. There can be no assurance that an active public market for the New Notes will develop. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange pursuant to the Exchange Offer. SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH 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 , 1994. estate inventories was written down 51% from $225 million to $111 million. Prior to the Acquisition, the Company had already taken significant writedowns to its land inventory. Such writedowns aggregated approximately $140.3 million during fiscal years 1991 and 1992. During much of the period of RTC control, new construction and acquisition activity was halted in California as the RTC followed a strategy essentially limited to liquidating inventory. Closings in California decreased from 775 homes in fiscal year 1990 (the year prior to RTC control) to 115 homes in fiscal year 1993 (the last year that included any period of RTC control). At the time of the Acquisition, construction activity had virtually ceased and there were only 13 completed and 15 partially completed homes remaining at the Company. Because of the time required to recommence active building operations after the Acquisition, the Company did not begin closing a significant number of homes in California until the third and fourth quarters of fiscal year 1994. Because of the 22 months of RTC control, the period required to recommence California operations and the acquisition of Durable in the middle of fiscal year 1994, management of the Company does not believe that its historical operating results prior to the third and fourth quarters of fiscal year 1994 are meaningful indicators of its future performance. Since the Acquisition, the Company has focused on: (i) recommencing California building operations; (ii) diversifying its geographic markets to include areas outside of Southern California; (iii) diversifying its product offerings to include both entry level and move-up homes in order to appeal to a broad customer base; (iv) improving and broadening its capital base and sources of financial liquidity; (v) controlling costs while increasing operational efficiency; and (vi) reducing land and inventory risk by avoiding speculative building, constraining project sizes, avoiding entitlement risks and acquiring land through the use of options, purchase contracts, development agreements and joint ventures. The Company believes that it has made progress in implementing the strategic goals described above. Since the Acquisition, the Company has: (i) recommenced active building operations in Southern California; (ii) become a significant participant in the Las Vegas, Nevada residential housing market through its acquisition of Durable (the "Durable Acquisition"); (iii) reduced prices, largely as a result of its reduced land basis, on its California products without adversely affecting its product design or quality; (iv) obtained approximately $120 million of construction financing commitments, which includes approximately $66 million from IHP Investment Fund I, L.P. (the "CalPERS LP"), the limited partner in four California partnerships with the Company (the "CalPERS Partnerships"), which amounts the Company has utilized in the past but are presently not available to the Company as a result of restrictions contained in the Indenture; (v) established new management control systems and reduced overhead; and (vi) completed the sale and issuance of the Old Notes and the Warrants. While the Company believes that it has made progress in achieving its strategic goals, the Company had significant operating losses during the 1991, 1992 and 1993 fiscal years, which included the 22-month period of RTC control (November 1990 to August 1992). During much of the period of RTC control, the operations of the Company essentially were limited to liquidating standing inventory and, at the direction of its RTC-controlled board of directors, the Company did not start any new projects or acquire land or options for land for new projects. The Company was profitable during the 1994 fiscal year, but it did incur losses during the first two quarters of such fiscal year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." At May 31, 1994, the Company was in various stages of development with respect to 21 active projects, including 11 projects located in the Orange and Riverside Counties of Southern California and in 10 projects located in Las Vegas and Laughlin, Nevada. The Company is actively selling homes in 18 of these projects. At May 31, 1994, the Company owned approximately 1,515 building sites (946 in California and 569 in Nevada) and controlled an additional 1,396 building sites (639 in California and 757 in Nevada) through options and purchase contracts. The Company expects to start construction on approximately 14 new projects during fiscal year 1995 and also expects that substantially all of the projects that generated closings during the third and fourth quarters of fiscal year 1994 will be generating closings throughout fiscal year 1995. At May 31, 1994, the Company had a total backlog of 279 homes sold with an aggregate sales value of $55.1 million, which is moderately lower than the backlog at the start of the third and fourth quarters of fiscal year 1994. The backlog at May 31, 1994 included 132 homes sold with an aggregate sales value of $40.0 million in California and 147 homes sold with an aggregate sales value of $15.1 million in Nevada. The Company was originally incorporated in California in 1975, reincorporated in Nevada in 1987 and reincorporated in Delaware in 1993. Durable was incorporated in Nevada in 1975. Peters Ranchland Company, Inc. was incorporated in Delaware in 1992. J.M. Peters Nevada, Inc. was incorporated in Delaware in 1993. The principal executive offices of the Company and each of the Guarantors are located at 3501 Jamboree Road, Suite 200, Newport Beach, California, 92660, and the telephone number is (714) 854-2500. STRUCTURE OF THE COMPANY The Company conducts its business directly and through its subsidiaries and consolidated partnerships. As of May 31, 1994, approximately 76.0% of the Company's assets were held directly at J.M. Peters Company, Inc, approximately 10.6% were held directly at Durable and approximately 13.4% were held through Peters Ranchland, Inc. The following chart sets forth the structure of the Company: <TABLE> <S> <C> <C> <C> <C> ------------------------------ J.M. PETERS COMPANY, INC. a Delaware corporation ------------------------------ - ------------------------ ------------------------ ------------------------ J.M. PETERS NEVADA, DURABLE HOMES, INC.* PETERS RANCHLAND INC. a Nevada corporation COMPANY, INC. a Delaware corporation Wholly Owned Subsidiary a Delaware corporation Wholly Owned Subsidiary Wholly Owned Subsidiary - ------------------------ ------------------------ ------------------------ - ------------------------ ------------------------ ------------------------ General Partner of: General Partner of: General Partner of: Taos Estates, L.P. Las Hadas, L.P. Ranchland Alicanta Development, L.P. Plateau Venture, L.P. Ranchland Montilla, Development, L.P. Portraits Venture, L.P. Ranchland Fairway Estates Development, L.P. Taos Estates, L.P. Ranchland Portola Development, L.P. - ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ P.B. PARTNERS BAYHILL ESCORW, INC. NEWPORT DESIGN CAPITAL PACIFIC DURABLE HOMES OF a California a California corporation CENTER, INC. COMMUNITIES, INC. CALIFORNIA, INC., general partnership 50% the Company a California corporation a Delaware corporation a Delaware corporation 50% the Company 50% Bernard Selz Wholly Owned Subsidiary Wholly Owned Subsidiary Wholly Owned Subsidiary 50% Bramalea California, Inc. - ------------------------ ------------------------ ------------------------ ------------------------ ----------------------- * Joint, several, full and unconditional guarantors of the Notes. </TABLE> See "Business -- Joint Ventures" for additional information regarding each subsidiary's interest in the joint ventures for which it acts as the general partner. RECENT DEVELOPMENTS The Company's backlog of sold but unclosed homes stood at 222 homes at August 31, 1994 versus 297 homes at August 31, 1993. The lower backlog is the result of a temporary lack of inventory for sale in California and Nevada and the effect of increased interest rates on the entry-level buyer of Durable homes in Nevada. In the quarter ended August 31, 1994, the Company closed 172 homes, up from 15 homes closed in the comparable period ended August 31, 1993. The Company has recently formed two new subsidiaries. J.M. Peters Arizona, Inc. will concentrate on homebuilding in the Arizona market. Capital Pacific Mortgage, Inc. was formed for the purpose of entering into a joint venture with a Nevada mortgage broker for the purpose of financing sales of the Company's homes. The joint venture will be accounted for by the equity method. Neither the new subsidiaries nor the joint venture have any operating results to date. THE EXCHANGE OFFER SECURITIES OFFERED... Up to $100,000,000 aggregate principal amount of 12 3/4% Senior Notes Due May 1, 2002. The terms of the New Notes and Old Notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the Old Notes and except for certain interest provisions relating to the Old Notes described below under "-- Terms of the New Notes." THE EXCHANGE OFFER... The New Notes are being offered in exchange for a like principal amount of Old Notes. Old Notes may be exchanged only in integral multiples of $1,000. The issuance of the New Notes is intended to satisfy obligations of the Company contained in the Registration Agreement. EXPIRATION DATE; WITHDRAWAL OF TENDER............. The Exchange Offer will expire 5:00 p.m. New York City time, on , 1994, or such later date and time to which it is extended by the Company. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. CERTAIN CONDITIONS TO THE EXCHANGE OFFERS............ The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. The Company currently expects that each of the conditions will be satisfied and that no waivers will be necessary. See "The Exchange Offer -- Certain Conditions to the Exchange Offer." PROCEDURES FOR TENDERING OLD NOTES Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with such Old Notes and any other required documentation, to the Exchange Agent (as defined) at the address set forth herein. See "The Exchange Offer -- Procedures for Tendering Old Notes." USE OF PROCEEDS...... There will be no proceeds to the Company from the exchange of Notes pursuant to the Exchange Offer. EXCHANGE AGENT....... United States Trust Company of New York is serving as the Exchange Agent in connection with the Exchange Offer. FEDERAL INCOME TAX CONSEQUENCES....... The exchange of Notes pursuant to the Exchange Offer will not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE EXCHANGE OFFER Based on certain interpretive letters issued by the staff of the Commission to third parties in unrelated transactions, holders of Old Notes (other than any holder who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who exchange their Old Notes for New Notes pursuant to the Exchange Offer generally may offer such New Notes for resale, resell such New Notes, and otherwise transfer such New Notes without compliance with the registration and prospectus delivery provisions of the Securities Act provided such New Notes are acquired in the ordinary course of the holder's business and such holders have no arrangement with any person to participate in a distribution of such New Notes. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution". In addition, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdiction or an exemption from registration or qualification is available and is complied with. The Company has agreed, pursuant to the Registration Agreement and subject to certain specified limitations therein, to register or qualify the New Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Notes reasonably requests in writing. If a holder of Old Notes does not exchange such Old Notes for New Notes pursuant to the Exchange Offer, such Old Notes will continue to be subject to the restrictions on transfer contained in the legend thereon. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. See "The Exchange Offer -- Consequences of Failure to Exchange; Resales of New Notes." The Old Notes were initially issued in units consisting of ten Old Notes and 79 Warrants to purchase Company Common Stock (the "Warrants"). Upon commencement of the Exchange Offer, the Old Notes and the Warrants will become separately transferable. Following commencement of the Exchange Offer but prior to its consummation, the Old Notes and the Warrants may be traded separately in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market. Following consummation of the Exchange Offer, the Warrants will remain eligible for PORTAL trading, but the New Notes will not be eligible for PORTAL trading. TERMS OF NEW NOTES The terms of the New Notes are identical in all material respects to the Old Notes, except (i) for certain transfer restrictions and registration rights relating to the Old Notes and (ii) that, if by November 14, 1994, neither the Exchange Offer has been consummated nor a Shelf Registration Statement with respect to such Notes has been declared effective, the interest rate on each Old Note from and after November 14, 1994 shall be permanently increased to a rate of 13 1/4% per annum. AGGREGATE PRINCIPAL AMOUNT..............$100,000,000. For a discussion of the federal income tax treatment of the New Notes, see "Certain Federal Income Tax Considerations." INTEREST PAYMENT DATES...............May 1 and November 1 of each year, commencing November 1, 1994. MATURITY..............May 1, 2002. GUARANTEES The New Notes will be fully and unconditionally guaranteed by Durable and certain of the Company's other subsidiaries. Each of the guarantees will be a senior unsecured obligation of such subsidiary and will rank pari passu in right of payment with all existing and future senior unsecured indebtedness of such subsidiary. See "Description of the Notes -- The Subsidiary Guarantees." OPTIONAL REDEMPTION Prior to May 1, 1997, the Company may use the proceeds of one or more Public Equity Offerings (as defined) to redeem up to 35% of the aggregate principal amount of the Notes at 112.75% of their principal amount, plus accrued interest. The New Notes will not otherwise be redeemable at the option of the Company prior to May 1, 1999. Thereafter, the New Notes will be redeemable at 106.375% of their principal amount, declining ratably to par on and after May 1, 2001, plus accrued interest. OFFERS TO PURCHASE In the event of a Change of Control, holders of the New Notes will have the right to require the Company to purchase the New Notes then outstanding at a purchase price equal to 101% of the principal amount of the New Notes, plus accrued interest to the date of purchase. In the event that for two consecutive fiscal quarters the Company's Consolidated Tangible Net Worth (as defined) is less than $37 million, the Company will be required to offer to purchase 10% of the then outstanding principal amount of the Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued interest to the date of purchase. At February 28, 1994, after giving effect to the issuance of the Old Notes and the Warrants and the application of the estimated net proceeds thereof, the Consolidated Tangible Net Worth of the Company would have been $57.1 million. In addition, under certain circumstances the Company will be required to offer to purchase New Notes with the proceeds of certain Asset Sales (as defined). For more complete information regarding mandatory offers to purchase the New Notes, see "Description of the Notes -- Certain Covenants -- Maintenance of Consolidated Tangible Net Worth," "Description of the Notes -- Certain Covenants -- Limitation on Asset Sales" and "Description of the Notes -- Repurchase of Notes upon a Change of Control." RANKING; SECURED INDEBTEDNESS....... The New Notes will be senior unsecured indebtedness of the Company, ranking pari passu in right of payment with all existing and future unsecured indebtedness of the Company that is not, by its terms, expressly subordinated in right of payment to the Notes. At May 31, 1994, the Company had no indebtedness junior to the Old Notes and $10 million of secured indebtedness senior to the Old Notes. The Company may Incur (as defined) each and all of the following: (i) Indebtedness (as defined) outstanding at any time in an aggregate principal amount not to exceed the greater of (A) $15 million or (B)(1) 10% of the Adjusted Consolidated Net Tangible Assets (as defined) if Adjusted Consolidated Net Tangible Assets are less than $200 million, or (2) 15% of Adjusted Consolidated Net Tangible Assets if Adjusted Consolidated Net Tangible Assets are equal to or greater than $200 million, in the case of each of clauses (A) and (B), less any amount of Indebtedness permanently repaid as provided under the heading "Description of the Notes -- Covenants -- Limitation on Asset Sales," (ii) Indebtedness to any Restricted Subsidiary (as defined) that is a Wholly Owned Subsidiary (as defined) of the Company; (iii) Non-Recourse Indebtedness (as defined); (iv) Refinancing Indebtedness (as defined), other than with respect to Indebtedness Incurred under clause (i) of this paragraph; and (v) Indebtedness under Interest Rate Agreements (as defined). The Indenture also permits the Company to grant liens to secure additional Indebtedness permitted by the Indenture so long as the amount of such secured Indebtedness (other than Non-Recourse Indebtedness) does not exceed 40% of the Adjusted Consolidated Net Tangible Assets (as defined) of the Company and also permits certain other liens. See "Description of the Notes -- Certain Covenants -- Limitation on Liens." Holders of such secured indebtedness will be entitled to payment out of the proceeds of their collateral prior to any holders of general unsecured indebtedness, including the holders of Notes. CERTAIN COVENANTS.... The Indenture contains certain covenants that, among other things, limit the incurrence of additional indebtedness by the Company and its Restricted Subsidiaries (as defined); the payment of dividends; the repurchase of capital stock and subordinated indebtedness; the making of certain other distributions and of certain loans and investments; the ability to create certain liens; the creation of restrictions on the ability of Restricted Subsidiaries to pay dividends or make other payments to the Company; and the ability to enter into certain transactions with affiliates or merge, consolidate or transfer substantially all assets. See "Description of the Notes -- Certain Covenants."

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+SUMMARY The following information is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements contained elsewhere in this Prospectus. As used in this Prospectus, the "Company" or "Peters" refers to J.M. Peters Company, Inc., a Delaware corporation, and its subsidiaries and consolidated partnerships (including the Guarantors), unless the context requires otherwise. THE COMPANY The Company is one of the leading single family homebuilders in Orange County, California and Las Vegas, Nevada, where it builds and sells homes targeted to entry level and move-up buyers. Since 1975, the Company has built and sold nearly 8,000 homes, principally in Orange County, but also in the adjacent counties of Riverside, San Diego and Los Angeles. Since 1969, Durable Homes, Inc. ("Durable"), a wholly-owned subsidiary that was acquired by the Company in 1993, has built and sold nearly 7,000 homes, principally in Las Vegas. The Company believes that in 1993 it was the 10th largest homebuilder in Orange County and Durable was the 8th largest homebuilder in Las Vegas (in each case, based on unit sales). During the fiscal year ended February 28, 1994, the Company (including Durable's results on a pro forma basis for the full fiscal year) closed 644 home sales at an average sales price of $159,000 (including 205 homes closed in California at an average sales price of $293,000 and 439 homes closed in Nevada at an average sales price of $96,000). During the fiscal quarter ended May 31, 1994, the Company closed 193 homes at an average price of $158,500 and 6 custom lots at an average price of $192,000. Recent market information indicates that the Orange County housing market is improving and that the Las Vegas housing market remains quite strong. The number of sales of new homes in Orange County was 15% higher during 1993 than during 1992, and the overall inventory of unsold completed new homes in Orange County decreased from an approximately 40 week supply in September 1990 to an approximately 14 week supply in June 1994. The percentage of households in the Orange County area that can afford a median priced home increased from 14% in December 1989 to 42% in May 1994. Las Vegas, with an expanding job base and relatively low median housing prices, was one of the fastest growing markets in the United States for new home sales in 1993, with annual unit sales of 15,800, 40% greater than the 1992 level. The U.S. Census Bureau ranked Las Vegas as the number one metropolitan area in percentage population growth between 1990 and 1992, with a 14% gain to 971,200 people. During the same period, Orange County gained 106,000 new residents, an increase of over 4%. While the Company believes that the housing market in California is recovering and that the housing market in Nevada is holding strong, the Company will continue to be affected by real estate market conditions in areas where its development projects are located and in areas where its potential customers reside. The residential homebuilding industry is cyclical and sensitive to changes in general national and regional economic conditions, such as: levels of employment; consumer confidence and income; availability of financing to homebuilders for acquisitions, development and construction; availability of financing to homebuyers for permanent mortgages; interest rate levels; the condition of the resale market for used homes; and the general demand for housing. Housing demand is particularly sensitive to changes in interest rates. If mortgage interest rates increase significantly, thus affecting prospective buyers' ability to obtain affordable financing for their home purchases, the Company's sales and operating results may be adversely affected. In August 1992, Capital Pacific Homes, Inc., a Delaware corporation ("CPH") that is wholly owned by Hadi Makarechian, Chairman of the Board and Chief Executive Officer of the Company, and Dale Dowers, President and Chief Operating Officer of the Company (who have 35 years of combined financial, construction, homebuilding and design experience), acquired control of the Company in a $47.25 million purchase (the "Acquisition") from The Resolution Trust Corporation (the "RTC"). At the time of the Acquisition, the Company had an experienced management team in place and almost 2,000 entitled lots in California (a majority of which were still held by the Company as of May 31, 1994). The Acquisition (and the Company's results of operations for the first six months of fiscal year 1993) allowed the Company to significantly improve its balance sheet, as debt was reduced by $215 million (from $263 million to $48 million), stockholders' equity increased by $76 million to $51 million and the book value of residential real Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED SEPTEMBER 21, 1994 PROSPECTUS OFFER FOR ALL OUTSTANDING 12 3/4% SENIOR NOTES DUE 2002 IN EXCHANGE FOR 12 3/4% SENIOR NOTES DUE MAY 1, 2002 OF J.M. PETERS COMPANY, INC. FULLY AND UNCONDITIONALLY GUARANTEED BY DURABLE HOMES, INC. PETERS RANCHLAND COMPANY, INC. AND J.M. PETERS NEVADA, INC. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1994, UNLESS EXTENDED J.M. Peters Company, Inc., a Delaware corporation (the "Company"), hereby offers to exchange an aggregate principal amount of up to $100,000,000 of its 12 3/4% Senior Notes Due May 1, 2002 (the "New Notes") for a like principal amount of its 12 3/4% Senior Notes Due 2002 (the "Old Notes") outstanding on the date hereof upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"). The New Notes and Old Notes are collectively hereinafter referred to as the "Notes." The terms of the New Notes are identical in all material respects to those of the Old Notes except (i) for certain transfer restrictions and registration rights relating to the Old Notes and (ii) that, if by November 14, 1994, neither an Exchange Offer with respect to the Old Notes has been consummated nor a Shelf Registration Statement (as defined) with respect to such Notes has been declared effective, the interest rate on each Old Note from and after November 14, 1994 shall be permanently increased to a rate of 13 1/4% per annum. The New Notes will be issued pursuant to, and entitled to the benefits of, the Indenture (as defined) governing the Old Notes. The Old Notes and the New Notes are jointly, severally, fully and unconditionally guaranteed by Durable Homes, Inc., Peters Ranchland Company, Inc. and J.M. Peters Nevada, Inc. (collectively, the "Guarantors"), each of which is a wholly-owned subsidiary of the Company. The New Notes will be senior unsecured indebtedness of the Company, ranking pari passu in right of payment with the Company's other unsecured indebtedness. At May 31, 1994, the Company had no indebtedness junior to the Old Notes and $10 million of secured indebtedness senior to Old Notes. Holders of future secured indebtedness will be entitled to payment out of the proceeds of their collateral prior to any holders of general unsecured indebtedness, including holders of the Notes. See "Description of the Notes." The New Notes will bear interest from and including the date of consummation of the Exchange Offer. Interest on the New Notes will be payable in arrears on May 1 and November 1 of each year commencing November 1, 1994. Additionally, interest on the New Notes will accrue from the last interest payment date on which interest was paid on the Old Notes surrendered in exchange therefor or, if no interest has been paid on the Old Notes, from the date of original issue of the Old Notes. The New Notes are being offered hereunder in order to satisfy certain obligations of the Company contained in the Notes Registration Rights Agreement dated May 13, 1994 (the "Registration Agreement"), between the Company and Morgan Stanley & Co. Incorporated, as the initial purchaser, with respect to the initial sale of the Old Notes. The Company will not receive any proceeds from the Exchange Offer. The Company will pay all the expenses incident to the Exchange Offer. Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date for the Exchange Offer. In the event the Company terminates the Exchange Offer and does not accept for exchange any Old Notes with respect to the Exchange Offer, the Company will promptly return such Old Notes to the holders thereof. See "The Exchange Offer." ------------------------ Prior to the Exchange Offer, there has been no public market for the Old Notes. If a market for the New Notes should develop, such New Notes could trade at a discount from their principal amount. The Company currently does not intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotation system and no active public market for the New Notes is currently anticipated. There can be no assurance that an active public market for the New Notes will develop. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange pursuant to the Exchange Offer. SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH 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 , 1994. estate inventories was written down 51% from $225 million to $111 million. Prior to the Acquisition, the Company had already taken significant writedowns to its land inventory. Such writedowns aggregated approximately $140.3 million during fiscal years 1991 and 1992. During much of the period of RTC control, new construction and acquisition activity was halted in California as the RTC followed a strategy essentially limited to liquidating inventory. Closings in California decreased from 775 homes in fiscal year 1990 (the year prior to RTC control) to 115 homes in fiscal year 1993 (the last year that included any period of RTC control). At the time of the Acquisition, construction activity had virtually ceased and there were only 13 completed and 15 partially completed homes remaining at the Company. Because of the time required to recommence active building operations after the Acquisition, the Company did not begin closing a significant number of homes in California until the third and fourth quarters of fiscal year 1994. Because of the 22 months of RTC control, the period required to recommence California operations and the acquisition of Durable in the middle of fiscal year 1994, management of the Company does not believe that its historical operating results prior to the third and fourth quarters of fiscal year 1994 are meaningful indicators of its future performance. Since the Acquisition, the Company has focused on: (i) recommencing California building operations; (ii) diversifying its geographic markets to include areas outside of Southern California; (iii) diversifying its product offerings to include both entry level and move-up homes in order to appeal to a broad customer base; (iv) improving and broadening its capital base and sources of financial liquidity; (v) controlling costs while increasing operational efficiency; and (vi) reducing land and inventory risk by avoiding speculative building, constraining project sizes, avoiding entitlement risks and acquiring land through the use of options, purchase contracts, development agreements and joint ventures. The Company believes that it has made progress in implementing the strategic goals described above. Since the Acquisition, the Company has: (i) recommenced active building operations in Southern California; (ii) become a significant participant in the Las Vegas, Nevada residential housing market through its acquisition of Durable (the "Durable Acquisition"); (iii) reduced prices, largely as a result of its reduced land basis, on its California products without adversely affecting its product design or quality; (iv) obtained approximately $120 million of construction financing commitments, which includes approximately $66 million from IHP Investment Fund I, L.P. (the "CalPERS LP"), the limited partner in four California partnerships with the Company (the "CalPERS Partnerships"), which amounts the Company has utilized in the past but are presently not available to the Company as a result of restrictions contained in the Indenture; (v) established new management control systems and reduced overhead; and (vi) completed the sale and issuance of the Old Notes and the Warrants. While the Company believes that it has made progress in achieving its strategic goals, the Company had significant operating losses during the 1991, 1992 and 1993 fiscal years, which included the 22-month period of RTC control (November 1990 to August 1992). During much of the period of RTC control, the operations of the Company essentially were limited to liquidating standing inventory and, at the direction of its RTC-controlled board of directors, the Company did not start any new projects or acquire land or options for land for new projects. The Company was profitable during the 1994 fiscal year, but it did incur losses during the first two quarters of such fiscal year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." At May 31, 1994, the Company was in various stages of development with respect to 21 active projects, including 11 projects located in the Orange and Riverside Counties of Southern California and in 10 projects located in Las Vegas and Laughlin, Nevada. The Company is actively selling homes in 18 of these projects. At May 31, 1994, the Company owned approximately 1,515 building sites (946 in California and 569 in Nevada) and controlled an additional 1,396 building sites (639 in California and 757 in Nevada) through options and purchase contracts. The Company expects to start construction on approximately 14 new projects during fiscal year 1995 and also expects that substantially all of the projects that generated closings during the third and fourth quarters of fiscal year 1994 will be generating closings throughout fiscal year 1995. At May 31, 1994, the Company had a total backlog of 279 homes sold with an aggregate sales value of $55.1 million, which is moderately lower than the backlog at the start of the third and fourth quarters of fiscal year 1994. The backlog at May 31, 1994 included 132 homes sold with an aggregate sales value of $40.0 million in California and 147 homes sold with an aggregate sales value of $15.1 million in Nevada. The Company was originally incorporated in California in 1975, reincorporated in Nevada in 1987 and reincorporated in Delaware in 1993. Durable was incorporated in Nevada in 1975. Peters Ranchland Company, Inc. was incorporated in Delaware in 1992. J.M. Peters Nevada, Inc. was incorporated in Delaware in 1993. The principal executive offices of the Company and each of the Guarantors are located at 3501 Jamboree Road, Suite 200, Newport Beach, California, 92660, and the telephone number is (714) 854-2500. STRUCTURE OF THE COMPANY The Company conducts its business directly and through its subsidiaries and consolidated partnerships. As of May 31, 1994, approximately 76.0% of the Company's assets were held directly at J.M. Peters Company, Inc, approximately 10.6% were held directly at Durable and approximately 13.4% were held through Peters Ranchland, Inc. The following chart sets forth the structure of the Company: <TABLE> <S> <C> <C> <C> <C> ------------------------------ J.M. PETERS COMPANY, INC. a Delaware corporation ------------------------------ - ------------------------ ------------------------ ------------------------ J.M. PETERS NEVADA, DURABLE HOMES, INC.* PETERS RANCHLAND INC. a Nevada corporation COMPANY, INC. a Delaware corporation Wholly Owned Subsidiary a Delaware corporation Wholly Owned Subsidiary Wholly Owned Subsidiary - ------------------------ ------------------------ ------------------------ - ------------------------ ------------------------ ------------------------ General Partner of: General Partner of: General Partner of: Taos Estates, L.P. Las Hadas, L.P. Ranchland Alicanta Development, L.P. Plateau Venture, L.P. Ranchland Montilla, Development, L.P. Portraits Venture, L.P. Ranchland Fairway Estates Development, L.P. Taos Estates, L.P. Ranchland Portola Development, L.P. - ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ P.B. PARTNERS BAYHILL ESCORW, INC. NEWPORT DESIGN CAPITAL PACIFIC DURABLE HOMES OF a California a California corporation CENTER, INC. COMMUNITIES, INC. CALIFORNIA, INC., general partnership 50% the Company a California corporation a Delaware corporation a Delaware corporation 50% the Company 50% Bernard Selz Wholly Owned Subsidiary Wholly Owned Subsidiary Wholly Owned Subsidiary 50% Bramalea California, Inc. - ------------------------ ------------------------ ------------------------ ------------------------ ----------------------- * Joint, several, full and unconditional guarantors of the Notes. </TABLE> See "Business -- Joint Ventures" for additional information regarding each subsidiary's interest in the joint ventures for which it acts as the general partner. RECENT DEVELOPMENTS The Company's backlog of sold but unclosed homes stood at 222 homes at August 31, 1994 versus 297 homes at August 31, 1993. The lower backlog is the result of a temporary lack of inventory for sale in California and Nevada and the effect of increased interest rates on the entry-level buyer of Durable homes in Nevada. In the quarter ended August 31, 1994, the Company closed 172 homes, up from 15 homes closed in the comparable period ended August 31, 1993. The Company has recently formed two new subsidiaries. J.M. Peters Arizona, Inc. will concentrate on homebuilding in the Arizona market. Capital Pacific Mortgage, Inc. was formed for the purpose of entering into a joint venture with a Nevada mortgage broker for the purpose of financing sales of the Company's homes. The joint venture will be accounted for by the equity method. Neither the new subsidiaries nor the joint venture have any operating results to date. THE EXCHANGE OFFER SECURITIES OFFERED... Up to $100,000,000 aggregate principal amount of 12 3/4% Senior Notes Due May 1, 2002. The terms of the New Notes and Old Notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the Old Notes and except for certain interest provisions relating to the Old Notes described below under "-- Terms of the New Notes." THE EXCHANGE OFFER... The New Notes are being offered in exchange for a like principal amount of Old Notes. Old Notes may be exchanged only in integral multiples of $1,000. The issuance of the New Notes is intended to satisfy obligations of the Company contained in the Registration Agreement. EXPIRATION DATE; WITHDRAWAL OF TENDER............. The Exchange Offer will expire 5:00 p.m. New York City time, on , 1994, or such later date and time to which it is extended by the Company. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. CERTAIN CONDITIONS TO THE EXCHANGE OFFERS............ The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. The Company currently expects that each of the conditions will be satisfied and that no waivers will be necessary. See "The Exchange Offer -- Certain Conditions to the Exchange Offer." PROCEDURES FOR TENDERING OLD NOTES Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with such Old Notes and any other required documentation, to the Exchange Agent (as defined) at the address set forth herein. See "The Exchange Offer -- Procedures for Tendering Old Notes." USE OF PROCEEDS...... There will be no proceeds to the Company from the exchange of Notes pursuant to the Exchange Offer. EXCHANGE AGENT....... United States Trust Company of New York is serving as the Exchange Agent in connection with the Exchange Offer. FEDERAL INCOME TAX CONSEQUENCES....... The exchange of Notes pursuant to the Exchange Offer will not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE EXCHANGE OFFER Based on certain interpretive letters issued by the staff of the Commission to third parties in unrelated transactions, holders of Old Notes (other than any holder who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who exchange their Old Notes for New Notes pursuant to the Exchange Offer generally may offer such New Notes for resale, resell such New Notes, and otherwise transfer such New Notes without compliance with the registration and prospectus delivery provisions of the Securities Act provided such New Notes are acquired in the ordinary course of the holder's business and such holders have no arrangement with any person to participate in a distribution of such New Notes. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution". In addition, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdiction or an exemption from registration or qualification is available and is complied with. The Company has agreed, pursuant to the Registration Agreement and subject to certain specified limitations therein, to register or qualify the New Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Notes reasonably requests in writing. If a holder of Old Notes does not exchange such Old Notes for New Notes pursuant to the Exchange Offer, such Old Notes will continue to be subject to the restrictions on transfer contained in the legend thereon. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. See "The Exchange Offer -- Consequences of Failure to Exchange; Resales of New Notes." The Old Notes were initially issued in units consisting of ten Old Notes and 79 Warrants to purchase Company Common Stock (the "Warrants"). Upon commencement of the Exchange Offer, the Old Notes and the Warrants will become separately transferable. Following commencement of the Exchange Offer but prior to its consummation, the Old Notes and the Warrants may be traded separately in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market. Following consummation of the Exchange Offer, the Warrants will remain eligible for PORTAL trading, but the New Notes will not be eligible for PORTAL trading. TERMS OF NEW NOTES The terms of the New Notes are identical in all material respects to the Old Notes, except (i) for certain transfer restrictions and registration rights relating to the Old Notes and (ii) that, if by November 14, 1994, neither the Exchange Offer has been consummated nor a Shelf Registration Statement with respect to such Notes has been declared effective, the interest rate on each Old Note from and after November 14, 1994 shall be permanently increased to a rate of 13 1/4% per annum. AGGREGATE PRINCIPAL AMOUNT..............$100,000,000. For a discussion of the federal income tax treatment of the New Notes, see "Certain Federal Income Tax Considerations." INTEREST PAYMENT DATES...............May 1 and November 1 of each year, commencing November 1, 1994. MATURITY..............May 1, 2002. GUARANTEES The New Notes will be fully and unconditionally guaranteed by Durable and certain of the Company's other subsidiaries. Each of the guarantees will be a senior unsecured obligation of such subsidiary and will rank pari passu in right of payment with all existing and future senior unsecured indebtedness of such subsidiary. See "Description of the Notes -- The Subsidiary Guarantees." OPTIONAL REDEMPTION Prior to May 1, 1997, the Company may use the proceeds of one or more Public Equity Offerings (as defined) to redeem up to 35% of the aggregate principal amount of the Notes at 112.75% of their principal amount, plus accrued interest. The New Notes will not otherwise be redeemable at the option of the Company prior to May 1, 1999. Thereafter, the New Notes will be redeemable at 106.375% of their principal amount, declining ratably to par on and after May 1, 2001, plus accrued interest. OFFERS TO PURCHASE In the event of a Change of Control, holders of the New Notes will have the right to require the Company to purchase the New Notes then outstanding at a purchase price equal to 101% of the principal amount of the New Notes, plus accrued interest to the date of purchase. In the event that for two consecutive fiscal quarters the Company's Consolidated Tangible Net Worth (as defined) is less than $37 million, the Company will be required to offer to purchase 10% of the then outstanding principal amount of the Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued interest to the date of purchase. At February 28, 1994, after giving effect to the issuance of the Old Notes and the Warrants and the application of the estimated net proceeds thereof, the Consolidated Tangible Net Worth of the Company would have been $57.1 million. In addition, under certain circumstances the Company will be required to offer to purchase New Notes with the proceeds of certain Asset Sales (as defined). For more complete information regarding mandatory offers to purchase the New Notes, see "Description of the Notes -- Certain Covenants -- Maintenance of Consolidated Tangible Net Worth," "Description of the Notes -- Certain Covenants -- Limitation on Asset Sales" and "Description of the Notes -- Repurchase of Notes upon a Change of Control." RANKING; SECURED INDEBTEDNESS....... The New Notes will be senior unsecured indebtedness of the Company, ranking pari passu in right of payment with all existing and future unsecured indebtedness of the Company that is not, by its terms, expressly subordinated in right of payment to the Notes. At May 31, 1994, the Company had no indebtedness junior to the Old Notes and $10 million of secured indebtedness senior to the Old Notes. The Company may Incur (as defined) each and all of the following: (i) Indebtedness (as defined) outstanding at any time in an aggregate principal amount not to exceed the greater of (A) $15 million or (B)(1) 10% of the Adjusted Consolidated Net Tangible Assets (as defined) if Adjusted Consolidated Net Tangible Assets are less than $200 million, or (2) 15% of Adjusted Consolidated Net Tangible Assets if Adjusted Consolidated Net Tangible Assets are equal to or greater than $200 million, in the case of each of clauses (A) and (B), less any amount of Indebtedness permanently repaid as provided under the heading "Description of the Notes -- Covenants -- Limitation on Asset Sales," (ii) Indebtedness to any Restricted Subsidiary (as defined) that is a Wholly Owned Subsidiary (as defined) of the Company; (iii) Non-Recourse Indebtedness (as defined); (iv) Refinancing Indebtedness (as defined), other than with respect to Indebtedness Incurred under clause (i) of this paragraph; and (v) Indebtedness under Interest Rate Agreements (as defined). The Indenture also permits the Company to grant liens to secure additional Indebtedness permitted by the Indenture so long as the amount of such secured Indebtedness (other than Non-Recourse Indebtedness) does not exceed 40% of the Adjusted Consolidated Net Tangible Assets (as defined) of the Company and also permits certain other liens. See "Description of the Notes -- Certain Covenants -- Limitation on Liens." Holders of such secured indebtedness will be entitled to payment out of the proceeds of their collateral prior to any holders of general unsecured indebtedness, including the holders of Notes. CERTAIN COVENANTS.... The Indenture contains certain covenants that, among other things, limit the incurrence of additional indebtedness by the Company and its Restricted Subsidiaries (as defined); the payment of dividends; the repurchase of capital stock and subordinated indebtedness; the making of certain other distributions and of certain loans and investments; the ability to create certain liens; the creation of restrictions on the ability of Restricted Subsidiaries to pay dividends or make other payments to the Company; and the ability to enter into certain transactions with affiliates or merge, consolidate or transfer substantially all assets. See "Description of the Notes -- Certain Covenants."

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+SUMMARY This summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus. Unless the context otherwise indicates, (i) all information in this Prospectus assumes that the Underwriters' over-allotment option is not exercised, (ii) the mergers (collectively, the "Merger") of ICN Pharmaceuticals, Inc. ("ICN"), SPI Pharmaceuticals, Inc. ("SPI") and Viratek, Inc. ("Viratek") into New ICN and ICN Biomedicals, Inc. ("Biomedicals," and together with ICN, SPI and Viratek, the "Predecessor Companies") into a wholly owned subsidiary of New ICN have been consummated and New ICN has succeeded the Predecessor Companies in their respective businesses and (iii) all per share amounts have been restated to reflect stock splits and dividends. Except as the context otherwise requires, all references to New ICN or the Company include its subsidiaries.

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and historical and pro forma financial statements appearing elsewhere in this Prospectus and should be read only in conjunction with the entire Prospectus. For ease of reference, a glossary of certain terms used in this Prospectus is included as Appendix C to this Prospectus. FERRELLGAS PARTNERS, L.P. Ferrellgas Partners, L.P. (the "Partnership") is a Delaware limited partnership which recently acquired and now operates the propane business and assets of Ferrellgas, Inc. ("Ferrellgas"). Ferrellgas is the general partner (the "General Partner") of the Partnership and a wholly owned subsidiary of Ferrell Companies, Inc. ("Ferrell"). Ferrell was founded in 1939 as a single retail propane outlet in Atchison, Kansas, and has grown principally through the acquisition of retail propane operations throughout the United States. The Partnership believes that it is the second largest retail marketer of propane in the United States, based on gallons sold, serving more than 650,000 residential, industrial/commercial and agricultural customers in 47 states and the District of Columbia through approximately 461 retail outlets and 249 satellite locations in 38 states (some outlets serve an interstate market). The Partnership's largest market concentrations are in the Midwest, Great Lakes and Southeast regions of the United States. Ferrellgas has historically operated in areas of strong retail market competition, which has required it to develop and implement strict capital expenditure and operating standards in its existing and acquired retail propane operations in order to control operating costs. This effort has resulted in upgrades in the quality of its field managers, the application of strong return on asset benchmarks and improved productivity methodologies. Retail propane sales volumes were approximately 564 million, 553 million and 496 million gallons during the combined fiscal year of the Partnership and Ferrellgas ended July 31, 1994 and Ferrellgas' fiscal years ended July 31, 1993 and 1992, respectively. Ferrellgas' earnings before depreciation, amortization, interest and taxes ("EBITDA") were $98.0 million, $89.4 million and $87.1 million for the eleven-month period ended June 30, 1994 and the fiscal years ended July 31, 1993 and 1992, respectively. The Partnership's pro forma EBITDA was $97.4 million and $88.9 million for the fiscal years ended July 31, 1994 and 1993, respectively. Ferrellgas' net earnings were $11.5 for the eleven-month period ended June 30, 1994 and its net losses were $0.8 million and $11.7 million for the fiscal years ended July 31, 1993 and 1992, respectively. The Partnership's pro forma net earnings before extraordinary items were $39.9 million and $28.3 million for the fiscal years ended July 31, 1994 and 1993, respectively. For a discussion of the seasonality of the Partnership's operations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations-General." BUSINESS STRATEGY The retail propane industry is a mature one, in which the Partnership foresees only limited growth in total demand for the product. Based on information available from the Energy Information Administration, the Partnership believes the overall demand for propane has remained relatively constant over the past several years, with year to year industry volumes being impacted primarily by weather patterns. As a result, growth in this industry is accomplished primarily through acquisitions. Except for a few large competitors, the propane industry is highly fragmented and principally composed of over 3,000 local and regional companies. Historically, Ferrellgas has been successful in acquiring independent propane retailers and integrating them into its operations at what it believes to be attractive returns. In July 1984, Ferrellgas acquired propane operations with annual retail sales volumes of approximately 33 million gallons at a cost of approximately $13.0 million, and in December 1986, Ferrellgas acquired propane operations with annual retail sales volumes of approximately 395 million gallons at a cost of approximately $457.5 million. Since December 1986, and as of July 31, 1994, Ferrellgas has acquired 70 local independent propane retailers which it believes were not individually material. These acquisitions significantly expanded and diversified Ferrellgas' geographic presence. The Partnership plans to continue to expand its business principally through acquisitions in areas in close proximity to its existing operations so that such newly acquired operations can be efficiently combined with existing operations and savings can be achieved through the elimination of certain overlapping functions. An additional goal of these acquisitions is to improve the operations and profitability of the businesses the Partnership acquires by integrating them into its established propane supply network. The Partnership also plans to pursue acquisitions which broaden its geographic coverage. Ferrellgas has historically increased its existing customer base and retained the customers of acquired operations through marketing efforts that focus on providing quality service to customers. The Partnership believes that there are numerous local retail propane distribution companies that are possible candidates for acquisition by the Partnership and that the Partnership's geographic diversity of operations helps to create many attractive acquisition opportunities. The Partnership is unable to predict the amount or timing of future capital expenditures for acquisitions. As of July 5, 1994, Ferrellgas, L.P., a subsidiary of the Partnership (the "Operating Partnership"), entered into a bank credit facility (the "Credit Facility") providing a maximum $185 million commitment for borrowings and letters of credit. Under the terms of the Credit Facility $70 million is available solely to finance acquisitions and growth capital expenditures, of which $25 million remains unused. In addition to borrowings under the Credit Facility, the Partnership may fund future acquisitions from internal cash flow or the issuance of additional Partnership interests. Under the instruments governing the Operating Partnership's debt, including the Credit Facility, the Partnership is prohibited from making distributions to its partners and other Restricted Payments (as defined in the instruments governing such debt) unless certain specified targets for capital expenditures and expenditures for permitted acquisitions have been met. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Pro Forma Financial Condition." In addition to growth through acquisitions, the Partnership believes that it may also achieve growth within its existing propane operations. Historically, Ferrellgas experienced modest internal growth in its customer base. As a result of Ferrellgas' experience in responding to competition and in implementing more efficient operating standards, the Partnership believes that it is positioned to be more successful in direct competition for customers. The Partnership currently has marketing programs underway which focus specific resources toward this effort. See "Business-Retail Operations-Business Strategy." GENERAL Propane, a byproduct of natural gas processing and petroleum refining, is a clean-burning energy source recognized for its transportability and ease of use relative to alternative forms of stand alone energy sources. In the residential and commercial markets, propane is primarily used for space heating, water heating and cooking. In the agricultural market propane is primarily used for crop drying, space heating, irrigation and weed control. In addition, propane is used for certain industrial applications, including use as an engine fuel which is burned in internal combustion engines that power vehicles and forklifts and as a heating or energy source in manufacturing and drying processes. Consumption of propane as a heating fuel peaks sharply in winter months. The Partnership sells propane primarily to four specific markets: residential, industrial/commercial, agricultural and other (principally to other propane retailers and as an engine fuel). During the pro forma fiscal year ended July 31, 1994, sales to residential customers accounted for 60% of retail gross profits, sales to industrial/commercial customers accounted for 27% of retail gross profits, sales to agricultural customers accounted for 6% of retail gross profits and sales to other customers accounted for 7% of retail gross profits. Residential sales have a greater profit margin and a more stable customer base and tend to be less sensitive to price changes than the other markets served by the Partnership. While the propane distribution business is seasonal in nature and historically sensitive to variations in weather, management believes that the geographical diversity of the Partnership's areas of operations helps to minimize the Partnership's exposure to regional weather or economic patterns. Furthermore, long-term historic weather data from the National Climatic Data Center indicate that average annual temperatures have remained relatively constant over the last 30 years, with fluctuations occurring on a year-to-year basis only. In each of the past five fiscal years, which include the two warmest winters in the United States since 1953, pro forma Available Cash would have been sufficient to allow the Partnership to distribute the Minimum Quarterly Distribution on all Common Units assuming projected pro forma interest expense and capital expenditure levels. Profits in the retail propane business are primarily based on the cents-per- gallon difference between the purchase price and the sales price of propane. The Partnership generally purchases propane on a short-term basis; therefore, its supply costs generally fluctuate with market price fluctuations. Should the wholesale cost of propane decline in the future, the Partnership's margins on its retail propane distribution business should increase in the short-term because retail prices tend to change less rapidly than wholesale prices. Should the wholesale cost of propane increase, for similar reasons retail margins and profitability would likely be reduced at least for the short-term until retail prices can be increased. Historically, Ferrellgas has been able to maintain margins on an annual basis following changes in the wholesale cost of propane. Ferrellgas' success in maintaining its margins is evidenced by the fact that since fiscal 1990 average annual retail gross margins, measured on a cents-per- gallon basis, have generally varied by a relatively low percentage. The Partnership is unable to predict, however, how and to what extent a substantial increase or decrease in the wholesale cost of propane would affect the Partnership's margins and profitability. Propane competes primarily with natural gas, electricity and fuel oil as an energy source, principally on the basis of price, availability and portability. Propane serves as an alternative to natural gas in rural and suburban areas where natural gas is unavailable or portability of product is required. Propane is generally more expensive than natural gas on an equivalent BTU basis in locations served by natural gas, although propane is sold in such areas as a standby fuel for use during peak demand periods and during interruption in natural gas service. Propane is generally less expensive to use than electricity for space heating, water heating and cooking. Although propane is similar to fuel oil in application, market demand and price, propane and fuel oil have generally developed their own distinct geographic markets, lessening competition between such fuels. The retail propane business of the Partnership consists principally of transporting propane to its retail distribution outlets and then to tanks located on its customers' premises. Propane supplies are purchased in the contract and spot markets, primarily from natural gas processing plants and major oil companies. In addition, retail propane customers typically lease their stationary storage tanks from their propane distributors. Approximately 70% of the Partnership's customers lease their tank from the Partnership. The lease terms and, in most states, certain fire safety regulations, restrict the refilling of a leased tank solely to the propane supplier that owns the tank. The cost and inconvenience of switching tanks minimizes a customer's tendency to switch among suppliers of propane on the basis of minor variations in price. The Partnership is also engaged in the trading of propane and other natural gas liquids, chemical feedstocks marketing and wholesale propane marketing. In pro forma fiscal year 1994, annual wholesale and trading sales volume was approximately 1.7 billion gallons of propane and other natural gas liquids, approximately 57% of which was propane. Because the Partnership possesses a large distribution system, underground storage capacity and the ability to buy large volumes of propane, the General Partner believes that the Partnership is in a position to achieve product cost savings and avoid shortages during periods of tight supply to an extent not generally available to other retail propane distributors. PARTNERSHIP STRUCTURE AND MANAGEMENT Ferrellgas serves as the general partner of the Partnership. The management and employees of Ferrellgas manage and operate the propane business and assets of the Partnership as officers and employees of the General Partner. See "Management."

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+PROSPECTUS SUMMARY The following is qualified by the detailed summary information and financial statements (including the notes thereto) included elsewhere in this Prospectus.

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+PROSPECTUS SUMMARY THE COMPANY The Company, acting through its subsidiaries, primarily provides integrated solid waste collection, disposal and recycling services to public and private sector customers. The Company currently owns or operates nine solid waste landfills with three located in Texas, two in California and one each in Michigan, North Carolina, Indiana and North Dakota with approximately 1,143 permitted acres and total available permitted disposal capacity of approximately 43.7 million in-place cubic yards as of September 30, 1995. The Company also currently owns fourteen collection companies providing collection service to over 212,000 residential, commercial and industrial customers, primarily in areas surrounding its landfill sites and in Florida. In addition, the Company provides related environmental services including engineering, consulting and analysis, remediation and other technical services. The Company, through certain recently acquired subsidiaries, also is engaged in the electronic security services business, which consists of the sale, installation, and maintenance of electronic security systems for commercial and residential use as well as the continuous electronic monitoring of installed security systems. The Company's strategy is to act aggressively in growing as an integrated solid waste management company by acquiring and integrating existing solid waste collection, disposal and recycling businesses, and to expand its recently acquired electronic security services business by internal growth and by making additional acquisitions in that industry. Further, the Company currently anticipates expanding its operations outside of solid waste management, electronic security services and related lines of business. Management also plans to augment its growth strategy by expanding its existing facilities and increasing marketing efforts related to securing additional long-term contracts and additional volumes at its existing operations. See "Business -- Acquisitions". On August 3, 1995, following a special meeting of the Company's stockholders, the Company appointed a new management team consisting of H. Wayne Huizenga as Chairman of the Board and Chief Executive Officer, Harris W. Hudson as President and a Director, Gregory K. Fairbanks as an Executive Vice President and Chief Financial Officer, and John J. Melk as a Director. Michael G. DeGroote, former Chairman, Chief Executive Officer and President, was named Vice Chairman of the Board, and Donald E. Koogler resigned as a Director but remains as an Executive Vice President and Chief Operating Officer. This new management team is implementing the aggressive growth strategy for the Company. The Common Stock of the Company is traded on Nasdaq under the trading symbol "RWIN," and is also listed on the Toronto Exchange and trades under the symbol "RWI." The Company's principal executive offices are located at 200 East Las Olas Boulevard, Suite 1400, Ft. Lauderdale, Florida 33301, and its telephone number is (305) 761-8333. RECENT DEVELOPMENTS Private Placement Transaction. On September 7, 1995, the Company issued and sold 5,000,000 shares of Common Stock in a private placement transaction for $20.25 per share resulting in net proceeds of approximately $100 million after deducting fees and commissions. Acquisition of Kertz Security Systems. On August 28, 1995, the Company issued 1,090,000 shares of Common Stock in exchange for all of the outstanding shares of common stock of Kertz Security Systems II, Inc. and Kertz Security Systems, Inc. (together, "Kertz"). Kertz provides electronic security monitoring and maintenance to over 30,000 residential and commercial customers predominantly in the South Florida, Tampa and Orlando areas. Acquisition of Southland Environmental Services. On August 24, 1995, the Company entered into a merger agreement for the acquisition of Southland Environmental Services, Inc. ("Southland") in exchange for an aggregate of 2,600,000 shares of Common Stock, subject to pending regulatory approvals and customary closing conditions. The acquisition of Southland is expected to close in October 1995 and will be accounted for as a pooling of interests business combination. Southland, through its subsidiaries, provides solid waste collection services to over 70,000 residential, commercial and industrial customers in and around Jacksonville, Florida, owns and operates a construction and demolition landfill, and provides composting and recycling services. SUMMARY CONSOLIDATED FINANCIAL DATA The following Summary Consolidated Financial Data should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations, the Company's Consolidated Financial Statements and Notes thereto and other financial and pro forma information included elsewhere in this Prospectus. (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------------- ----------------------------------------------- 1995 1994 1994 1993 1992 1991 1990 ------- ------- ------- ------- ------- ------- ------- (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA(2), (3), (4), (6): Revenue................................................ $29,919 $23,957 $48,766 $41,095 $35,341 $27,040 $15,776 Income (loss) from continuing operations before income taxes(1)...................................... $ 5,376 $ 4,148 $ 8,503 $(3,695) $ 4,789 $ 4,799 $(1,552) Income (loss) from continuing operations(1)............ $ 4,242 $ 4,148 $ 8,503 $(3,905) $ 4,676 $ 3,017 $ (931) Earnings (loss) per common and common equivalent share from continuing operations........................... $ 0.15 $ 0.15 $ 0.31 $ (0.14) $ 0.18 $ 0.16 $ (0.10) Weighted average common and common equivalent shares... 28,929 27,470 27,417 27,508 26,351 19,245 9,132 </TABLE> <TABLE> <CAPTION> DECEMBER 31, JUNE 30, --------------------------------------------------- 1995 1994 1993 1992 1991 1990 ------------ -------- -------- -------- -------- ------- (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA(2), (3), (4), (5), (6): Working capital (deficiency)............................. $ 5,275 $ 4,136 $ 3,577 $ 1,867 $ 12,936 $(2,961) Short-term debt, including current maturities of long-term debt......................................... $ 1,254 $ 1,293 $ 1,776 $ 2,334 $ 2,499 $ 7,172 Long-term debt, net of current maturities................ $ 17,995 $ 14,926 $ 14,193 $ 2,575 $ 3,530 $ 6,906 Stockholders' equity..................................... $ 69,588 $ 87,969 $ 77,620 $ 97,255 $ 96,611 $41,263 Total assets............................................. $116,932 $132,441 $121,236 $128,107 $127,677 $67,873 </TABLE> - --------------- (1) Includes restructuring and unusual charges of $10,040,000, $2,250,000 and $1,544,000 in 1993, 1992 and 1991, respectively. See Note 4 of Notes to Consolidated Financial Statements included elsewhere in this Prospectus. (2) In April 1995, the Company spun-off its hazardous waste services segment, Republic Environmental Systems, Inc., to the Company's stockholders of record as of April 21, 1995. Accordingly, this segment was accounted for as a discontinued operation and the Company's Consolidated Financial Statements for all periods presented have been restated to report separately the net assets and operating results of these discontinued operations. (3) In 1992, the Company acquired Stout Environmental, Inc. ("Stout") in a merger transaction accounted for under the pooling-of-interests method of accounting. Accordingly, the financial data presented above for periods prior to that date has been restated as if the Company and Stout had operated as one entity since inception. (4) In 1992, the Company sold its demolition and excavation subsidiary and the Consolidated Financial Statements were restated to reflect the demolition and excavation operations as a discontinued operation for periods prior to that date. (5) On August 3, 1995, the Company issued and sold an aggregate of 8,350,000 shares of Common Stock and warrants to purchase an additional 16,700,000 shares of Common Stock to Mr. Huizenga, Westbury (Bermuda) Ltd (a company controlled by Mr. DeGroote) and Mr. Hudson. Also on August 3, 1995, the Company issued and sold an additional 1,000,000 shares of Common Stock each to Mr. Huizenga and Mr. Melk. On July 24, 1995, the Company issued and sold 5,400,000 shares of Common Stock in a private placement transaction. On September 7, 1995, the Company issued and sold 5,000,000 shares of Common Stock in an additional private placement transaction. See the Company's unaudited Condensed Consolidated Pro Forma Financial Statements included elsewhere in this Prospectus. (6) On August 3, 1995, the Company issued 8,000,000 shares of Common Stock in exchange for all of the outstanding shares of common stock of Hudson Management Corporation and Envirocycle, Inc. On August 28, 1995, the Company issued 1,090,000 shares of its Common Stock in exchange for all of the outstanding shares of common stock of Kertz. On August 24, 1995, the Company entered into a definitive agreement to acquire all of the outstanding common stock of Southland in exchange for 2,600,000 shares of Common Stock of the Company. See the Company's unaudited Condensed Consolidated Pro Forma Financial Statements included elsewhere in this Prospectus. (7) No cash dividends were declared on the Company's Common Stock during the periods presented. See "Price Range of Common Stock and Dividend Policy."

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+SUMMARY The following is a brief summary of the more detailed information contained in this Proxy Statement with respect to the Merger discussed herein. This Summary is not intended to be complete and is qualified in its entirety by the more detailed information contained elsewhere in this Proxy Statement, the Annexes hereto and other documents referred to in this Proxy Statement. Terms used but not defined in this Summary have the meanings ascribed to them elsewhere in this Proxy Statement. Cross references in this Summary are to the captions of sections of this Proxy Statement. Stockholders are urged to read this Proxy Statement and the Annexes hereto in their entirety. THE COMPANY Salick Health Care, Inc. provides disease-specific health care services and risk-based products for health care payors, principally in the areas of the diagnosis and treatment of cancer and the treatment of kidney failure. The Company was organized in 1983 as a California corporation, but changed its state of incorporation to Delaware in 1991. The principal executive offices of the Company are located at 8201 Beverly Boulevard, Los Angeles, California 90048 and its telephone number at that address is (213) 966-3400. ZENECA Zeneca is a wholly owned subsidiary of Zeneca PLC. Zeneca holds substantially all of the operating assets of Zeneca PLC. Zeneca PLC is a major international bioscience business engaged in the research, development, manufacture and marketing of ethical (prescription) pharmaceuticals, agricultural chemicals, specialty chemicals, seeds and biological products. Zeneca and Zeneca PLC's principal executive offices are located at 15 Stanhope Gate, London W1Y 6LN, United Kingdom, and the telephone number is 011-44-171-304-5000. Zeneca PLC and its consolidated subsidiaries are referred to hereinafter as "Zeneca Group" or "Group." Merger Subsidiary is an indirect wholly owned subsidiary of Zeneca. Merger Subsidiary has not conducted any business other than in connection with the Merger Proposal. Zeneca and Zeneca PLC are English companies and Merger Subsidiary is a Delaware corporation. The principal executive offices of Merger Subsidiary are located at 1800 Concord Pike, Wilmington, Delaware 19897 and the telephone number is (302) 886-3000. THE ANNUAL MEETING The Annual Meeting will be held on April 13, 1995 at 9:30 A.M., local time, at the Company's principal executive offices located at 8201 Beverly Boulevard, Los Angeles, California 90048. At the Annual Meeting, the Company's stockholders will be asked to consider and vote upon the Merger Proposal, the election of two Class I Directors and such other matters as may properly come before the Annual Meeting. The Merger Agreement provides for the merger of Merger Subsidiary with and into the Company, with the Company being the surviving corporation. The Merger Agreement also provides that, in the Merger, each Share (other than Shares as to which appraisal rights under Section 262 of the Delaware Law have been perfected) will be converted into the right to receive: (i) $18.875 in cash and (ii) although no fractional shares will be issued, one-half share of Special Common Stock of the Company. The shares of common stock of Merger Subsidiary will be converted into shares of the Common Stock of the Company representing immediately after the Merger fifty percent of the equity of the Company (assuming exercise in full of all options outstanding immediately prior to the Merger), in exchange for which Zeneca will provide all the cash consideration to be received by stockholders in the Merger in exchange for their Shares. All fractional shares of Special Common Stock that holders of Shares otherwise would be entitled to receive will be aggregated and sold and the net proceeds paid to such holders. Holders of the Special Common Stock may exercise the Put during a twenty business day period commencing two and one-half years after the Effective Time (or earlier upon a change of control as defined in the Certificate of Incorporation) and sell all or some of their shares of the Special Common Stock to the Company at the Put Price, subject to having funds legally available therefor as described herein. If such funds are not legally available to the Company as set forth in the Merger Agreement, Zeneca PLC will assume the obligations of the Company with respect to the Put. The Company will have the right to Call, subject to having available funds therefor as described herein, all, but not less than all, of the Special Common Stock at any time during the four year period commencing with the Closing at the Call Price. As additional consideration for Shares converted in the Merger, the Company will make a distribution, out of funds legally available therefor, to all holders of record of Shares immediately prior to the Effective Time in an aggregate amount of $0.625 per Share, to be paid in two equal installments of $0.3125 each, the first to be paid 180 days after the Closing and the second to be paid 360 days after the Closing. See "THE MERGER AGREEMENT--Conversion and Exchange of Shares," "--Surrender and Payment," "--Fractional Shares," "-- Additional Cash Consideration" and "--Obligations of Zeneca PLC Regarding Put." Shares with respect to which appraisal rights shall have been perfected will be converted in the Merger into the right to receive the amount to which the holder thereof is entitled upon appraisal. See "MERGER PROPOSAL--Appraisal Rights" and "APPRAISAL RIGHTS." Approval of the Merger Proposal will also constitute approval of amendments to the Company's certificate of incorporation to, among other things, authorize ten members for the Board of Directors, five of whom are to be elected by the holders of the Common Stock and five of whom are to be elected by the holders of the Special Common Stock. From the Effective Time, the Board of Directors will consist of Robert C. Black, Dr. Michael G. Carter, John G. Goddard, Dr. Thomas F.W. McKillop and Dr. Clifford Richard Guy who have been designated by Zeneca and Bernard Salick, M.D., Leslie F. Bell, Michael T. Fiore, Barbara Bromley-Williams and Thomas Mintz, M.D., who have been designated by the Company and currently serve on the Company's Board of Directors. Additionally, approval of the Merger Proposal by the Company's stockholders will also constitute approval of (i) revisions to the Company's certificate of incorporation to, among other things, authorize the issuance by the Company of Special Common Stock, (ii) revisions to the Company's existing by-laws, and (iii) the treatment and disposition of outstanding options under the Plans, as contemplated by the Merger Agreement. Pursuant to the Merger Agreement, outstanding options granted under the Plans will, in connection with the Merger, be exchanged for options to purchase shares of Special Common Stock, with appropriate upward (but not downward) adjustments to the exercise price and appropriate downward (but not upward) adjustments to the number of shares of Special Common Stock subject to such options so that the spread between the value (determined as set forth in the Merger Agreement) of the shares of Special Common Stock and the exercise price under the Replacement Options will not exceed the spread immediately prior to the Effective Time between the value of the Shares and the exercise price under the Company Options for which the Replacement Options are exchanged. See "THE MERGER AGREEMENT--Treatment of Stock Options" and "DESCRIPTION OF AMENDMENTS TO THE CHARTER DOCUMENTS OF THE COMPANY." Additionally, at the Annual Meeting, the Company's stockholders will be asked to elect two Class I directors to serve for a three year term and until their successors are duly elected and qualified. If the Merger is approved, such persons will serve as Class I directors only until the consummation thereof. RECORD DATE; VOTE REQUIRED Only holders of records of Shares at the close of business on March 3, 1995 (the "Record Date") will be entitled to vote at the Annual Meeting. At the Record Date, there were 10,342,006 Shares outstanding and entitled to vote. Under the Company's certificate of incorporation, subject to certain exceptions, each Share entitles the holder thereof to ten votes on each matter to be considered at the Annual Meeting, except that no holder is entitled to exercise more than one vote on any such matter in respect of any Share with respect to which there has been a change of beneficial ownership after August 27, 1991 or, except for Shares issued on conversion of the Company's 7 1/4% Convertible Subordinated Debentures Due 2000 (the "Debentures") or exercise of options held on that date, Shares which were issued after that date. The number of votes to which a holder of Shares is entitled to ten votes cannot, however, exceed that percentage of the votes entitled to be cast at the Annual Meeting which is equal to that percentage of the total outstanding Shares which such Shares represented as of August 27, 1991. Based on the information with respect to beneficial ownership possessed by the Company at the Record Date, it is estimated that the holders of approximately 40% of the Shares will be entitled (subject to the limitation described in the preceding sentence) to exercise ten votes per Share at the Annual Meeting, the holders of the remainder of the outstanding Shares will be entitled to one vote per Share and Dr. Salick, Chairman of the Board and Chief Executive Officer of the Company, who beneficially owned approximately 21.2% of the outstanding Shares on the Record Date (excluding Shares issuable upon exercise of presently exercisable options), will be entitled (after application of the limitation described in the preceding sentence) to approximately 39.7% of the votes entitled to be cast at the Annual Meeting (see "STOCK OWNERSHIP-- Management"). The actual voting power of each holder of Shares, including Dr. Salick, will be based on information possessed by the Company at the time of the Annual Meeting. Under the Company's certificate of incorporation shares held in "street" or "nominee" name are presumed to have had a change in beneficial ownership after August 27, 1991 and are, absent satisfactory evidence to the contrary, entitled to one vote per Share. As of the Record Date, directors and executive officers of the Company and their affiliates owned beneficially an aggregate of 2,318,252 Shares (excluding Shares issuable upon exercise of presently exercisable options) or approximately 22.4% of the Shares outstanding on such date. Based on the information with respect to beneficial ownership possessed by the Company at the Record Date, it is estimated that such persons are entitled (after application of the above-described limitation on the number of votes) to cast approximately 41.8% of the votes entitled to be cast on the Merger. Dr. Salick has entered into a Voting and Standstill Agreement with Zeneca pursuant to which he has agreed to vote the Shares beneficially owned by him over which he has voting power in favor of the Merger. See "MERGER PROPOSAL--Agreements Ancillary to the Merger Agreement." There is no cumulative voting. The presence in person or by properly executed proxy of holders of a majority of all of the votes entitled to be cast at the Annual Meeting is necessary to constitute a quorum at the Annual Meeting. Under the Delaware Law, the affirmative vote of holders of Shares possessing a majority of the votes entitled to be cast at the Annual Meeting is required to approve the Merger Proposal. Abstentions and broker non-votes will not be voted for or against the approval and adoption of the Merger Agreement but will have the effect of a negative vote because the affirmative vote of holders of a majority of the votes entitled to be cast is required to approve the Merger Proposal. The candidates for election of directors receiving the highest number of affirmative votes of the Shares present at the Annual Meeting entitled to vote on the election of directors will be the directors elected. Any vote against the candidates or withheld from voting (whether by abstention, broker non-votes or otherwise) will not be counted and will have no legal effect or effect on the vote with respect to the election of directors. Shares represented by properly executed proxies timely received by the Company will be voted in accordance with the instructions indicated thereon. If no instructions are so indicated, such Shares will be voted FOR approval of the Merger Proposal and FOR the election of the two Class I director nominees. See "INTRODUCTION--Record Date; Voting Rights; Proxies." RECOMMENDATION OF THE BOARD OF DIRECTORS The Board of Directors of the Company has determined that the Merger is fair to and in the best interests of the Company and its stockholders and unanimously recommends approval of the Merger Proposal to the Company's stockholders. See "MERGER PROPOSAL--Background of and Reasons for the Merger," "--Recommendation of the Company's Board of Directors," "--Effects of the Merger," and "--Interests of Certain Persons in the Merger." EFFECTIVE TIME AND CONDITIONS TO THE MERGER; TERMINATION The Merger will become effective on the day and at the time that a Certificate of Merger is filed with the Secretary of State of the State of Delaware pursuant to the Delaware Law. It is currently expected that, if all conditions to the Merger have been met or waived, the filing will take place on the date of the Annual Meeting, or as soon thereafter as practicable. See "MERGER PROPOSAL--Certain Regulatory Matters" and "THE MERGER AGREEMENT-- Conditions to Consummation of the Merger." Stockholders should not send certificates representing their Shares to the Company or the Exchange Agent for the Merger prior to receipt of a Letter of Transmittal that will be sent to stockholders following the Annual Meeting. See "THE MERGER AGREEMENT--Surrender and Payment." The obligations of the Company, Zeneca and Merger Subsidiary to consummate the Merger are subject to certain conditions including, among other things, the approval of the Merger Proposal by the stockholders of the Company in accordance with the Delaware Law, the expiration or termination of any applicable waiting period (including any extensions thereof) under the HSR Act, the execution and delivery of certain Employment Agreements, the consent of certain parties and the absence of any injunction or other legal prohibition to consummation of the Merger. On January 13, 1995, the Company and Zeneca were notified that the requisite waiting period under the HSR Act had been terminated. Additionally, the Merger Agreement required the Company to call for redemption and redeem the Debentures not converted into Shares. The Debentures were called in December 1994 and all outstanding Debentures were converted into Shares. See "MERGER PROPOSAL--Regulatory Matters" and "THE MERGER AGREEMENT-- Conditions to the Consummation of the Merger" and "--Convertible Subordinated Debentures." The Merger Agreement may be terminated at any time prior to the Effective Time (notwithstanding any approval of the Merger Proposal by the stockholders of the Company): (i) by mutual written consent of the Company and Zeneca, (ii) by either the Company or Zeneca, if the Merger has not been consummated by June 30, 1995, (iii) by either the Company or Zeneca, if there is any law, regulation or final judgment, injunction, order or decree that makes consummation of the Merger illegal or otherwise prohibited, (iv) by Zeneca, upon the occurrence of certain specified events, (v) by Zeneca, if any representation or warranty of the Company in the Merger Agreement was not true and correct in all material respects when made or deemed made or the Company has failed to observe or perform, in any material respect, any of its obligations under the Merger Agreement, (vi) by the Company, if any representation or warranty of Zeneca or Merger Subsidiary in the Merger Agreement was not true and correct in all material respects when made or deemed made or Zeneca or Merger Subsidiary has failed to observe or perform in any material respect its obligations under the Merger Agreement, and (vii) by either the Company or Zeneca, if the stockholders of the Companyfail to approve and adopt the Merger Proposal at the Annual Meeting. See "THE MERGER AGREEMENT--Termination; Amendments; Assignment." The Merger Agreement provides that the Company will pay Zeneca a termination fee of $11 million (plus up to an additional $1 million as reimbursement for all reasonable fees payable and expenses incurred) if the Merger Agreement is terminated pursuant to the provisions described in clause (iv) above. Such termination fee was required by Zeneca as a condition to its willingness to enter into the Merger Agreement. See "THE MERGER AGREEMENT--Termination; Amendments; Assignment" and "--Expenses; Termination Fee." SPECIAL COMMON STOCK Effective upon consummation of the Merger, the Company's certificate of incorporation will be amended by operation of the Merger to, among other things, authorize the issuance of the Special Common Stock. Shares of Special Common Stock will be substantially identical to the Shares, except that (i) for a period of four years after the Effective Time, the Company has the right (the Call) to acquire, subject to having available funds therefor as described herein, all, but not less than all, of the shares of the Special Common Stock at the fair market value thereof subject to a floor of $42.00 per share (discounted from the date which is two and one-half years from the Effective Time, if called prior to that date, at a rate which, when compounded on a daily basis, is equal to four percent on an annualized basis), and a ceiling of $50.00 per share during the two years and seven month period from and after the Effective Time, (ii) for a twenty-business day period commencing two and one-half years after the Effective Time (or earlier upon a change of control as defined in the Certificate of Incorporation), the holders of the Special Common Stock have the right (the Put) to require the Company to purchase all or some of their shares thereof at $42.00 per share, subject to having funds legally available therefor as described herein, and (iii) the holders of shares of Special Common Stock will be entitled to receive a $42.00 per share preferential distribution upon any liquidation, dissolution or winding up of the Company prior to any distribution being made to the holders of the Common Stock. See "DESCRIPTION OF THE SPECIAL COMMON STOCK." In addition, until the end of the Put Period, the holders of the Special Common Stock will have the right to elect five of the ten directors of the Company following the Merger, with the remaining five directors to be elected by the holders of the Common Stock. Certain of the shares of the Special Common Stock will be entitled to ten votes per share when voting separately as a class. See "DESCRIPTION OF THE SPECIAL COMMON STOCK--Voting Rights." OPINIONS OF FINANCIAL ADVISORS Goldman Sachs and Lazard Freres acted as financial advisors to the Company in connection with its consideration of the Merger transaction. Goldman Sachs and Lazard Freres each provided to the Board of Directors of the Company its written opinion, dated December 22, 1994, that, as of the date thereof, the consideration to be received by the holders of Shares pursuant to the Merger Agreement is fair to such holders. Each of the financial advisors confirmed in writing to the Company's Board of Directors such opinion as of the date of mailing of this Proxy Statement. The full text of the written opinion of each of Goldman Sachs and Lazard Freres, dated December 22, 1994, which sets forth the assumptions made, the matters considered and the scope of reviews undertaken in connection therewith, is set forth in Annex E and F, respectively, to this Proxy Statement and should be read in its entirety. See "MERGER PROPOSAL--Opinions of the Company's Financial Advisors." APPRAISAL RIGHTS Under the Delaware Law, any holder of record of Shares who votes against or abstains from voting in favor of the Merger and delivers a demand for appraisal prior to the vote of the Company's stockholders on the Merger, has the right to obtain cash payment for the "fair value" of his, her or its Shares (excluding any element of value arising from the accomplishment or expectation of the Merger). In order to exercise such rights, a stockholder must strictly comply with all the procedural requirements of Section 262 of the Delaware Law, a description of which is provided in "THE MERGER AGREEMENT--Appraisal Rights" and "APPRAISAL RIGHTS" and the full text of which is attached as Annex D to this Proxy Statement. Section 262 should be read in its entirety. Such "fair value" would be determined in judicial proceedings, the result of which cannot be predicted. Failure to comply strictly with all of the requirements of Section 262 may result in a loss of appraisal rights. MARKET PRICES The Shares are traded on the Nasdaq National Market under the symbol "SHCI." The following table sets forth, for the periods indicated, the high and low closing prices of the Shares on the Nasdaq National Market as reported by NASDAQ: <TABLE> <CAPTION> HIGH LOW ------- ------- <S> <C> <C> 1st quarter ended November 30, 1992...................... $14 3/4 $ 9 3/4 2nd quarter ended February 28, 1993...................... $ 16 $10 3/4 3rd quarter ended May 31, 1993........................... $13 3/8 $10 1/2 4th quarter ended August 31, 1993........................ $14 1/4 $11 3/4 1st quarter ended November 30, 1993...................... $16 1/2 $ 13 2nd quarter ended February 28, 1994...................... $17 1/4 $ 14 3rd quarter ended May 31, 1994........................... $ 19 $15 1/2 4th quarter ended August 31, 1994........................ $18 1/2 $14 1/4 1st quarter ended November 30, 1994...................... $25 1/4 $17 3/4 2nd quarter ended February 28, 1995...................... $35 3/8 $23 1/2 </TABLE> On December 21, 1994, the last full trading day prior to the announcement that the Merger Agreement had been executed, the closing price per Share, as reported on the Nasdaq National Market, was $29.25. On March 10, 1995, the closing sale price per Share, as reported on the Nasdaq National Market, was $35 1/2. Based upon security position listings and the Company's belief, it is estimated there were more than 1,500 holders of the Shares as of March 3, 1995. CERTAIN FEDERAL INCOME TAX CONSEQUENCES A portion of each Share exchanged by a stockholder in the Merger will be considered to have been sold to Zeneca and the remainder will be considered to have been exchanged with the Company for the Special Common Stock and the right to the Distribution. An exchanging stockholder will recognize gain or loss on the exchange of that portion of each Share considered to have been sold to Zeneca measured by the difference between the consideration received from Zeneca and such stockholder's basis in such portion of the Share. Any gain on the exchange of that portion of each Share considered to have been exchanged with the Company (measured by the excess of the value of the Special Common Stock and the right to the Distribution over the basis in such portion of the Share) will be recognized only to the extent of the value of the right to the Distribution. An exchanging stockholder will not recognize any loss on the exchange of that portion of each Share considered to have been exchanged with the Company. If the Special Common Stock were treated as preferred stock for purposes of Section 305 of the Code, holders of Special Common Stock would be required to include in gross income the excess of the Put Price over the fair market value of such share at issuance during the period starting at the Effective Time and ending during the Put Period. While there is no authority directly on point, and the issue is not free from doubt, special counsel to the Company believes that the Special Common Stock should not be recharacterized as preferred stock for this purpose and the Company intends to treat it accordingly. See "MERGER PROPOSAL--Certain Federal Income Tax Consequences." ACCOUNTING TREATMENT The proposed Merger will be accounted for as a recapitalization of the Company. The net carrying amount of the Debentures has been credited to stockholders' equity upon the conversion thereof. The Common Stock issued to Zeneca will be capitalized in an amount equal to the Cash Consideration to be received by existing stockholders of the Company in exchange for their Shares. The cash proceeds paid to existing stockholders in exchange for their Shares (including the Distribution payable by the Company) will be charged to stockholders' equity. The Special Common Stock issued to existing stockholders will be capitalized at par value. Cash consideration paid to existing stockholders upon exercise of the Put and/or the Call will be charged against stockholders' equity at the date of exercise. Cash consideration received by the Company from Zeneca to fund the Put and/or the Call will be credited to stockholders' equity. The proposed accounting treatment will result in an increase in total stockholders' equity as a result of the conversion of the Debentures and assumed exercise of outstanding stock options, offset by the Merger transaction expenses and accrual of the Distribution payable by the Company. See "MERGER PROPOSAL--Accounting Treatment" and "THE MERGER AGREEMENT--Convertible Subordinated Debentures."

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+SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information, including "Risk Factors" and the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. Except as otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Underwriting."

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+SUMMARY This Summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. Certain capitalized terms used in the Summary are defined elsewhere in this Prospectus. Reference is made to the "Index of Principal Terms" for the location herein of defined terms. Issuer.................... CIT RV Owner Trust 1995-A (the "Trust" or the "Issuer"), a Delaware business trust to be formed by the Seller and the Owner Trustee pursuant to the Trust Agreement dated as of June 1, 1995. Seller.................... The CIT Group Securitization Corporation II (the "Company"), a wholly-owned, limited purpose subsidiary of The CIT Group Holdings, Inc. ("CIT"). Neither CIT nor any of its affiliates, including the Company and The CIT Group/Sales Financing, Inc. ("CITSF"), has guaranteed, insured or is otherwise obligated with respect to the Securities, except for the Limited Guarantee provided by CIT in favor of the Certificateholders (the "Limited Guarantee"). See "Special Considerations--Limited Obligations". Servicer.................. The CIT Group/Sales Financing, Inc. (in such capacity referred to herein as the "Servicer"), a wholly-owned subsidiary of CIT. Indenture Trustee......... The Chase Manhattan Bank (National Association), as trustee under the Indenture to be dated as of June 1, 1995 (the "Indenture Trustee"). Owner Trustee............. The First National Bank of Chicago, as trustee under the Trust Agreement to be dated as of June 1, 1995 (the "Owner Trustee" and, together with the Indenture Trustee, the "Trustees"). An individual who is a Delaware Resident is expected to act as a co-trustee pursuant to a co-trustee agreement with the Owner Trustee. Special Considerations.... Certain potential risks and other considerations are particularly relevant to a decision to invest in any securities sold hereunder. See "Special Considerations". The Notes................. The CIT RV Owner Trust 1995-A Asset Backed Notes (the "Notes") will represent obligations of the Trust secured by the assets of the Trust (other than the Certificate Distribution Account). See "The Notes--General". The Trust will issue $188,000,000 aggregate principal amount of Class A ___% Asset Backed Notes (the "Class A Notes") pursuant to an Indenture, to be dated as of June 1, 1995, between the Issuer and the Indenture Trustee (the "Indenture"). See "The Notes--General". The Notes will be offered for purchase in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof in book-entry form only. Definitive Notes will be issued only under the limited circumstances described herein. Persons acquiring beneficial interests in the Notes will hold their interests through The Depository Trust Company ("DTC") in the United States or Cedel, societe anonyme ("Cedel") or the Euroclear System ("Euroclear") in Europe. See "Certain Information Regarding the Securities--Book-Entry Registration" and "--Definitive Securities" and Annex I hereto. The Certificates.......... The CIT RV Owner Trust 1995-A ___% Asset Backed Certificates (the "Certificates" and, together with the Notes, the "Securities") will represent - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- fractional undivided interests in the Trust. See "The Certificates--General". The Trust will issue $12,000,000 aggregate principal amount of Certificates (the "Original Certificate Balance") pursuant to a Trust Agreement, to be dated as of June 1, 1995, between the Seller and the Owner Trustee (the "Trust Agreement"). Payments in respect of the Certificates will be subordinated to payments on the Notes to the limited extent described herein. See "The Certificates--General". The Certificates will be issued in minimum denominations of $20,000 and integral multiples of $1,000 in excess thereof in book-entry form only; provided, however, that one Certificate may be issued in a denomination other than an integral multiple of $1,000 such that the Affiliated Purchaser (as defined herein) may be issued at least 1% of the Certificate Balance (as described herein). Persons acquiring beneficial interests in the Certificates will hold their interests through DTC. Definitive Certificates will be issued only under the limited circumstances described herein. See "Certain Information Regarding the Securities--Book-Entry Registration" and "--Definitive Securities". Property of the Trust..... The property of the Trust will primarily include a pool of simple interest retail installment sale contracts (the "Initial Contracts") secured by the new and used recreational vehicles financed thereby (the "Initial Financed Vehicles"), certain monies received under the Initial Contracts on and after June 1, 1995 (the "Initial Cut-off Date"), security interests in the Initial Financed Vehicles, the Collection Account, the Note Distribution Account, the Certificate Distribution Account, the Capitalized Interest Account and the Pre-Funding Account, in each case together with the proceeds thereof, the proceeds from claims under certain insurance policies in respect of individual Initial Financed Vehicles or the related Obligors and certain rights under the Sale and Servicing Agreement to be dated as of June 1, 1995 (the "Sale and Servicing Agreement"), among the Seller, the Servicer, and the Owner Trustee. From time to time on or before September 15, 1995, additional simple interest retail installment sale contracts (the "Subsequent Contracts" and, together with the Initial Contracts, the "Contracts") secured by the new and used recreational vehicles financed thereby (the "Subsequent Financed Vehicles" and, together with the Initial Financed Vehicles, the "Financed Vehicles"), certain monies received under the Subsequent Contracts on and after the related Subsequent Cut-off Dates, security interests in the Subsequent Financed Vehicles and proceeds from claims under certain insurance policies in respect of individual Subsequent Financed Vehicles or the related Obligors will be purchased by the Trust from the Seller from monies on deposit in the Pre-Funding Account. See "The Trust Property". The Contracts............. The properties of the Trust will consist primarily of installment sale contracts for recreational vehicles originated by recreational vehicle dealers ("Dealers") in the ordinary course of business and acquired by CITSF or the CIT Group/Consumer Finance, Inc. (NY) ("CITCF-NY") in the ordinary course of its - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- business. The Financed Vehicles will consist of motor homes, travel trailers and other types of recreational vehicles. See "The Contract Pool". On or prior to the date of issuance of the Securities (the "Closing Date"), CITCF-NY will sell certain contracts that will constitute a portion of the Initial Contracts to CITSF pursuant to a Sale and Purchase Agreement to be dated as of June 1, 1995, CITSF will sell the Initial Contracts to the Company pursuant to a Purchase Agreement to be dated as of June 1, 1995 (the "Purchase Agreement") and the Company will sell the Initial Contracts to the Trust pursuant to the Sale and Servicing Agreement. As of the Initial Cut-off Date, the Initial Contracts had an aggregate principal balance of $155,987,746, a weighted average original maturity of 152 months and a remaining weighted average maturity of 150 months. The final scheduled payment date on the Initial Contract with the last maturity occurs in June 2010. See "The Contract Pool". From time to time on or prior to September 15, 1995, pursuant to the Sale and Servicing Agreement, CITSF will be obligated to sell, and the Company will be obligated to purchase, subject to the satisfaction of certain conditions described therein, Subsequent Contracts at a purchase price equal to the aggregate principal amount thereof as of the first day in the related month of transfer designated by CITSF and the Company (each, a "Subsequent Cut-off Date"). A portion of such Subsequent Contracts may be acquired by CITSF from CITCF-NY. Pursuant to the Sale and Servicing Agreement and one or more subsequent transfer agreements (each, a "Subsequent Transfer Agreement") among the Company, the Servicer and the Owner Trustee, and subject to the satisfaction of certain conditions described herein and therein, the Company will in turn sell the Subsequent Contracts to the Trust at a purchase price equal to the amount paid by the Company to CITSF for such Subsequent Contracts, which purchase price shall be paid from monies on deposit in the Pre-Funding Account. The aggregate principal balance of the Subsequent Contracts to be conveyed to the Trust during the Funding Period will not exceed $44,012,254. Subsequent Contracts will be transferred from CITSF to the Company and from the Company to the Trust on the Business Day specified by CITSF and the Company during the month in which the related Subsequent Cut-off Date occurs (each, a "Subsequent Transfer Date"). The Pre-Funding Account... The Pre-Funding Account will be maintained with the Owner Trustee and is designed solely to hold funds to be applied by the Owner Trustee during the Funding Period to pay to the Company the purchase price for Subsequent Contracts. Monies on deposit in the Pre-Funding Account will not be available to cover losses on or in respect of the Contracts. On the Closing Date the Pre-Funding Account will be created with an initial deposit, from the proceeds of the Securities, of $44,012,254 (the "Pre-Funded Amount"). The "Funding Period" will be the period from the Closing Date until the earliest to occur of (i) the date on which the amount on deposit in the Pre-Funding Account is less than $100,000, (ii) the date on which an Event of Default occurs under the Indenture, (iii) the date on which an Event of Termination occurs under the Sale and Servicing Agreement, (iv) the insolvency of the Company, CITSF, - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CITCF-NY or CIT or (v) the close of business on September 15, 1995. During the Funding Period, on one or more Subsequent Transfer Dates, the Pre-Funded Amount will be applied to purchase Subsequent Contracts from the Company. The Company expects that the Pre-Funded Amount will be reduced to less than $100,000 by September 15, 1995, although no assurance can be given that this will in fact occur. Any portion of the Pre-Funded Amount remaining on deposit in the Pre-Funding Account at the end of the Funding Period will be payable as principal to Noteholders on the first Distribution Date thereafter or, if the end of the Funding Period is on a Distribution Date, then on such date. Capitalized Interest Account................... On the Closing Date approximately $__________ of the proceeds from the sale of the Securities will be deposited into an account (the "Capitalized Interest Account") in the name of the Owner Trustee on behalf of the Securityholders. Amounts deposited in the Capitalized Interest Account will be used on the July 1995, August 1995 and September 1995 Distribution Dates, if applicable, to fund the excess, if any, of (i) the product of (x) the weighted average of the Class A Rate and the Pass-Through Rate as of the first day of the related Interest Accrual Period and (y) the undisbursed funds (excluding investment earnings) in the Pre-Funding Account (as of the last day of the related Due Period) over (ii) the amount of any investment earnings on funds in the Pre-Funding Account that are available to pay interest on the Securities on each such Distribution Date. Any amounts remaining in the Capitalized Interest Account on the last day of the Funding Period and not used for such purposes will be deposited in the Collection Account and be available for distributions, as described herein, on the first Distribution Date thereafter or, if the end of the Funding Period is on a Distribution Date, then on such date. Distribution Dates........ Payments of interest and principal on the Securities will be made on the fifteenth day of each month or, if any such day is not a Business Day, on the next succeeding Business Day (each, a "Distribution Date"), commencing July 17, 1995. Payments on the Securities on each Distribution Date will be made to the holders of record of the related Securities at the close of business on the day immediately preceding such Distribution Date or, in the event Definitive Securities have been issued, at the close of business on the last day of the month immediately preceding the month in which such Distribution Date occurs (each, a "Record Date"). To the extent not previously paid in full prior to such time, the outstanding principal amount of the Class A Notes and the Certificates will be payable on the Distribution Date occurring in January 2011 (the "Class A Final Scheduled Distribution Date" and the "Certificate Final Scheduled Distribution Date", respectively). A "Business Day" is any day other than a Saturday, Sunday or any day on which banking institutions or trust companies in the states of New York, Illinois or Oklahoma are authorized by law, regulation or executive order to be closed. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Interest Accrual Period... The period for which interest is payable on a Distribution Date on the Securities shall be the period from the most recent Distribution Date on which interest has been paid to but excluding the following Distribution Date, or in the case of the initial Distribution Date from June 15, 1995 to but excluding the initial Distribution Date (each, an "Interest Accrual Period"). Due Period................ With respect to any Distribution Date, the "Due Period" is the period during which principal, interest and fees will be collected on the Contracts for application towards the payment of principal and interest to the Securityholders and the payment of fees on such Distribution Date. The "Due Period" will be the calendar month immediately preceding the Distribution Date. The first Due Period will commence on and include June 1, 1995 and will end on and include June 30, 1995. Determination Date........ The "Determination Date" is the third Business Day prior to each Distribution Date. On each Determination Date, the Indenture Trustee will determine the amount in the Collection Account available for distribution on the related Distribution Date, allocate such amounts between the Notes and the Certificates and make payments to Securityholders all as described under "The Purchase Agreements and The Trust Documents-- Distributions". Terms of the Notes........ The principal terms of the Notes will be as described below: A. Interest Rate ....... The Class A Notes will bear interest at the rate of ___% per annum (the "Class A Rate"). B. Interest............. Interest on the outstanding principal amount of the Notes will accrue at the Class A Rate during the Interest Accrual Period. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months. See "The Notes--Payment of Interest". C. Principal............ Principal of the Notes will be payable on each Distribution Date in an amount equal to the Principal Distribution Amount, calculated as described under "The Notes--Payments of Principal", to the extent of the Available Amount (as defined under "The Purchase Agreements and The Trust Documents--Distributions" herein) remaining after the Servicer has been reimbursed for any outstanding Advances and has been paid the Servicing Fee (including any unpaid Servicing Fee with respect to one or more prior Due Periods) (collectively, the "Servicer Payment") and following the payment of interest due on the Notes on such Distribution Date. The unpaid principal balance of the Notes will be payable on the Class A Final Scheduled Distribution Date. See "The Notes--Payments of Principal". D. Redemption........... The Notes will be subject to mandatory redemption in part in the event that any portion of the Pre-Funded Amount remains on deposit in the Pre-Funding Account at the end of the Funding Period. See "The Notes--Redemption" and "Certain Information Regarding the Securities". In the event of an Optional Purchase or Auction Sale, as described herein, the outstanding Notes will be redeemed, at a redemption price equal to the unpaid principal amount of the Class A Notes plus accrued and unpaid interest thereon at the Class A Rate. See "Summary--Optional Purchase of - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- the Contracts", "--Auction Sale", "The Notes--Redemption" and "The Purchase Agreements and The Trust Documents--Insolvency Event". Terms of the Certificates.. The principal terms of the Certificates will be as described below: A. Pass-Through Rate.... The Certificates will bear interest at the rate of ___% per annum (the "Pass-Through Rate"). B. Interest............. On each Distribution Date, the Owner Trustee will distribute pro rata to Certificateholders of record as of the related Record Date interest accrued during the related Interest Accrual Period, in an amount equal to one-twelfth of the product of the Pass-Through Rate and the Certificate Balance as of the first day of the immediately preceding Due Period (after giving effect to distributions of principal to be made on the Distribution Date occurring in such immediately preceding Due Period). The "Certificate Balance" means the Original Certificate Balance reduced by (i) all distributions allocable to principal actually made to Certificateholders, including Guarantee Payments allocable to principal, (ii) the aggregate amount of all Principal Liquidation Loss Amounts distributable to Certificateholders to the extent such amounts have not been so previously distributed and (iii) on or after the Distribution Date on which the Class A Notes have been paid in full (the "Cross-Over Date"), the aggregate amount of all Principal Distribution Amounts distributable to Certificateholders to the extent such amounts have not been so previously distributed. Distributions of interest on the Certificates will be funded to the extent of the Available Amount after the Servicer has been reimbursed for any outstanding Monthly Advances and has been paid the Servicer Payment and interest and principal has been paid in respect of the Notes on such Distribution Date or, to the extent such Available Amount is insufficient, will be funded through a payment under the Limited Guarantee, subject to the Guarantee Payment Limit. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The rights of Certificateholders to receive distributions of interest will be subordinated to the rights of Noteholders to receive interest and principal, as described herein. See "The Certificates --Distributions of Interest". C. Principal............ On each Distribution Date on or after the Cross-Over Date, principal of the Certificates will be payable, subject to the extent of the remaining Available Amount and the Guarantee Payment Limit, in an amount equal to the Principal Distribution Amount with respect to such Distribution Date. Such principal payments will be funded to the extent of the Available Amount remaining after the Servicer has been reimbursed for any outstanding Monthly Advances and has been paid the Servicer Payment, and the interest due on the Certificates has been paid or, to the extent such Available Amount is insufficient, will be funded through a payment under the Limited Guarantee, subject to the Guarantee Payment Limit. The rights of Certificateholders to receive distributions of principal will be subordinated to the rights of Noteholders to receive distributions of interest and principal and following the payment of distributions of interest in respect of the Certificates and to the extent described herein. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- On each Distribution Date prior to the Cross-Over Date, the Certificateholders will be entitled to receive, subject to the remaining Available Amount and the Guarantee Payment Limit, the Principal Liquidation Loss Amount for such Distribution Date. Such principal payments will be funded to the extent of the Available Amount remaining after the Servicer has been reimbursed for any outstanding Monthly Advances and has been paid the Servicer Payment, the principal and interest due on the Notes has been paid and the interest on the Certificates has been paid or, to the extent that such remaining Available Amount is insufficient, will be funded through a payment under the Limited Guarantee, subject to the Guarantee Payment Limit. The "Principal Liquidation Loss Amount" for any Distribution Date will equal the amount, if any, by which the sum of the aggregate outstanding principal balance of the Notes and the Certificate Balance (after giving effect to all distributions of principal on such Distribution Date) exceeds the sum of the aggregate principal balance of the Contracts (the "Pool Balance") plus the amounts remaining on deposit in the Pre-Funding Account, if any, at the close of business on the last day of the related Due Period. The Principal Liquidation Loss Amount represents future principal payments on the Contracts that, because of the subordination of the Certificates and liquidation losses on the Contracts, will not be paid to the Certificateholders. D. Redemption............ In the event of an Optional Purchase or Auction Sale, the Certificates will be redeemed at a redemption price equal to the Certificate Balance plus accrued and unpaid interest thereon at the Pass-Through Rate. See "Summary--Optional Purchase of the Contracts", "--Auction Sale", "The Certificates--Redemption" and "The Purchase Agreements and The Trust Documents--Insolvency Event". Mandatory Prepayment...... The Notes will be prepaid in part on the Distribution Date immediately succeeding the day on which the Funding Period ends (or on the Distribution Date on which the Funding Period ends if the Funding Period ends on a Distribution Date) in the event that any portion of the Pre-Funded Amount remains on deposit in the Pre-Funding Account after giving effect to the acquisition by the Seller and the sale to the Trust of all Subsequent Contracts, including any such acquisition and conveyance on the date on which the Funding Period ends (a "Mandatory Prepayment"). The amount to be distributed to Noteholders in connection with any Mandatory Prepayment will equal the remaining Pre-Funded Amount. Subordination of the Certificates.......... The rights of the Certificateholders to receive distributions with respect to the Contracts will be subordinated to the rights of the Class A Noteholders, to the extent described herein. This subordination is intended to enhance the likelihood of timely receipt by Class A Noteholders of the full amount of interest and principal required to be paid to them, and to afford such Class A Noteholders limited protection against losses in respect of the Contracts. No distribution will be made to the Certificateholders on any Distribution Date in respect of (i) interest or principal until the full amount of interest and principal on the Class A Notes payable on such Distribution Date - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- has been distributed to the Class A Noteholders and (ii) principal until the Class A Notes have been paid in full, other than distributions in respect of the Principal Liquidation Loss Amount. The protection afforded to the Class A Noteholders by the subordination feature described above will be effected by the preferential right of the Class A Noteholders to receive, to the extent described herein, current distributions from collections on or in respect of the Contracts prior to the application of such collections to making payments in respect of the Certificates. There is no other protection against losses on the Contracts afforded the Class A Notes. Guarantee Payments to Certificateholders under the Limited Guarantee of CIT.......... In order to mitigate the effect of the subordination of the Certificates and liquidation losses and delinquencies on the Contracts, the Certificateholders are entitled to receive on each Distribution Date the amount equal to the Guarantee Payment, if any, under the Limited Guarantee of CIT subject to the Guarantee Payment Limit. Prior to the Cross-Over Date, the "Guarantee Payment" will equal the lesser of (i) the amount, if any, by which (a) the sum of (x) the amount of interest payable to the Certificateholders for such Distribution Date, and (y) the Principal Liquidation Loss Amount, if any, exceeds (b) the Available Amount remaining for distribution to the Certificateholders after the Servicer has been reimbursed for any outstanding Monthly Advances and has been paid the Servicer Payment and distributions of interest and principal have been paid to the Noteholders on such Distribution Date and (ii) the Guarantee Payment Limit. On and after the Cross-Over Date, the "Guarantee Payment" will equal the lesser of (i) the amount, if any, by which (a) the sum of the amount of interest and principal payable to the Certificateholders on a Distribution Date exceeds (b) the Available Amount remaining after the Servicer has been reimbursed for any outstanding Monthly Advances and has been paid the Servicer Payment and distributions of interest and principal, if any, have been paid to the Noteholders on such Distribution Date and (ii) the Guarantee Payment Limit. The aggregate amount of Guarantee Payments made under the Limited Guarantee (including Guarantee Payments in respect of the Principal Liquidation Loss Amount) will not, except under certain limited circumstances specified in the Sale and Servicing Agreement, exceed $5,000,000 (the "Initial Guarantee Payment Limit"). The "Guarantee Payment Limit" will at any time generally equal the Initial Guarantee Payment Limit reduced by the amount of each Guarantee Payment made under the Limited Guarantee. Once the Guarantee Payment Limit has been reduced, it will not be reinstated or increased except if certain loss and delinquency tests established by the Rating Agencies are not satisfied and certain other conditions set forth in the Sale and Servicing Agreement are met. At any time that the Guarantee Payment Limit has been reduced to zero, holders of Certificates will bear the risk of all liquidation losses on the Defaulted Contracts and may suffer a loss. The Limited Guarantee will be an unsecured general obligation of CIT and will not be supported by any letter of credit or other credit - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- enhancement arrangement. As compensation for providing the Limited Guarantee, CIT will be entitled to receive a Guarantee Fee (the "Guarantee Fee") on each Distribution Date equal to 1/12 of the product of 0.25% and the aggregate outstanding principal balance of the Contracts as of the end of the second Due Period preceding such Distribution Date (or, in the case of the first Distribution Date, the Initial Cut-off Date). The right of CIT to receive payment of the Guarantee Fee on a Distribution Date will be subordinated to the rights of the Noteholders and Certificateholders to receive payments of interest and principal on such Distribution Date to the extent described herein. Alternate Credit Enhancement............... In the event that, at the Company's option, Alternate Credit Enhancement (as defined herein) is provided and, upon prior written notice to the Rating Agencies (as defined herein) such Rating Agencies shall have notified the Company, the Servicer and the Trust in writing that substitution of such Alternate Credit Enhancement for the Limited Guarantee will not result in the downgrade or withdrawal of the then current rating of the Notes or Certificates, the Limited Guarantee shall be released and shall terminate. The Alternate Credit Enhancement may consist of cash or securities deposited by CIT or any other Person in a segregated escrow or collateral account (an "Alternate Credit Enhancement"). On each Distribution Date after delivery of the Alternate Credit Enhancement, an amount, equal to the amount which would have been payable under the Limited Guarantee, shall be transferred from such escrow account or collateral account to the Certificate Distribution Account to make payments to the Certificateholders. CIT shall have no obligation to replenish the funds on deposit in any such escrow account or collateral account once they have been exhausted. See "The Notes--The Indenture--Modification of Indenture Without Noteholder Consent" and "The Purchase Agreements and The Trust Documents--Amendment". Monthly Advances.......... With respect to each Contract as to which there has been an Interest Shortfall during the related Due Period (other than an Interest Shortfall arising from a Contract which has been prepaid in full or which has been subject to a Relief Act Reduction (as defined herein) during the related Due Period), the Servicer shall advance funds in the amount of such Interest Shortfall (each, a "Monthly Advance") but only to the extent that the Servicer, in its good faith judgement, expects to recover such Monthly Advance from subsequent collections with respect to interest on such Contract made by or on behalf of the Obligor thereunder (the "Obligor"), net liquidation proceeds or insurance proceeds with respect to such Contract. The Servicer shall be reimbursed for any Monthly Advance from subsequent collections with respect to such Contract. If the Servicer determines in its good faith judgement that an unreimbursed Monthly Advance shall not ultimately be recoverable from such collections, the Servicer shall be reimbursed for such Monthly Advance from collections on all Contracts. The Servicer will not advance funds in respect of the principal component of any scheduled payment. See "The Purchase Agreements and The Trust Documents--Monthly Advances". - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- "Interest Shortfall" means with respect to any Contract and any Distribution Date, the excess of (x) the sum of (i) the product of one-twelfth of the weighted average of the Pass-through Rate and the Class A Rate multiplied by the outstanding principal amount of such Contract as of the last day of the second preceding Due Period (or, in the case of the first Due Period, as of the Initial Cut-off Date) calculated on the basis of a 360-day year comprised of twelve 30-day months and (ii) the product of (A) the Servicing Fee Rate, (B) the outstanding principal amount of such Contract as of the last day of the second preceding Due Period (or, in the case of the first Due Period, as of the Initial Cut-off Date) and (C) a fraction, the numerator of which is the number of days in the related Due Period and the denominator of which is 365, over (y) the amount of interest, if any, collected on such Contract in the related Due Period. Non-Reimbursable Payments.................. With respect to each Contract as to which there has been an Interest Shortfall in the related Due Period arising from either a prepayment in full of such Contract or a Relief Act Reduction in respect of such Contract during such Due Period, the Sale and Servicing Agreement will require the Servicer to deposit into the Collection Account on the Business Day immediately preceding the following Distribution Date, without the right of subsequent reimbursement, an amount equal to such Interest Shortfall (a "Non-Reimbursable Payment"). Servicing Fees............ The Servicer shall receive a monthly fee (the "Servicing Fee"), payable on each Distribution Date, equal to the sum of (i) the product of 1.00% per annum (the "Servicing Fee Rate") and the Pool Balance as of the last day of the second preceding Due Period (or, in the case of the first Distribution Date, as of the Initial Cut-off Date), based on the number of days in such Due Period and a 365-day year and (ii) any investment earnings on amounts on deposit in the Collection Account. In addition, the Servicer will be entitled to collect and retain any late, prepayment, extension and administrative fees or similar charges ("Late Fees") paid by the Obligors. See "The Purchase Agreements and The Trust Documents--Servicing Compensation." Optional Purchase of the Contracts ............ At its option, CITSF may purchase all the Contracts on any Distribution Date on which the Pool Balance is 10% or less of the Initial Pool Balance, at a purchase price determined as described under "The Purchase Agreements and The Trust Documents--Termination." The "Initial Pool Balance" equals the sum of (i) the Pool Balance as of the Initial Cut-off Date and (ii) the aggregate principal balance of all Subsequent Contracts added to the Trust as of their respective Subsequent Cut-off Dates. Auction Sale.............. Within ten days following a Distribution Date as of which the Pool Balance is 5% or less of the Initial Pool Balance, the Indenture Trustee (or, if the Notes have been paid in full and the Indenture has been discharged in accordance with its terms, the Owner Trustee) shall solicit bids for the purchase of the Contracts remaining in the Trust. In the event that satisfactory bids are received as described in "The Purchase Agreements and The Trust Documents--Termination," the net sale proceeds will be distributed to Securityholders, in the same order of priority as collections received in respect of the Contracts, - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- on the second Distribution Date succeeding such Record Date. If satisfactory bids are not received, such Trustee shall decline to sell the Contracts and shall not be under any obligation to solicit any further bids or otherwise negotiate any further sale of the Contracts. See "The Purchase Agreements and The Trust Documents--Termination". Ratings................... It is a condition to the issuance of the Securities that the Class A Notes be rated "Aaa" by Moody's Investors Service, Inc. ("Moody's") and "AAA" by Standard & Poor's Ratings Group ("Standard & Poor's" and together with Moody's, the "Rating Agencies") and the Certificates be rated "A2" by Moody's and "A" by Standard & Poor's. The ratings of the Class A Notes will be based primarily on the value of the Initial Contracts, the Pre-Funding Account and the terms of the Securities, including the subordination provided by the Certificates. The ratings of the Certificates will be based primarily on the Limited Guarantee provided by CIT. The foregoing ratings do not address the likelihood that the Securities will be retired following the sale of the Contracts by the Trustee as described above under "Auction Sale" or "Optional Purchase by CITSF". See "Ratings". There can be no assurance that any rating will remain in effect for any given period of time or that a rating will not be lowered or withdrawn by the assigning Rating Agency if, in its judgement, circumstances so warrant. In the event that the rating initially assigned to the Securities is subsequently lowered or withdrawn for any reason, no person or entity will be obligated to provide any additional credit enhancement with respect to such Securities. There can be no assurance whether any other rating agency will rate the Class A Notes or the Certificates, or if one does, what rating would be assigned by any such other rating agency. A security rating is not a recommendation to buy, sell or hold securities. Certain Federal Income Tax Considerations........ For Federal income tax purposes: (1) the Notes will constitute indebtedness; and (2) the Certificates will constitute interests in a trust fund that will not be treated as an association taxable as a corporation. Each Noteholder, by acceptance of a Note, will agree to treat the Notes as indebtedness, and each Certificateholder, by the acceptance of a Certificate, will agree to treat the Trust as a partnership in which the Certificateholders are partners for Federal income tax purposes. See "Certain Federal Income Tax Consequences". ERISA Considerations...... Subject to certain considerations discussed under "ERISA Considerations" herein, the Notes will be eligible for purchase by employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Employee benefit plans subject to ERISA will not be eligible to purchase the Certificates. Any benefit plan fiduciary considering the purchase of the Securities should, among other things, consult with its counsel in determining whether all required conditions have been satisfied. See "ERISA Considerations".

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+PROSPECTUS SUMMARY The following information is qualified in its entirety by the detailed information and financial statements found elsewhere in this Prospectus. As used in this Prospectus, unless the context indicates otherwise: (i) the "Company" or "Fort Howard" means Fort Howard Corporation, and where appropriate, its subsidiaries; (ii) "Common Stock" means the Common Stock, par value $.01 per share, of Fort Howard Corporation; (iii) "Offering" means the offering of 25,000,000 shares of Common Stock in the underwritten public offering to which this Prospectus relates and (iv) numbers and percentages of shares outstanding assume that the U.S. Underwriters' over-allotment option is not exercised and have been adjusted to reflect a 6.5-for-one split of the Common Stock effective January 31, 1995. The market share information and, unless otherwise indicated, the industry statistical information presented herein reflect the Company's best estimates based on publicly available information, and no assurance can be given regarding the accuracy of such estimates and statistics. THE COMPANY Founded in 1919, Fort Howard is a leading manufacturer, converter and marketer of sanitary tissue products, including specialty dry form products, in the United States and the United Kingdom. Its principal products, which are sold in the commercial (away-from-home) and consumer (at-home) markets, include paper towels, bath tissue, table napkins, wipers and boxed facial tissue manufactured from virtually 100% recycled fibers. The Company believes that it is the leading producer of tissue products in the domestic commercial market with a 26% market share and has focused two-thirds of its capacity on this faster growing segment of the tissue market. In the domestic consumer market, where the Company has a 9% market share, its principal brands include Mardi Gras printed napkins (which hold the leading domestic market position) and paper towels, Soft 'N Gentle bath and facial tissue, So-Dri paper towels, Page paper towels, bath tissue and table napkins, and Green Forest, the leading domestic line of environmentally positioned, recycled tissue paper products. Fort Howard also manufactures and distributes its products in the United Kingdom where it currently has the fourth largest market share, primarily in the consumer segment of that market. For the past 20 years Fort Howard has maintained annual EBITDA margins in excess of 30%, approximately double those publicly reported by the Company's competitors over the past five years. At the same time, the Company has achieved strong market share growth on the basis of its position as a low cost producer in the markets in which it competes. From 1984 to 1994, the Company has doubled its production capacity by constructing world-class, integrated, regional tissue mills which utilize the Company's proprietary de-inking technology to produce quality tissue from a broad range of wastepaper grades. These mills enable the Company to produce low cost, quality tissue products because they: (i) include state-of-the-art wastepaper de-inking and processing systems that process relatively low grades of wastepaper to produce low cost fiber for making tissue paper; (ii) contain eight of the eleven largest (270-inch) tissue paper machines in the world, which significantly increase labor productivity; (iii) are geographically located to minimize distribution costs; (iv) generate their own steam and electrical power and (v) manufacture certain of their own process chemicals and converting materials. The Company's business strategy is focused on increasing its profitability by maintaining and enhancing its position in the United States and internationally. The Company's strategy involves: (i) maintaining its position as a low cost producer of tissue products in the markets in which it competes; (ii) sustaining its growth in domestic commercial market shipments and market share by selectively increasing sales to large distributors and national accounts, improving its position with club warehouses and expanding its specialty dry form business; (iii) sustaining its growth in domestic consumer market shipments and market share by focusing on the value segment of that market; (iv) developing opportunities for further international growth and (v) improving its financial flexibility. The Company's current plans to support growth in domestic tissue shipments include, subject to market conditions and the successful completion of the Recapitalization described below, adding one world-class (270-inch) tissue paper machine over the next five years. The Company was acquired by The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II") and other investors in 1988 (the "Acquisition"). Morgan Stanley Group Inc. ("Morgan Stanley Group"), directly and through certain affiliated entities which it controls, including MSLEF II, currently beneficially owns 62.8% of the outstanding Common Stock of Fort Howard. Upon consummation of the Offering, Morgan Stanley Group and its affiliates will own 37.9% of the outstanding Common Stock (35.8% if the U.S. Underwriters' over-allotment option is exercised in full). Morgan Stanley Group and MSLEF II are affiliates of both Morgan Stanley & Co. Incorporated ("MS&Co"), a representative of the U.S. Underwriters, and Morgan Stanley & Co. International Limited ("MS&Co International"), a representative of the International Underwriters. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company: U.S. Offering.............................. 20,000,000 shares International Offering..................... 5,000,000 shares Total.................................. 25,000,000 shares Common Stock to be outstanding following the Offering.....................................63,101,239 shares(a) Use of Proceeds.............................. The net proceeds to the Company from the Offering will be used to repay or refinance certain indebtedness of the Company. See "Use of Proceeds." Nasdaq National Market Symbol..................................... "FORT" </TABLE> - ------------ (a) Excludes 3,741,465 shares of Common Stock issuable upon exercise of outstanding options. See "Management--Compensation of Executive Officers and Directors." THE PROPOSED RECAPITALIZATION The Company is implementing a recapitalization plan (the "Recapitalization") to prepay or redeem a substantial portion of its indebtedness in order to reduce the level and overall cost of its debt, extend certain maturities, increase shareholders' equity and enhance its access to capital markets. The Recapitalization includes the following components: (1) The offering by the Company of 25,000,000 shares of Common Stock in the United States and internationally; (2) Entering into a bank credit agreement (the "New Bank Credit Agreement") consisting of a $300 million revolving credit facility (the "1995 Revolving Credit Facility"), an $810 million term loan (the "1995 Term Loan A") and a $330 million term loan (the "1995 Term Loan B" and, together with the 1995 Term Loan A, the "New Term Loans"); and entering into a receivables credit agreement consisting of a $60 million term loan (the "1995 Receivables Facility"); (3) The application of the net proceeds of the Offering, together with borrowings under the New Term Loans and the 1995 Receivables Facility, to prepay or redeem all of the Company's indebtedness outstanding under (a) the Company's Amended and Restated Credit Agreement, dated as of October 24, 1988, as amended (the "1988 Bank Credit Agreement"), (b) the Company's term loan agreement dated as of March 22, 1993 (the "1993 Term Loan Agreement;" the borrowings under the New Term Loans and the 1995 Receivables Facility and the prepayment of the 1988 Bank Credit Agreement and the 1993 Term Loan Agreement with such borrowings are collectively referred to as the "Bank Refinancing") and (c) all outstanding Senior Secured Floating Rate Notes (the "Senior Secured Notes") due 1997 through 2000 (the "Senior Secured Note Redemption"); and (4) The application approximately one month following the closing of the Offering of borrowings under the New Term Loans, the 1995 Receivables Facility and the 1995 Revolving Credit Facility to redeem (a) all outstanding 14 1/8% Junior Subordinated Discount Debentures (the "14 1/8% Debentures") due 2004 (the "14 1/8% Debenture Redemption") and (b) all outstanding 12 5/8% Subordinated Debentures (the "12 5/8% Debentures") due 2000 (the "12 5/8% Debenture Redemption"), at 102.5% of the principal amount thereof. The Senior Secured Note Redemption, 12 5/8% Debenture Redemption and 14 1/8% Debenture Redemption are collectively referred to as the "1995 Debt Redemptions." Consummation of the Offering is conditioned on the concurrent consummation of the other components of the Recapitalization (other than the 14 1/8% Debenture Redemption and the 12 5/8% Debenture Redemption) and the provision by the Company of notices of redemption to the respective trustees of the 14 1/8% Debentures and the 12 5/8% Debentures. The estimated sources and uses of funds required to complete the Recapitalization, assuming that all components of the Recapitalization occur on March 15, 1995, are as follows (in millions): Sources of Funds: AMOUNT Proceeds of the Offering.......................................... $ 300.0 1995 Term Loan A.................................................. 810.0 1995 Term Loan B.................................................. 330.0 1995 Revolving Credit Facility.................................... 209.3 1995 Receivables Facility......................................... 60.0 -------- Total Sources of Funds............................................ $1,709.3 -------- -------- Uses of Funds: 14 1/8% Debenture Redemption...................................... $ 566.9 Senior Secured Note Redemption.................................... 300.0 1988 Revolving Credit Facility Prepayment......................... 300.0 1988 Term Loan Prepayment......................................... 224.5 12 5/8% Debenture Redemption (including 2.5% redemption premium).. 149.5 1993 Term Loan Prepayment......................................... 100.0 Company Transaction Fees and Expenses(a).......................... 68.4 -------- Total Uses of Funds............................................... $1,709.3 -------- -------- - ------------ <TABLE> <S> <C> (a) Includes underwriters' commissions and other transaction fees and expenses of the Recapitalization payable or reimbursable by the Company. </TABLE> For more information concerning the Recapitalization, see "Use of Proceeds." SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA The following table sets forth summary historical consolidated financial data of the Company for the years ended December 31, 1994, 1993 and 1992, that were derived from the consolidated financial statements of the Company, which were audited by Arthur Andersen LLP, independent public accountants, whose report thereon appears elsewhere in this Prospectus. Reference is made to such report which calls attention to a change in the method of accounting for postretirement benefits other than pensions. The following table also sets forth summary unaudited pro forma consolidated financial data of the Company derived from the unaudited pro forma condensed consolidated statements of income and pro forma condensed consolidated balance sheet and notes thereto included elsewhere in this Prospectus. The pro forma financial data were prepared as if the Recapitalization had occurred on December 31, 1994 for consolidated balance sheet purposes, and as if the Recapitalization had occurred on January 1, 1994 for consolidated statement of income purposes. In addition, the sale of the Company's 8 1/4% Senior Notes due 2002 (the "8 1/4% Notes") and the Company's 9% Senior Subordinated Notes due 2006 (the "9% Notes"), the redemption of $238 million of the 12 5/8% Debentures, the redemption of all the Company's 12 3/8% Senior Subordinated Notes due 1997 (the "12 3/8% Notes") and a $100 million prepayment of the term indebtedness (the "1988 Term Loan") under the 1988 Bank Credit Agreement, all of which occurred in February and March 1994 (collectively, the "1994 Refinancing"), are also treated for consolidated statement of income purposes as if they occurred on January 1, 1994. See "Pro Forma Financial Data." THE PRO FORMA FINANCIAL DATA DO NOT PURPORT TO REPRESENT WHAT THE COMPANY'S FINANCIAL POSITION OR RESULTS OF OPERATIONS WOULD ACTUALLY HAVE BEEN IF THE RECAPITALIZATION IN FACT HAD OCCURRED AT DECEMBER 31, 1994, OR IF THE RECAPITALIZATION AND THE 1994 REFINANCING HAD OCCURRED ON JANUARY 1, 1994 OR TO PROJECT THE COMPANY'S FINANCIAL POSITION OR RESULTS OF OPERATIONS FOR ANY FUTURE DATE OR PERIOD. The following financial information should be read in conjunction with "Capitalization," "Selected Historical Consolidated Financial Data," "Pro Forma Financial Data," "Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations" and the audited consolidated financial statements and the related notes thereto included elsewhere in this Prospectus. SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA <TABLE> <CAPTION> HISTORICAL PRO FORMA(A) ----------------------------- ------------ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, ----------------------------- 1994 1994 1993 1992 ------------ ------- ------- ------- (IN MILLIONS, EXCEPT RATIOS AND PER SHARE AMOUNTS) STATEMENT OF INCOME DATA: <S> <C> <C> <C> <C> Net sales............................................ $ 1,274 $ 1,274 $ 1,187 $ 1,151 Cost of sales........................................ 867 867 784 726 ------------ ------- ------- ------- Gross income......................................... 407 407 403 425 Selling, general and administrative(b)............... 110 110 97 97 Amortization of goodwill(c).......................... -- -- 43 57 Goodwill write-off(c)................................ -- -- 1,980 -- Environmental charge(d).............................. 20 20 -- -- ------------ ------- ------- ------- Operating income (loss)(d)........................... 277 277 (1,717) 271 Interest expense..................................... 290 338 342 338 Other (income) expense, net.......................... -- -- (3) 2 ------------ ------- ------- ------- Loss before taxes.................................... (13) (61) (2,056) (69) Income taxes (credit)................................ -- (19) (16) -- ------------ ------- ------- ------- Loss before extraordinary items and adjustment for accounting change..................................... (13) (42) (2,040) (69) Extraordinary items--losses on debt repurchases (net of income taxes)................................... -- (28) (12) -- Adjustment for adoption of SFAS No. 106 (net of income taxes)(e)................................... -- -- -- (11) ------------ ------- ------- ------- Net loss(d)(f)....................................... $ (13) $ (70) $(2,052) $ (80) ------------ ------- ------- ------- ------------ ------- ------- ------- Loss per share(d)(f)................................. $ (0.20) $ (1.85) $(53.85) $ (2.10) OTHER DATA: EBITDA(g)............................................ $ 393 $ 393 $ 387 $ 410 EBITDA as a percent of net sales(g).................. 30.8% 30.8% 32.6% 35.6% Depreciation of property, plant and equipment........ $ 96 $ 96 $ 88 $ 81 Non-cash interest expense(h)......................... 13 74 101 140 Capital expenditures................................. 84 84 166 233 Weighted average number of shares of Common Stock outstanding (in thousands)(f)......................... 63,103 38,103 38,107 38,107 BALANCE SHEET DATA (AT END OF PERIOD): Total assets......................................... $ 1,706 $ 1,681 $ 1,650 $ 3,575 Working capital (deficit)............................ 10 (98) (92) (124) Long-term debt (including current portion) and Common Stock with put right.................................. 3,078 3,318 3,234 3,104 Shareholders' deficit................................ (1,872) (2,148) (2,081) (29) </TABLE> - ------------ <TABLE> <S> <C> (a) For a discussion of the pro forma adjustments, see "Pro Forma Financial Data."

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+SUMMARY The following summary information is qualified in its entirety by and should be read in conjunction with the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context requires otherwise, all references to (i) "Premier" mean Premier Parks Inc. and its subsidiaries prior to the acquisition of Funtime by Premier (the "Merger") on August 15, 1995; (ii) "Funtime" mean Funtime Parks, Inc. and its subsidiaries; and (iii) the "Company" mean the combined businesses of Premier and Funtime giving effect to the consummation of the Merger. THE COMPANY The Company is a leading theme park operator which operates six parks with an aggregate 1994 attendance of approximately four million. The Company's parks are regional parks, drawing on average approximately 88% of their patrons from within a 100-mile radius. The parks are located in five geographically diverse markets: Washington, D.C./Baltimore; Buffalo/Rochester; Cleveland; Columbus; and Oklahoma City. The parks are designed to provide a complete family-oriented entertainment experience, and feature a broad selection of state-of-the-art and traditional thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues and merchandise outlets. For the twelve months ended June 30, 1995, the Company's total revenue on a pro forma basis was approximately $77.6 million. Each of the Company's parks is located in a highly populated market where there is limited direct competition. The Company believes that the combination of the limited supply of real estate appropriate for theme park development, high initial capital investment, long developmental lead-time, and zoning restrictions provides each of its parks a significant degree of protection from new competitive theme park openings. Based on its knowledge of the development of other theme parks in the United States, the Company's management estimates that it would cost at least $100 million and would take a minimum of two years to construct a new regional theme park. The Company believes that the geographic diversity of its parks limits its exposure to local economic downturns and unfavorable weather conditions. In addition, the Company believes that as a multi-park operator it benefits from numerous competitive advantages over single-park operators, including the ability to (i) exercise group purchasing power (for both operating and capital assets); (ii) achieve administrative economies of scale; (iii) attract greater sponsorship revenue and support from sponsors with nationally recognized brands; (iv) recruit and retain superior management personnel; and (v) optimize the use of its capital assets by rotating rides among its parks to provide fresh attractions at each park. The Company operates six parks: Adventure World, a combination theme and water park located three miles off the Beltway, between Washington, D.C. (15 miles away) and Baltimore, Maryland (30 miles away); Frontier City, a western themed park in Oklahoma City, Oklahoma; White Water Bay, a tropical themed water park also located in Oklahoma City; Geauga Lake, a combination theme and water park near Cleveland, Ohio; Darien Lake & Camping Resort, a combination theme and water park with an adjacent camping resort, located between Buffalo and Rochester, New York; and Wyandot Lake, a water park which also includes "dry" rides and other attractions, located adjacent to the Columbus Zoo in Columbus, Ohio. BUSINESS STRATEGY The Company's senior management team has extensive experience in the theme park industry and believes it has a proven track record in acquiring and re-positioning regional parks and in operating its parks efficiently. Since senior management assumed control in 1989, Premier has followed a strategy of selectively acquiring undermanaged parks which had lacked capital investment and marketing expertise. The Company's operating strategy is to increase revenue through attendance and per capita spending gains, while maintaining strict control of operating expenses in order to benefit from the substantial operating leverage inherent in the theme park business. The primary elements of this strategy include (i) adding rides and attractions and improving overall park quality; (ii) enhancing marketing, sponsorship and group sales programs; and (iii) generating higher ticket revenues and in-park spending. Management believes it has successfully demonstrated the effectiveness of its strategy at the Premier parks and plans to implement this strategy at the Funtime parks. Management believes that while the Funtime parks have generated strong and stable cash flows over the last five years, they lacked the sustained capital investment and creative marketing required to realize their full potential. In addition, the Company will continue to evaluate potential acquisitions of additional regional theme parks. ADD RIDES AND ATTRACTIONS AND IMPROVE PARK QUALITY. Over the past several years, the Company has made significant investments in Frontier City and Adventure World which, together with enhanced marketing, sales and sponsorship programs, have resulted in significant improvements in attendance, revenue and earnings before interest, taxes, depreciation and amortization ("EBITDA") at these parks. Frontier City--In 1990 and 1991, an aggregate of approximately $7.0 million was invested in Frontier City to add several major rides, expand and improve the children's area, significantly increase the size of and theme the group picnic facilities and construct a 12,000 square foot air-conditioned mall and main events center. These additions, combined with an aggressive marketing strategy, resulted in Frontier City's attendance, revenue and EBITDA increasing approximately 54%, 83%, and 124%, respectively, from 1989 to 1991. Adventure World--Since acquiring Adventure World in January 1992, the Company invested over $15.0 million in the park through 1994 to add numerous rides and attractions and to improve theming. These additions and improvements, combined with an aggressive and creative marketing strategy, enabled the Company to increase Adventure World's attendance by 72%, from approximately 363,000 in 1992 to over 625,000 in 1994, to more than double park revenue from $6.1 million in 1992 to $12.7 million in 1994, and to increase EBITDA from a deficit of ($410,000) to $2.1 million during the same period. As a result of these improvements, Adventure World has been voted the "Most Improved Park" in the country in each of the last three years, according to Inside Track Magazine, a recognized industry periodical. In 1995, the Company added the Mind Eraser, a $6.6 million state-of-the-art suspended steel looping roller coaster. Based on information provided by the ride's manufacturer and obtained from other theme park companies, management believes that the addition of this type of ride at other regional parks with similar demographic characteristics has resulted in annual attendance gains in the range of 100,000 to 200,000. The Company expects to recognize similar gains at Adventure World in 1995. Moreover, the addition of this ride has allowed the Company to increase ticket prices at Adventure World for the 1995 season and to realize in-park spending gains. The Company expects to spend approximately $21.5 million from the proceeds of the Transactions described below to add rides and attractions and make other improvements at its parks for the 1996 season. Approximately $4.0 million of this capital is expected to be invested in Adventure World to continue penetrating the densely populated Washington, D.C./Baltimore market (approximately 6.5 million and 10.9 million people within 50 and 100 miles, respectively). Given the size of this market, standard levels of market penetration in the industry, the performance of similarly situated parks and attendance gains achieved at the park to date, management believes that Adventure World has the potential to reach annual attendance levels in excess of 1.5 million within the next five years. The balance of the capital will primarily be used to add rides and attractions at the Funtime parks. Based on industry experience and the Company's experience at the Premier parks, the Company believes that these efforts, together with aggressive and creative marketing programs, will increase attendance and per capita spending at each of the Funtime parks. ENHANCE MARKETING, SPONSORSHIP AND GROUP SALES PROGRAMS. Premier's parks have benefitted from professional, creative marketing programs which emphasize the marketable rides and attractions, breadth of available entertainment and value provided by each park. The Company's marketing programs have a local orientation, which the Company believes is a key ingredient to successful marketing for regional theme parks. For example, Cal Ripken, Jr., the all-star shortstop for the Baltimore Orioles, serves as official spokesperson for Adventure World, making numerous appearances in radio and television commercials, and Olympic gymnast Shannon Miller, an Oklahoma City resident, has opened rides at White Water Bay. Management intends to implement similar marketing programs to promote the planned capital improvements at the Funtime parks. The Company has also successfully attracted well known sponsorship and promotional partners, such as Pepsi, McDonald's, Taco Bell, Blockbuster, 7 Eleven, Wendy's and various supermarket chains. The Company believes that its increased number of parks and annual attendance resulting from the Merger will enable it to expand and enhance its sponsorship and promotional programs. In addition, group sales and pre-sold tickets provide the Company with a consistent and stable base of attendance, representing over 40% of aggregate attendance in 1994. Premier has increased its group sales and pre-sold ticket business by approximately 65.3% from 1992 to 1994. The Company believes that it has the opportunity to continue to expand its group sales and pre-sold ticket business. GENERATE HIGHER TICKET REVENUES AND IN-PARK SPENDING. Management regularly reviews its ticket price levels and ticket category mix in order to capitalize on opportunities to implement selective price increases, both through main gate price increases and the reduction in the number and types of discounts. Management believes that opportunities exist to implement marginal ticket price increases without significant reductions in attendance levels. Such increases have successfully been implemented on a park-by-park basis in connection with the introduction of major new attractions or rides. In addition, discounts are typically offered on weekdays and evenings to encourage attendance at less popular times. As a result of these measures, the average ticket price per paid visitor at the Premier parks increased 10.2% from 1992 to 1994. The Company believes that through similar measures it will be able to increase the average ticket price per paid visitor at the Funtime parks. The Company also seeks to increase in-park spending by adding well-themed restaurants, remodeling and updating existing restaurants and adding new merchandise outlets. The Company has successfully increased spending on food and beverage by introducing well-recognized local and national brands, such as Domino's, Friendly's, TCBY and KFC. Finally, the Company has taken steps to decrease the waiting time for its most popular restaurants and merchandise outlets. As a result of these measures, average in-park spending per visitor at the Premier parks increased 14.3% from 1992 to 1994. The Company believes that through similar measures it will be able to increase average in-park spending per visitor at the Funtime parks. The Company has also developed a variety of off-season special events designed to increase attendance and revenue prior to Memorial Day and after Labor Day. Examples include Hallowscream, a Halloween event in which parks are transformed with supernatural theming, scary rides and haunting shows, and Octoberfest, the presentation of traditional German food, theming, music and entertainment. Over the last several years, Frontier City has drawn over 25,000 visitors to each of its Octoberfest and Hallowscream events. In 1994, over 50,000 visitors attended Hallowscream at Adventure World. Management intends to introduce these types of events to the Funtime parks and believes they will have a similar impact on attendance. EVALUATE POTENTIAL ACQUISITIONS. The theme park industry is highly fragmented and comprised of a large number of single-park operators. Management believes that potential acquisition opportunities will arise and intends to evaluate selective acquisitions that complement its existing operations and fit within its targeted level of attendance of up to two million annually. The Company believes that its increased size resulting from the Merger will enhance its ability to make park acquisitions for stock. The Company expects to generally be able to eliminate duplicative overhead expenses and recognize other economies of scale in connection with such acquisitions. For example, the Funtime acquisition was achieved at a purchase price multiple of approximately 4.1x Funtime's 1994 EBITDA, adjusted by approximately $2.5 million for the elimination of corporate overhead, non-recurring park operating expense savings and increases in revenue it expects to achieve after the Merger as well as $261,000 of non-recurring corporate expenses. THE MERGER Pursuant to an Agreement and Plan of Merger dated as of June 30, 1995 (the "Merger Agreement"), on August 15, 1995, Premier acquired by merger (the "Merger") all of the capital stock of Funtime from its current shareholders (the "Selling Shareholders") for approximately $60.0 million (subject to post-closing adjustment), which amount includes the repayment in full of all principal and accrued interest of Funtime's indebtedness ($37.1 million). The Merger Agreement provides that the Selling Shareholders will receive substantially all of Funtime's net operating cash flow for the 1995 season through September 30, 1995. See "The Merger." On August 15, 1995, the Company also consummated a series of related transactions (collectively, with the Merger, the "Transactions"): 1. The Company issued $90.0 million principal amount of Old Notes. 2. The Company issued to certain of Premier's stockholders, their affiliates and others in a private placement (the "Convertible Preferred Stock Offering"), 200,000 shares of its Series A 7% Cumulative Convertible Preferred Stock (the "Convertible Preferred Stock") for an aggregate purchase price of $20.0 million. See "Capital Structure--Convertible Preferred Stock." 3. Premier's $7.0 million aggregate principal amount of 9.5% Convertible Subordinated Notes (the "Convertible Notes") and $2.1 million aggregate principal amount of 8% Junior Subordinated Notes (the "Junior Notes") were converted (the "Existing Note Conversion") into its common stock (the "Common Stock"). 4. The Company repaid in full all of Premier's indebtedness ($16.1 million) under its then existing bank facilities and mortgage loans (the "Existing Bank Debt"). 5. The Company entered into a three-year, $20.0 million senior revolving credit facility (the "Senior Credit Facility"). Borrowings under the Senior Credit Facility will be secured by substantially all of the Company's assets (other than real estate) and will be required to be repaid in full for at least 45 consecutive days during the period from July 1 to November 1 of each year. The following table sets forth a summary of the sources and uses of funds associated with the Transactions. <TABLE> <CAPTION> SOURCES AMOUNT ------- ------ (DOLLARS IN THOUSANDS) <S> <C> Old Notes Offering(1)................................. $ 90,000 Convertible Preferred Stock Offering(1)............... 20,000 Issuance of Common Stock in Existing Note Conversion.. 9,100 ---------- Total........................................... $119,100 ---------- ---------- </TABLE> <TABLE> <CAPTION> USES ---- <S> <C> Acquisition of Funtime................................ $ 52,700(2) Repayment of Premier's Existing Bank Debt............. 16,100 Extinguishment of debt in Existing Note Conversion.... 9,100 Prefunding of capital expenditures(3)................. 21,500 Other cash(4)......................................... 13,700 Transaction expenses.................................. 6,000 ---------- Total........................................... $119,100 ---------- ---------- </TABLE> - ------------ (1) Reflects gross proceeds. (2) Reflects the net cash amount to be paid by Premier in the Merger, excluding (i) the aggregate of $5.3 million described in note 4 below which was deposited into escrow or paid or retained by the Company, and (ii) an estimated $2.0 million of post-closing adjustments described under the caption "The Merger." (3) See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity, Capital Commitments and Resources" and "Business--Capital Improvements." (4) Consists of (i) $8.4 million to be utilized for general corporate purposes, (ii) $2.5 million deposited into an escrow account to cover indemnification claims which may arise after the closing of the Merger, and (iii) $2.8 million paid or retained by the Company out of the Merger consideration to fund specified liabilities of Funtime. See "The Merger." THE EXCHANGE OFFER The Exchange Offer applies to $90.0 million aggregate principal amount of the Old Notes. The form and terms of the New Notes are the same as the form and terms of the Old Notes except that the New Notes have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture pursuant to which the Old Notes were issued. The Old Notes and the New Notes are sometimes referred to collectively herein as the "Notes." See "Description of The New Notes." <TABLE> <S> <C> The Exchange Offer........... $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, Old Notes representing $90.0 million aggregate principal amount are outstanding. The terms of the New Notes and the Old Notes are identical except that the New Notes have been registered under the Securities Act and will not bear any legends restricting their transfer. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to the Company and the Note Guarantors, the Company and the Note Guarantors believe that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Notes, whether or not that person is the holder of the Old Notes (other than any such holder or such other person that is an "affiliate" of the Company or any Note Guarantor 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 (i) the New Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Notes. See "The Exchange Offer--Purpose and Effect." Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where those Old Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of those New Notes. See "Plan of Distribution." Registration Rights.......... The Old Notes were sold by the Company on August 15, 1995, Agreement in a private placement. In connection with the sale, the Company and the Note Guarantors entered into an Exchange and Registration Rights Agreement with the purchasers (the "Registration Rights Agreement") providing for the Exchange Offer. See "The Exchange Offer--Purpose and Effect." Expiration Date.............. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1995, or such later date and time to which it is extended (the "Expiration Date"). See "The Exchange Offer-- Expiration Date; Extensions; Amendments." Withdrawal................... The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. See "The Exchange Offer-- Withdrawal Rights." </TABLE> <TABLE> <S> <C> Interest on the New Notes.... Interest on each New Note will accrue from the date of and Old Notes issuance of the Old Note for which the New Note is exchanged or from the date of the last periodic payment of interest on such Old Note, whichever is later. Conditions to the Exchange... The Exchange Offer is subject to certain customary Offer conditions, certain of which may be waived by the Company. See "The Exchange Offer--Conditions to the Exchange Offer." Procedures for Tendering..... Each holder of Old Notes wishing to accept the Exchange Old Notes Offer must complete, sign (together with any required signature guarantees) and date the Letter of Transmittal, or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Letter of Transmittal, or the copy, together with the Old Notes and any other required documentation, to the Exchange Agent at the address set forth herein. Persons holding Old Notes through DTC and wishing to accept the Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering participant will agree to be bound by the Letter of Transmittal. By executing or agreeing to be bound by the Letter of Transmittal, each holder will represent to the Company and the Note Guarantors that, among other things, (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder of the Old Notes, (ii) neither the holder nor any such other person is engaging in or intends to engage in a distribution of such New Notes, (iii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes, and (iv) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Company or any Note Guarantors. Pursuant to the Registration Rights Agreement, the Company and the Note Guarantors are required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Notes if (i) existing Commission interpretations are changed such that the New Notes received by holders in the Exchange Offer are not or would not be, upon receipt, transferable by each such holder (other than an affiliate of the Company or any Note Guarantor) without restriction under the Securities Act, or (ii) any holder of Old Notes either (a) is not eligible to participate in the Exchange Offer, or (b) participates in the Exchange Offer and does not receive freely transferrable New Notes in exchange for Old Notes (in each case under this clause (ii) other than as a result of applicable Commission interpretations or laws in effect on the original issue date of the Old Notes). See "The Exchange Offer--Purpose and Effect." Acceptance of Old Note....... The Company and the Note Guarantors will accept for exchange and Delivery of New Notes any and all Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Special Procedures for....... Any beneficial holder whose Old Notes are registered in the Beneficial Holders name of his broker, dealer, commercial bank, trust company or other nominee and who wishes to tender in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on his behalf. For this purpose, a registered holder shall be deemed to include DTC participants listed on a DTC security position listing. If such beneficial holder </TABLE> <TABLE> <S> <C> wishes to tender on his own behalf, such beneficial holder must, prior to completing and executing the Letter of Transmittal and delivering his Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such holder's name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. See "The Exchange Offer--Procedures for Tendering." Guaranteed Delivery.......... Holders of Old Notes who wish to tender their Old Notes and Procedures whose Old Notes are not immediately available or who cannot deliver their Old Notes and a properly completed Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date may tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures." Exchange Agent............... United States Trust Company of New York is serving as Exchange Agent in connection with the Exchange Offer. The mailing address of the Exchange Agent is P.O. Box 844 Peter Cooper Station, New York, N.Y. 10276-0843. Attention: Corporate Trust Operations. Deliveries by overnight courier should be sent to 770 Broadway, New York, N.Y. 10003 Attn: Corporate Trust Operations. By-hand deliveries should be addressed to 65 Beaver Street, New York, NY 10005 Attn: Ground Level, Corporate Trust Operations. For information with respect to the Exchange Offer, call Customer Service of the Exchange Agent at (800) 548 6565; Fax (212) 420 6152. Federal Income Tax........... The exchange pursuant to the Exchange Offer should not be a Consideration taxable event for federal income tax purposes. See "Federal Income Tax Considerations." Effect of Not Tendering...... Old Notes that are not tendered or that are tendered but not accepted will, following the completion of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. Except in limited circumstances, the Company and the Note Guarantors will have no further obligations to provide for the registration under the Securities Act of such Old Notes. </TABLE> THE OFFERING <TABLE> <S> <C> Issuer....................... Premier Parks Inc. Holding Company Structure.... Premier Parks Inc. is a holding company which derives substantially all of its operating income from its principal subsidiaries (the "Note Guarantors"). Securities Offered........... $90,000,000 aggregate principal amount of 12% Senior Notes due 2003 (the "New Notes"). Maturity..................... August 15, 2003. Interest Payment Dates....... August 15 and February 15 of each year, commencing on February 15, 1996. Optional Redemption.......... Except as described below, the Company may not redeem the New Notes prior to August 15, 1999. On or after such date, the Company may redeem the New Notes, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, at any time on or prior to August 15, 1998, the Company may redeem up to 33 1/3% of the original aggregate principal amount of the New Notes with the Net Cash Proceeds of one or more Public Equity Offerings by the Company following which there is a Public Market, at a price equal to 110% of the principal amount to be redeemed, together with accrued and unpaid interest, if any, </TABLE> <TABLE> <S> <C> provided that at least 66 2/3% of the original aggregate principal amount of the Notes remain outstanding immediately after each such redemption. Change of Control............ Upon a Change of Control, the Company will be required to make an offer to repurchase the New Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of repurchase. See "Description of the New Notes--Change of Control." Note Guarantees.............. The New Notes will be guaranteed on a senior, unsecured basis (each such guarantee being a "Note Guarantee") by the Note Guarantors. See "Description of the New Notes--Note Guarantees" and "--Certain Covenants--Future Note Guarantors." Ranking...................... The New Notes will be unsecured obligations of the Company and will be effectively subordinated to all existing and future secured indebtedness of the Company and its subsidiaries to the extent of the value of the assets securing such indebtedness. The New Notes will rank pari passu in right of payment with all other Senior Indebtedness of the Company (including the Old Notes) and will rank senior in right of payment to all existing and future Subordinated Obligations of the Company. At June 30, 1995, on a pro forma basis after giving effect to the Transactions, the aggregate amount of Senior Indebtedness of the Company and its subsidiaries would have been approximately $91.8 million, of which $1.8 million would have been secured indebtedness, and the Company would have had unused commitments of $20.0 million under the Senior Credit Facility. See "Description of the New Notes--Ranking." Restrictive Covenants........ The Indenture under which the New Notes will be issued (the "Indenture") limits (i) the incurrence of additional indebtedness by the Company and its subsidiaries, (ii) the payment of dividends on, and redemption of, capital stock of the Company and the redemption of certain Subordinated Obligations of the Company, (iii) other restricted payments, (iv) sales of assets and subsidiary stock, (v) transactions with affiliates, (vi) the creation of liens, (vii) the sale or issuance of capital stock of certain subsidiaries and (viii) consolidations, mergers and transfers of all or substantially all of the assets of the Company. The Indenture also prohibits certain restrictions on distributions from subsidiaries. However, all of these limitations and prohibitions are subject to a number of important qualifications and exceptions. See "Description of the New Notes--Certain Covenants." Use of Proceeds.............. There will be no cash proceeds to the Company from the issuance of the New Notes pursuant to the Exchange Offer. See "Use of Proceeds" for a description of the use of the proceeds of the Old Notes. </TABLE> RISK FACTORS Prospective investors should carefully consider all of the information set forth in this Prospectus and, in particular, should evaluate the specific factors set forth under "Risk Factors" for risks involved in an investment in the Notes.

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+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, INFORMATION CONTAINED IN THIS PROSPECTUS GIVES EFFECT TO (I) THE REINCORPORATION OF HOLDINGS (FORMERLY INTERNATIONAL CONTROLS CORP.) IN DELAWARE IN OCTOBER 1994 AND (II) A 16,800 FOR 1 STOCK SPLIT OF HOLDINGS' COMMON STOCK (THE "COMMON STOCK") WHICH OCCURRED ON MARCH 27, 1995. UNLESS THE CONTEXT OTHERWISE REQUIRES, (A) REFERENCES IN THIS PROSPECTUS TO THE COMPANY ARE TO GREAT DANE HOLDINGS INC. (AND ITS PREDECESSOR, INTERNATIONAL CONTROLS CORP.) AND ITS CONSOLIDATED SUBSIDIARIES AND (B) REFERENCES IN THIS PROSPECTUS TO HOLDINGS ARE TO GREAT DANE HOLDINGS INC. (AND ITS PREDECESSOR, INTERNATIONAL CONTROLS CORP.). UNLESS OTHERWISE SPECIFIED, THE INFORMATION SET FORTH IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION (THE "OVER-ALLOTMENT OPTION"). THE COMPANY OVERVIEW Through Great Dane Trailers, Inc. ("Great Dane"), the Company is one of the largest manufacturers of truck trailers and intermodal containers and chassis in the United States. In addition, through Checker Motors Corporation's ("Motors") subsidiaries, CMC Kalamazoo Inc. ("CMC") and South Charleston Stamping & Manufacturing Company ("SCSM"), the Company is one of the leading independent manufacturers of sheet metal stampings for automotive components and subassemblies for sale to North American original equipment manufacturers ("OEMs"). For the year ended December 31, 1994, these two principal lines of business accounted for approximately 93% of the Company's revenues and 93% of the Company's total segment operating profit (segment gross profit less selling, general and administrative expenses). The Company's other operations consist of its vehicular operations, primarily Yellow Cab Company ("Yellow Cab"), which is currently the largest owner of taxicabs and provider of taxi-related services in Chicago, Illinois, and its insurance operations, American Country Insurance Company ("Country"), which underwrites property and casualty insurance. The Company's objective is to expand its transportation related manufacturing businesses, Great Dane, CMC and SCSM, primarily through internal growth. In addition, the Company will consider strategic acquisitions, should opportunities arise. The Company will also focus on reducing its aggregate indebtedness and believes that Yellow Cab and Country provide a consistent source of cash flow for debt repayment. TRAILER MANUFACTURING Great Dane designs, manufactures and distributes a full line of truck trailers (including dry freight vans, refrigerated trailers ("reefers") and platform trailers) and intermodal containers and chassis. In 1994, Great Dane was one of the largest manufacturers of truck trailers in the United States, accounting for approximately 13.0% of the new truck trailer market, including 11.5% of the new van market, 11.5% of the new platform trailer market and 38.4% of the new reefer market. Great Dane is also one of the leading producers of domestic intermodal containers and chassis, with a market share of 18.8% in 1994. In 1991, Great Dane assembled a new senior management team and initiated a strategic plan designed to improve its competitive position by (i) reducing operating costs; (ii) increasing manufacturing efficiencies and flexibility; (iii) developing new products; and (iv) expanding its large order customer base. Accordingly, Great Dane reduced overhead, reconfigured plants to increase capacity, re-designed assembly lines to improve efficiencies, re-engineered certain products to reduce material and manufacturing costs, initiated new product development programs and began to develop relationships with large order customers including J.B. Hunt Transport ("J.B. Hunt") and XTRA Corporation. From 1991 to 1994, Great Dane's revenues increased from $400.2 million to $859.1 million and segment operating profit increased from $7.1 million to $58.6 million. In addition, Great Dane's operating profit margin increased from 1.8% in 1991 to 6.8% in 1994. Great Dane believes that these initiatives combined with its strong brand name and reputation for manufacturing high quality products have positioned it for continued growth. The key elements of its growth strategy are as follows: - PRODUCT INNOVATION. Great Dane's engineering and flexible manufacturing expertise enable it to produce higher-margin, custom-designed products rapidly and efficiently while incorporating distinctive features through computer aided design technologies. Recent product innovations marketed by Great Dane include its proprietary, lightweight Thermacube van and reefer, and unique intermodal containers and chassis which initiated Great Dane's entry into the growing intermodal market. New products planned for introduction during 1995 include a proprietary, ultra-lightweight flatbed trailer and a new reefer product which incorporates a unique floor design. - INCREASE MARKET SHARE WITH LARGE ORDER FLEET CUSTOMERS. Great Dane is actively seeking to increase its sales to large order fleet customers which accounted, during 1993, for approximately 43% of total U.S. van trailer purchases. The Company believes that these customers are the fastest growing segment of the industry and estimates that its share of fleet orders approximated 10% during 1993. The balance of the U.S. van trailer market consists of small and medium sized customers (approximately 30%) and leasing companies (approximately 27%) where Great Dane estimates it had, during 1993, a 27% and 17% market share, respectively. In order to increase its market share with large order fleet customers, Great Dane has acquired the property and buildings in Terre Haute, Indiana for a 500,000 square foot manufacturing and product distribution facility, a portion of which will be equipped during 1995 with two high speed, more cost efficient assembly lines dedicated to high volume, standard specification fleet orders. - STRONG NATIONAL DISTRIBUTION NETWORK. The Company believes that Great Dane's distribution network, which consists of 17 Company-owned branches and 51 independent dealers, is the largest marketing organization in the North American trailer industry. This network provides Great Dane with a competitive advantage in marketing its new and used trailer products and providing higher-margin aftermarket parts and services. Great Dane believes that its parts and services business will provide earnings growth in the coming years due to the increasing size of the Great Dane and U.S. trailer fleets. - INTERMODAL TRANSPORTATION. In 1992, Great Dane entered the intermodal transportation market by developing, in conjunction with a leading truckload carrier, a unique line of intermodal containers and matching ultra-lightweight chassis. These containers and chassis enable its customer to utilize double stack rail intermodal service to haul freight loads of similar size and weight to those it carries with conventional over-the-road trailers. Great Dane's strategy is to utilize its engineering expertise to design intermodal products that meet the specific requirements of its customers. Great Dane has also improved its market responsiveness by adapting certain assembly lines to produce both trailers and containers. AUTOMOTIVE PRODUCTS OPERATIONS Through CMC and SCSM, the Company develops, designs, engineers and manufactures a broad range of sheet metal automotive components and subassemblies, including tailgates, fenders, doors, roofs and hoods for sale to North American OEMs. The majority of the Company's automotive segment revenues are derived from complex, value-added products, primarily assemblies containing multiple stamped parts and various welded or fastened components. The automotive supplier industry is experiencing consolidation as OEMs are increasingly requiring suppliers to meet more stringent quality standards and to possess certain full-service capabilities including design, engineering and project management support. The Company's principal objective is to capitalize on this trend as follows: - HIGH GROWTH LIGHT TRUCK/SPORT UTILITY VEHICLE FOCUS. CMC and SCSM focus on supplying components for light trucks, minivans and sport utility vehicles due to their high growth rate and long model lives. From 1983 to 1993, light truck/sport utility vehicles were the fastest growing segment of the automotive market with a 7.3% compound annual growth rate. The Company currently supplies parts on the following light truck/sport utility and minivan vehicles: Suburban, Tahoe/Yukon, Crew Cab, M Van (Astro and Safari), CK Pickup Truck and CK Sport Side Pickup. In addition, in 1994, the Company was awarded an eight-year contract by Mercedes-Benz to produce the majority of the stamping components for its new sport utility vehicle. - FULL-SERVICE CAPABILITIES. CMC and SCSM provide a full complement of services, including design, engineering and manufacturing, which enables them to play an integral role in the development and execution of product programs for their customers. CMC and SCSM work with their customers throughout the product development process and, in some cases, locate employees on site at their customers' facilities in order to design, engineer and manufacture high quality products at the lowest possible cost. The Company believes that this close coordination with its customers allows it to identify business opportunities and react to customer needs in the early stages of vehicle design and, therefore, maintain and increase its volume with its customers. - HIGH QUALITY PRODUCTS. The Company believes SCSM is one of the premier stamping facilities in the U.S. This is exemplified by SCSM's receipt of numerous quality awards including the General Motors Mark of Excellence and the General Motors QSP (quality, service, price) award for being General Motors' 1993 worldwide Supplier of the Year for major metal stampings. SCSM has also been qualified to produce components which comply with the ISO 9000 international standard. The Company believes that these awards are a critical factor in securing additional business from OEMs. - EXPANDING CUSTOMER BASE. CMC and SCSM have developed strong relationships with their customers based on their long history of supplying high quality products and their full-service capabilities. The Company's objectives are to increase volume with existing customers and develop relationships with new customers. In the last year, the Company's automotive segment has expanded its business with existing customers including General Motors Corporation ("GM"), Freightliner Corp., Saturn Corporation and Ford Motor Co., and has secured business with two new customers, Mercedes-Benz and Toyota. - FOCUS ON HIGHER-MARGIN/VALUE-ADDED PRODUCTS.CMC and SCSM strive to compete in markets where they can achieve greater profitability by providing complex, value-added products, primarily assemblies containing multiple stamped parts and various welded or fastened components. Unlike many of their competitors, CMC and SCSM presently have the equipment to supply complete assemblies including large stampings and related assembly parts. As an example, SCSM currently supplies the sliding door, which is composed of several stampings and fasteners, for the GM Astro and Safari Vans. The majority of the automotive segment's revenues are derived from such assemblies. OTHER OPERATIONS Yellow Cab is the largest taxicab fleet owner in the City of Chicago ("Chicago") and, as of January 1, 1995, owned 2,271 or 41% of the 5,500 taxicab licenses ("licenses"or "medallions") available in Chicago. Yellow Cab's primary business is the leasing of its medallions and vehicles to independent taxi operators. The Company also provides a variety of other services to taxi drivers and non-affiliated medallion holders, including insurance coverage through Country and repair and maintenance services. Country underwrites property and casualty insurance, including taxicab insurance, workers' compensation and other commercial and personal lines. During 1994, 75% of Country's total premium revenue was attributable to non-affiliated property/casualty lines, primarily workers' compensation, commercial automobile and commercial multiple peril. The remainder of Country's premium revenues was attributable to affiliated taxi liability and collision insurance in the State of Illinois and workers' compensation insurance in the States of Illinois and Michigan. Country is currently rated "A" by A.M. Best. Holdings was reincorporated in Delaware in 1994. Holdings currently maintains its principal executive offices at CMC's facility at 2016 North Pitcher Street, Kalamazoo, Michigan 49007 and its phone number is (616) 343-6121. RECENT DEVELOPMENTS The Company's subsidiaries have recently refinanced their credit facilities (the "Refinancing"). In January 1995, Motors and its subsidiaries entered into a new loan agreement consisting of a $45 million five-year term loan and a $20 million revolving credit facility, subject to availability. In February 1995, Great Dane amended its loan and security agreement by entering into a credit facility of up to $150 million, subject to availability. Proceeds from the Refinancing were used to refinance subsidiary indebtedness and to retire the $30 million aggregate principal amount of debt outstanding to the Company's shareholders (the "Note Repayment"). See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note O of Notes to Consolidated Financial Statements -- December 31, 1994. In December 1994, the Company redeemed, for $37 million, the minority interest in a subsidiary partnership (previously held by Executive Life Insurance Company). Subsequent to the redemption, the subsidiary partnership, Checker Motors Co., L.P. ("Checker L.P." or the "Partnership"), was dissolved, and its operations are now conducted by CMC, Yellow Cab, Chicago AutoWerks Inc. ("AutoWerks") and Country, each of which is a wholly-owned subsidiary of Motors.

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus assumes that no outstanding stock options or warrants are exercised. Unless the context otherwise requires, as used herein the "Company" shall mean Lone Star Industries, Inc. together with its subsidiaries and affiliates, including Rosebud Holdings, Inc. and its subsidiaries, and "Lone Star" shall mean the Company excluding Rosebud Holdings, Inc. and its subsidiaries. THE COMPANY Lone Star is a cement, construction aggregates and ready-mixed concrete company, with operations in the United States (principally in the midwest and southwest and on the east coast) and Canada. Lone Star's cement operations consist of five cement plants in the midwestern and southwestern regions of the United States and a 25% interest in Kosmos Cement Company, a partnership which operates one cement plant in each of Kentucky and Pennsylvania. These five wholly-owned cement plants produced 3.6 million tons of cement in 1993 and approximately 3.8 million tons in 1994, which approximates the rated capacity of such plants. Lone Star also is engaged in construction aggregate operations including the mining, processing and distribution of sand, gravel and crushed stone and provides a source of ready-mixed concrete and other construction materials. Lone Star's aggregate operations serve the construction market in the New York metropolitan area, the east coast and gulf coast of the United States, the Caribbean and the Nova Scotia and Prince Edward Island areas of Canada. The ready-mixed concrete business operates in central Illinois and the Memphis, Tennessee area. On a pro forma basis after giving effect to the plan of reorganization described below and the adoption of fresh-start reporting in connection therewith, the Company had approximately $270 million in revenues in 1993, with cement, construction aggregates and ready-mixed operations representing approximately 70%, 17% and 13%, respectively, of such revenues. For the nine months ended December 31, 1994, the Company had approximately $261.6 million in revenues, with cement, construction aggregates and ready-mixed operations representing approximately 68%, 18% and 14%, respectively, of such revenues. Bankruptcy Reorganization Proceedings In December 1990, Lone Star Industries, Inc. and certain of its subsidiaries commenced proceedings under Chapter 11 of the Federal Bankruptcy Code (the "Chapter 11 Cases"). The Chapter 11 Cases were precipitated by a variety of factors including generally depressed economic and business conditions, increasingly restricted sources of financing, potential defaults under long-term debt agreements, potential litigation exposure relating to concrete railroad crossties, and uncertainty and potential liabilities with respect to environmental, retiree benefit and pension related obligations. The Chapter 11 Cases were filed in order to preserve the Company's assets and enable it to seek a long-term solution to its financial, litigation and business problems. Prior to and during the course of the Chapter 11 Cases, the Company implemented a comprehensive organizational and financial restructuring. As part of this process, the Company closed various offices and facilities, centralized and reduced its corporate management structure, sold or otherwise disposed of non-core or unprofitable assets and operations (including substantially all partnership, joint venture and foreign interests), rejected, modified and assumed contracts and leases, and implemented many programs designed to improve the operating procedures, controls, efficiency and profitability of its ongoing operations. On April 14, 1994 (the "Plan Effective Date"), the Company emerged from bankruptcy pursuant to a plan of reorganization (the "Plan of Reorganization"). The predecessor to the Company is referred to herein as the "Predecessor Company." Unless the context otherwise requires, as used herein the term "Company" or "Lone Star" means the Company or Lone Star following the Plan Effective Date, and references to the Company prior to the Plan Effective Date mean the Predecessor Company. Upon emergence from bankruptcy (the "Reorganization"), the Company was reorganized around its core domestic operations, while remaining non-core assets and operations (the "Rosebud Assets") were transferred to Rosebud Holdings, Inc. and its subsidiaries (collectively, "Rosebud"), a wholly-owned liquidating subsidiary formed pursuant to the Plan of Reorganization. Also transferred to Rosebud was the Company's right to recover under certain litigations. See "Business -- Liquidating Subsidiary." Pursuant to the Plan of Reorganization, pre-petition equity interests were cancelled and holders thereof were issued a percentage of new equity interests, certain pre-petition indebtedness was discharged, certain pre-petition indebtedness was reinstated or restructured and assumed, certain litigations were settled, certain pre-petition creditors received cash, new indebtedness and a percentage of new equity interests in satisfaction of their claims, and a restructured Board of Directors was designated. The Plan of Reorganization also implemented settlements related to certain retiree health and life insurance benefits, pension and financing obligations. THE OFFERING <TABLE> <S> <C> SECURITIES OFFERED HEREBY Common Stock................ Up to 4,747,717 shares, including 891,609 shares of Common Stock issuable upon exercise of the Warrants Warrants.................... Up to 891,609 Common Stock Purchase Warrants, each Warrant entitling the holder thereof to purchase one share of Common Stock at an exercise price of $18.75 until December 31, 2000. The Warrants are not redeemable by the Company. Senior Notes................ Up to $21,330,000 aggregate principal amount of 10% Senior Notes due 2003 SECURITIES OUTSTANDING AS OF THE DATE HEREOF Common Stock................ 12,070,055 shares(1) Warrants.................... 4,003,278 Common Stock Purchase Warrants(2) Senior Notes................ $78 million principal amount of 10% Senior Notes due 2003 DESCRIPTION OF SENIOR NOTES OFFERED HEREBY Interest Rate............... 10% Interest Payment Dates...... January 31 and July 31 Maturity Date............... July 31, 2003 Optional Redemption......... Subject to certain covenants in the Credit Agreement, the Senior Notes are redeemable, in whole or in part, at any time at the Company's option at a redemption price of 100% of the principal amount thereof, plus accrued and unpaid interest thereon. Mandatory Redemption........ The Company is obligated in certain instances to make offers to purchase Senior Notes at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest thereon with the Excess Net Proceeds (as defined) of certain sales or dispositions of assets. Change in Control........... In the event of a Change in Control (as defined), the Company is obligated to make an offer to purchase all outstanding Senior Notes at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest thereon. Ranking..................... The Senior Notes are general unsecured obligations of the Company. The Senior Notes are senior obligations of the Company and will rank pari passu with all other senior indebtedness of the Company and will rank senior to all subordinated indebtedness of the Company. </TABLE> <TABLE> <S> <C> Sinking Fund................ Sinking fund payments in the amount of $10,000,000 each are required to be made in each of years 2000, 2001 and 2002; provided, however, that such payments will be reduced by the principal amount of any Senior Notes that the Company has optionally redeemed or purchased and delivered to the trustee for cancellation. Guarantees.................. The Senior Notes may be guaranteed in the future by certain Restricted Subsidiaries (as defined). As of the date hereof, there are no guarantees. Certain Covenants........... The Senior Note Indenture contains certain covenants relating to, among other things, (i) limitations on distributions; (ii) limitations on additional indebtedness; (iii) limitations on the consolidation or merger of the Company with or into another person or the conveyance, transfer or lease of substantially all the property of the Company to another person; (iv) limitations on transactions with affiliates; and (v) limitations on liens. Rating...................... None USE OF PROCEEDS............... None of the proceeds of this Offering will be received by the Company, except for the exercise price of the Warrants when and if they are exercised, which amount, if any, will be used for working capital and general corporate purposes. See "Use of Proceeds." NYSE SYMBOLS Common Stock................ LCE Warrants.................... LCE WS Senior Notes................ LCE 03 RISK FACTORS.................. Prospective purchasers should consider carefully the factors specified under "Risk Factors." </TABLE> - --------------- (1) Includes 341,720 shares of Common Stock which pursuant to the Plan of Reorganization will be distributed to pre-petition unsecured creditors and holders of pre-petition equity interests, but which had not been issued as of January 26, 1995. Does not include (i) 4,003,278 shares of Common Stock reserved for issuance upon exercise of the Warrants and (ii) 680,000 shares of Common Stock reserved for issuance upon exercise of options granted and to be granted under the Company's stock option plans. (2) Includes 102,971 Common Stock Purchase Warrants which pursuant to the Plan of Reorganization will be distributed to holders of pre-petition equity interests, but which had not been issued as of January 26, 1995. SUMMARY FINANCIAL INFORMATION Following the Reorganization, in accordance with AICPA Statement of Position No. 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code," the Company adopted "fresh-start" reporting ("Fresh-Start Reporting") which assumes that a new reporting entity has been formed as of the effective date of a plan of reorganization, which in the case of the Company was deemed to be March 31, 1994 for accounting purposes. As a result of Fresh-Start Reporting, the Company's consolidated financial statements for periods prior to March 31, 1994 are not comparable to consolidated financial statements presented on or subsequent to March 31, 1994. The following summary financial data of the Predecessor Company as of and for the fiscal years ended December 31, 1993, 1992 and 1991, as of and for the nine-month period ended September 30, 1993 and as of and for the three-month period ended March 31, 1994, and the following summary financial data of the Company as of and for the six-month period ended September 30, 1994 and the following summary pro forma financial data of the Company for the nine-month period ended September 30, 1994 are qualified in their entirety by reference to the financial statements of the Predecessor Company and the Company, respectively, and the related notes thereto and should be read in conjunction with such financial statements and related notes and with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein. <TABLE> <CAPTION> SUCCESSOR COMPANY PREDECESSOR COMPANY ----------------------------- ----------------------------------------------------------- FOR THE PRO FORMA FOR THE FOR THE SIX FOR THE NINE THREE NINE MONTHS MONTHS MONTHS MONTHS FOR THE YEAR ENDED ENDED ENDED ENDED ENDED DECEMBER 31, (IN THOUSANDS EXCEPT PER SHARE SEPTEMBER 30, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, ------------------------------- AMOUNTS) 1994 1994(1) 1994 1993 1993 1992 1991 - --------------------------------------------------- ------------- --------- ------------- -------- --------- -------- <S> <C> <C> <C> <C> <C> <C> <C> Net sales............................. $ 182,964 $ 228,227 $ 33,709 $ 175,835 $240,071 $ 230,098 $238,692 Joint venture income.................. $ 2,929 $ 3,004 $ 381 $ 17,573 $ 20,440 $ 37,831 $ 24,435 Income (loss) before reorganization items, income taxes, and cumulative effect of changes in accounting principles.......................... $ 32,868 $ 21,941 $ (3,170) $ 7,688 $ 6,196 $ (42,429) $ 2,948 Income (loss) before cumulative effect of changes in accounting principles and extraordinary item.............. $ 21,355 $ 14,262 $(150,638) $ (30,382) $(35,258) $ (45,428) $ (5,547) Net income (loss)..................... $ 21,355 $ 14,262 $ (23,118) $ (31,164) $(36,040) $(164,342) $ (5,547) Net income (loss) applicable to common stock(2)..................... $ 21,355 $ 14,262 $ (24,396) $ (34,998) $(41,152) $(169,455) $(10,661) ------------- ------------- --------- ------------- -------- --------- -------- Primary Earnings Per Common Share: Income (loss) before cumulative effect of changes in accounting principles.......................... $ 1.62 $ 1.15 (3) $ (2.05) $ (2.42) $ (3.03) $ (0.64) Net income (loss) per share......... $ 1.62 $ 1.15 (3) $ (2.10) $ (2.47) $ (10.18) $ (0.64) ------------- ------------- --------- ------------- -------- --------- -------- Weighted average common shares outstanding......................... 12,000 12,000 n/a 16,644 16,644 16,641 16,582 Cash dividends per common share....... -- -- -- -- -- -- -- ------------- ------------- --------- ------------- -------- --------- -------- Ratio of earnings to fixed charges(4).......................... 6.62x (4) (4) (4) 2.80x (4) 1.12x ------------- ------------- --------- ------------- -------- --------- -------- Average cement selling price (per ton)................................ $ 58.25 $ 57.49 $ 55.24 $ 52.09 $ 52.26 $ 48.93 $ 50.69 Commercial cement shipments (000's tons)........................ 2,237 2,918 469 2,328 3,143 3,070 2,682 Cement production (000's tons)........ 2,052 2,779 547 2,187 3,032 3,040 2,653 </TABLE> <TABLE> <CAPTION> PREDECESSOR COMPANY SUCCESSOR COMPANY ------------------------------------------------ ----------------------------- SEPTEMBER DECEMBER 31, SEPTEMBER 30, MARCH 31, 30, ------------------------------------ 1994 1994 1993 1993 1992 1991 ------------- ------------- --------- ------------- -------- --------- <S> <C> <C> <C> <C> <C> <C> <C> Financial Position at End of Period: Total assets.......................... $ 545,513 $ 579,411 $ 915,137 $ 924,885 $952,649 $ 914,437 Long-term debt(5): Senior notes........................ $ 78,000 $ 78,000 -- -- -- -- Asset proceeds notes................ $ 83,000 $ 112,000 -- -- -- -- Production payment.................... $ 19,966 $ 20,963 $ 4,000 $ 2,000 $ 4,000 $ 4,000 Liabilities subject to Chapter 11 proceedings......................... -- -- $ 608,562 $ 627,938 $611,129 $ 555,331 Redeemable preferred stock............ -- -- $ 37,500 $ 37,500 $ 37,500 $ 37,500 Common shareholders' equity........... $ 114,935 $ 93,313 $ 29,110 $ 12,348 $ 59,698 $ 226,162 </TABLE> (footnotes on next page) - --------------- (1) The pro forma consolidated financial data reflects the effect of implementation of the Plan of Reorganization, including changes in the operating units of the successor company, reductions in postretirement benefit expenses resulting from settlements reached during the Chapter 11 Cases, increased interest expense related to the issuance of the Senior Notes and the adoption of Fresh-Start Reporting, as if the Company had emerged from bankruptcy and adopted Fresh-Start Reporting as of January 1, 1993. The successor company's results include results of operations previously classified as assets held for sale and exclude the results of operations which have been transferred to Rosebud. See "Pro Forma Consolidated Statement of Operations (Unaudited)" included in Note 4 of Notes to Interim Consolidated Financial Statements and Pro Forma Financial Data included elsewhere herein. (2) In 1992, the Company adopted Statements of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions" ("SFAS 106"), and No. 109, "Accounting for Income Taxes" ("SFAS 109"). The cumulative effect of the change in accounting principles was an after-tax charge of $130,510,000 related to the adoption of SFAS 106 and an increase in earnings of $11,596,000 related to the adoption of SFAS 109. In addition, in 1992 the Company also recorded a pre-tax provision of $66,584,000 in connection with the settlement of the Company's concrete railroad crosstie litigation. See Notes 30, 31 and 33 of Notes to Consolidated Financial Statements included elsewhere herein. The three-month period ended March 31, 1994 included an extraordinary gain of $127,520,000 resulting from the discharge of pre-petition liabilities as a result of the Company's emergence from bankruptcy; a pre-tax loss of $133,917,000 to adjust the Company's assets and liabilities to fair value in accordance with Fresh-Start Reporting; and a $6,500,000 pre-tax insurance recovery related to the crosstie litigation settlement recorded in 1992. (3) On the Plan Effective Date, the Company issued shares of the new Common Stock, the Warrants, the Senior Notes, and the Asset Proceeds Notes (as hereinafter defined), transferred certain assets to Rosebud and adopted Fresh-Start Reporting effective as of March 31, 1994 for accounting purposes. As a result, earnings per share for the three-month period ended March 31, 1994 has not been presented because it is not meaningful. (4) For purposes of computing the ratio of earnings to fixed charges, "earnings" consist of income (loss) before reorganization items, income taxes and cumulative effect of changes in accounting principles plus fixed charges. "Fixed charges" consist of interest expense, capitalized interest and one-third of rental expense, which is deemed to be representative of the interest factor thereon. Earnings were insufficient to cover fixed charges by $3,283,000 for the three months ended March 31, 1994, and by $42,919,000 for the year ended December 31, 1992. The ratio of earnings to fixed charges is not included for the pro forma periods or the nine-month period ended September 30, 1993. (5) Pursuant to the Plan of Reorganization, the Company issued the Senior Notes, which bear interest at a rate of 10% per annum, payable semi-annually. Pursuant to the Plan of Reorganization, Rosebud, a wholly-owned subsidiary of the Company, issued 10% Asset Proceeds Notes due 1997 in the aggregate principal amount of $138,118,000 (the "Asset Proceeds Notes"). Interest on the Asset Proceeds Notes is payable semi-annually in cash and/or additional Asset Proceeds Notes (at the option of Rosebud) on each of January 31 and July 31. A portion of Rosebud's obligations under the Asset Proceeds Notes is guaranteed by the Company (the "Company Guarantee"). If, at the maturity date of the Asset Proceeds Notes, the aggregate amount of all cash payments of principal and interest on such notes is less than $88,118,000, the Company Guarantee is payable either in cash, five-year notes or a combination thereof to cover the shortfall between the actual payments and $88,118,000, plus interest; provided, however, that the total amount paid pursuant to the Company Guarantee cannot exceed $28,000,000. The Asset Proceeds Notes are included in the successor company's consolidated balance sheet at an amount equal to the estimated fair value of the Company's investment in Rosebud. RECENT DEVELOPMENTS On February 2, 1995, the Company issued the following press release: Stamford, Connecticut, February 2, 1995 -- Lone Star Industries, Inc. (NYSE/LCE) announced today a net profit of $8.0 million on sales of $78.7 million for the quarter ended December 31, 1994. Primary per share earnings for the period were $0.61. This represents the third consecutive quarter of profitability for Lone Star since emerging from bankruptcy in April, 1994. For the nine months ended December 31, 1994, Lone Star had net income of $29.3 million on sales of $261.6 million. Primary per share earnings for the nine month period were $2.22. Cement operations reported sales of $51.9 million and gross profit of $16.0 million for the 1994 three month period. Sales volume from comparable operations for the period declined 6% from a year ago due to lower inventory levels available for sale resulting from sold-out conditions at certain plants due to higher levels of shipments earlier in the year. The decrease in shipments was offset by net realized selling prices per ton that were 16% higher than the fourth quarter of last year. For the nine months ended December 31, 1994, cement gross profit was $54.4 million on sales of $176.7 million. Aggregate operations contributed gross profit of $2.9 million on sales of $15.9 million for the 1994 three month period with sales volumes increasing 16%. For the 1994 nine month period, gross profit was $8.3 million with sales totaling $47.7 million. Ready-mixed concrete and other operations reported gross profit of $0.9 million on sales of $10.9 million for the 1994 three month period. Ready-mixed concrete sales volume increased 9% and prices were up 6% over the same period a year ago. For the 1994 nine month period gross profit was $5.7 million with sales totaling $37.2 million. Results for the three and nine month periods ended December 31, 1994 are not comparable to reported results for the prior year because of differences in the operating units of the post-bankruptcy or successor company and the predecessor company. Comparability of results also is affected by the issuance of new common stock and debt and the adoption by the successor company of "fresh-start reporting" effective March 31, 1994. Rosebud Holdings, Inc., the Company's liquidating subsidiary, announced a $30.0 million redemption of the outstanding Asset Proceed Notes at par to take place on February 22, 1995. Rosebud also made the most recent interest payment, due January 31, 1995, in cash. Lone Star Industries, Inc. is a producer of cement, ready-mixed concrete, sand and gravel, crushed stone, and other construction materials. LONE STAR INDUSTRIES, INC. CONSOLIDATED SUMMARY OF EARNINGS (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) <TABLE> <CAPTION> PREDECESSOR COMPANY ------------------------------------------- SUCCESSOR COMPANY FOR THE FOR THE --------------------------- THREE MONTHS TWELVE MONTHS FOR THE FOR THE FOR THE ENDED ENDED THREE MONTHS NINE MONTHS THREE MONTHS DECEMBER 31, DECEMBER 31, ENDED ENDED ENDED 1993 1993 DECEMBER 31, DECEMBER 31, MARCH 31, ------------ ------------- 1994 1994 1994 ------------ ------------- ------------ (UNAUDITED) (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> <C> Net sales........................................... $ 78,681 $ 261,645 $ 33,709 $ 64,236 $ 240,071 =========== =========== =========== =========== ============ Income (loss) before reorganization items, income taxes, cumulative effect of changes in accounting principles and extraordinary item................. $ 12,265 $ 45,133 $ (3,170) $ (1,492) $ 6,196 Reorganization items: (Loss) gain on sale of assets(4).................. -- -- -- -- (37,335) Adjustments to fair value(1)...................... -- -- (133,917) -- -- Other............................................. -- -- (13,396) (2,729) (10,470) ------------ ------------- ------------ ------------ ------------- Total reorganization items.......................... -- -- (147,313) (2,729) (47,805) ------------ ------------- ------------ ------------ ------------- Income (loss) before income taxes and cumulative effect of changes in accounting principles........ 12,265 45,133 (150,483) (4,221) (41,609) (Provision) credit for income taxes................. (4,287) (15,800) (155) (655) 6,351 ------------ ------------- ------------ ------------ ------------- Income (loss) before cumulative effect of changes in accounting principles............................. 7,978 29,333 (150,638) (4,876) (35,258) Cumulative effect of changes in accounting principles:(3) Postretirement benefits other than pensions....... -- -- -- -- (782) Extraordinary item: gain on discharge of prepetition liabilities(1).................................... -- -- 127,520 -- -- ------------ ------------- ------------ ------------ ------------- Income (loss) before preferred dividends............ 7,978 29,333 (23,118) (4,876) (36,040) Provisions for preferred dividends.................. -- -- (1,278) (1,278) (5,112) ------------ ------------- ------------ ------------ ------------- Net income (loss) applicable to common stock........ $ 7,978 $ 29,333 $ (24,396) $ (6,154) $ (41,152) =========== =========== =========== =========== ============ Weighted average number of shares outstanding....... 12,000 12,000 n/m(2) 16,644 16,644 =========== =========== =========== =========== ============ Primary Income (loss) per common share:(2) Income (loss) before cumulative effect of changes in accounting principles............................. $ 0.61 $ 2.22 n/m(2) $ (0.37) $ (2.42) Cumulative effect of changes in accounting principles........................................ -- -- n/m(2) -- (0.05) Extraordinary gain on discharge of prepetition liabilities....................................... -- -- n/m(2) -- -- ------------ ------------- ------------ ------------ ------------- Net income (loss)................................... $ 0.61 $ 2.22 n/m(2) $ (0.37) $ (2.47) =========== =========== =========== =========== ============ ------------ ------------- ------------ ------------ ------------- Fully diluted income (loss) per common share:(2).... $ 0.61 $ 2.22 n/m(2) $ (0.37) $ (2.47) =========== =========== =========== =========== ============ </TABLE> - --------------- (1) On April 14, 1994, the Company emerged from its Chapter 11 reorganization proceedings, and adopted fresh-start reporting effective March 31, 1994. (2) Earnings per share for the Predecessor Company for the three months ended March 31, 1994 are not meaningful and prior period per share amounts are not comparable to the Successor Company per share amounts due to reorganization and revaluation entries and the issuance of 12 million shares of new common stock. Earnings per share for the Successor Company are calculated using the Modified Treasury Stock Method, in accordance with Accounting Principles Board Opinion No. 15. (3) In 1993 Kosmos Cement Company, a joint venture of the Company, adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Employment Benefits Other than Pensions." (4) Represents the loss on the sale of Companhia Nacional de Cimento Portland, the Company's Brazilian joint venture, for $69.6 million.

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+PROSPECTUS SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus. Reference is made to, and this summary is qualified in its entirety by, the more detailed information contained elsewhere in this Prospectus. Stockholders are urged to read carefully this Prospectus in its entirety. All information concerning Piedmont included in this Prospectus has been furnished by Piedmont and all information concerning Chartwell included in this Prospectus has been furnished by Chartwell. As used herein, "the Company" refers to Piedmont prior to the Merger and to Chartwell as the surviving corporation in the Merger (the "Surviving Corporation") from and after the effective time of the Merger (the "Effective Time"). THE COMPANIES PIEDMONT Piedmont is a financial services holding company, the principal subsidiaries of which are The Reinsurance Corporation of New York ("RECO") and Lexington Management Corporation ("LMC"). Founded in 1936, RECO is one of the oldest reinsurance companies in the United States. It is licensed to underwrite business in all states except Maine and Hawaii and is an approved surety for bonds and undertakings required for United States government contracts. It is also qualified to underwrite business in all U.S. Possessions as well as in Canada where it maintains a resident agent. RECO is engaged in providing reinsurance to ceding insurers of property and casualty risks that purchase reinsurance principally to reduce their liability on individual risks, to protect themselves against catastrophic losses and to enhance their ratio of total net liabilities to capital and surplus. RECO is Rated B++ (Very Good) by A.M. Best Company Inc. ("A.M. Best"), an independent rating entity serving the insurance industry. LMC, established in 1938 and acquired by Piedmont in 1969, is a holding company that offers a variety of asset management and related services to retail investors, institutions and high net worth individuals. LMC manages approximately $3.5 billion in assets, including $1.5 billion in a diversified group of mutual funds. Piedmont's principal executive offices are located at 80 Maiden Lane, New York, New York 10038, and its telephone number is (212) 363-4650. CHARTWELL Chartwell is a holding company, the principal subsidiary of which is Chartwell Reinsurance Company ("Chartwell Reinsurance"). Chartwell Reinsurance underwrites treaty reinsurance through reinsurance brokers for casualty and to a lesser extent property risks. Chartwell Reinsurance provides a broad array of reinsurance coverages to ceding companies, emphasizing working layer casualty coverages. Chartwell Reinsurance is rated "A-" (Excellent) by A.M. Best. Chartwell's other subsidiaries include Chartwell Advisers Limited ("Chartwell Advisers") and Drayton Company Limited ("Drayton"). Chartwell Advisers acts as the exclusive adviser to New London Capital plc, a non-affiliated company formed to underwrite at Lloyd's of London ("Lloyd's") through a group of wholly-owned subsidiaries that are limited liability corporate members of certain Lloyd's syndicates. Drayton is a Bermuda-domiciled insurer which is not currently writing new business. Chartwell is managing the resolution of the remaining claims under Drayton's old business and Drayton's remaining assets in a controlled winding-up (or "run-off") of such old business. Chartwell's principal executive offices are located at 300 Atlantic Street, Suite 400, Stamford, Connecticut 06901, and its telephone number is (203) 961-7300. THE CI NOTES DIVIDEND The Board of Directors of Piedmont intends to declare and distribute the CI Notes as a dividend to each holder of record of Piedmont Common Stock on the CI Notes Record Date. The CI Notes Dividend has not yet been declared by the Board of Directors of Piedmont, and, accordingly, the CI Notes Record Date has not yet been established. The CI Notes Record Date will be established by the Board of Directors of Piedmont as described more fully herein. The CI Notes Dividend is not contingent upon satisfaction of the conditions to the Spin-off (as defined below) or the Merger. The Board of Directors is not obligated to declare the dividend of or distribute the CI Notes, although the CI Notes Dividend is a condition to both the Spin-off and the Merger. The principal amount of the CI Notes to be issued to each holder of Piedmont Common Stock will bear the same relation to the aggregate principal amount of the CI Notes that the number of shares of Piedmont Common Stock held by such holder bears to the aggregate number of shares of Piedmont Common Stock outstanding as of the CI Notes Record Date. The CI Notes will be issued pursuant to an indenture between Piedmont and Shawmut Bank Connecticut, N.A., as trustee (the "Indenture"), and will be assumed by Chartwell in the Merger. See "DESCRIPTION OF CONTINGENT INTEREST NOTES." THE MERGER GENERAL Piedmont and Chartwell have entered into an Agreement and Plan of Merger, dated as of August 7, 1995, as amended as of November 9, 1995 (as amended, the "Merger Agreement"). Pursuant to the Merger Agreement, Piedmont will be merged with and into Chartwell, with Chartwell being the Surviving Corporation in the Merger. Piedmont has mailed to the holders of the Piedmont Common Stock and of its Cumulative Preferred Stock, Convertible Series A, par value $1.00 per share (the "Piedmont Preferred Stock"), its Proxy Statement dated November 17, 1995 in connection with the solicitation of proxies by the Board of Directors of Piedmont for use at a special meeting of stockholders of Piedmont to be held on December 8, 1995 (the "Piedmont Meeting") for the purpose of voting on approval of the Merger Agreement and related matters. Such Proxy Statement also constitutes the Prospectus of Chartwell with respect to the shares of its common stock, par value $.01 per share (the "Chartwell Common Stock"), to be issued in the Merger, and is referred to herein as the "Proxy Statement/Prospectus." MERGER CONSIDERATION The Merger Agreement provides that in the Merger, the shares of Piedmont Common Stock outstanding will be converted into the right to receive shares of Chartwell Common Stock representing, in the aggregate, approximately 45.25% of the aggregate number of shares of Chartwell Common Stock outstanding immediately following the Merger, while the Chartwell stockholders will retain shares representing in the aggregate approximately 54.75% of such stock. The number of Chartwell shares each Piedmont stockholder will receive is subject to automatic adjustment in the event that Piedmont or Chartwell or both were to suffer a decrease, as of the fifth business day prior to the Closing Date, in the stockholders' equity of such company and its consolidated subsidiaries (other than, in the case of Piedmont, the Asset Management Subs (as defined herein)) of from $2.5 million to $5 million on an after-tax basis from the amount thereof at March 31, 1995, other than as a result of certain specified causes and excluding certain specific items (such a decrease, a "Financial Adjustment"). See "THE MERGER--Merger Consideration" and "THE MERGER--The Merger Agreement--Conditions to the Merger" in the Proxy Statement/Prospectus. REGULATORY AND OTHER APPROVALS REQUIRED The Merger is subject to review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), by the Federal Trade Commission and the Department of Justice and is also subject to, among other approvals, the prior approval of insurance regulatory authorities in the States of Minnesota and New York, and potentially those of certain other states as well. Notification and report forms under the HSR Act were submitted on October 17, 1995 and early termination of the waiting period has been granted. See "THE MERGER--The Merger Agreement--Regulatory and Other Approvals." The holders of a majority in principal amount of Chartwell's 10 1/4% Senior Notes due 2004 (the "Senior Notes") are required to consent to certain Merger-related transactions. In addition, Chartwell has received a commitment from a commercial bank for the refinancing of Piedmont's existing bank credit facility as of the Effective Time. CONDITIONS TO THE MERGER In addition to obtaining requisite stockholder and regulatory approvals, the obligations of Piedmont and Chartwell to consummate the Merger are subject to the satisfaction or waiver of various conditions, including, among other things, the obtaining of required third party consents, the receipt of legal opinions with respect to the tax consequences of the Spin-off (as defined herein) and the Merger, the accuracy in all material respects of certain representations and warranties and the absence of certain material adverse changes. See "THE MERGER--The Merger Agreement-- Conditions to the Merger." Pursuant to a Voting Agreement dated as of August 7, 1995 (the "Piedmont Voting Agreement") between Chartwell and certain persons holding or otherwise having the power to vote certain of the shares of Piedmont Common Stock and Piedmont Preferred Stock, holders of shares representing approximately 37.5% of the total combined voting power of the Piedmont Common Stock and Piedmont Preferred Stock have agreed to vote in favor of the Merger Agreement and the transactions contemplated thereby, and holders of shares representing approximately 63.1% of the total voting power of the Piedmont Preferred Stock have agreed to vote in favor of the Piedmont Preferred Stock Amendment (as defined below). As a result, approval of the Merger Agreement and other related transactions will require the additional affirmative vote of holders of shares representing approximately 12.5% of the total combined voting power of the Piedmont Common Stock and the Piedmont Preferred Stock. Because holders representing in excess of a majority of the Piedmont Preferred Stock outstanding have agreed in the Piedmont Voting Agreement to vote in favor of the Piedmont Preferred Stock Amendment, approval of such amendment is virtually assured. In addition to approval by the common and preferred stockholders of Piedmont described above, the Merger Agreement requires approval by holders of two-thirds of the outstanding shares of Chartwell Common Stock. Such approval is expected to occur at or near the time of the Piedmont Meeting. Pursuant to a voting agreement with Piedmont dated August 7, 1995, holders of in excess of two-thirds of the outstanding shares of Chartwell Common Stock have agreed to vote in favor of the Merger Agreement and related transactions and as result, approval by the holders of Chartwell Common Stock is virtually assured. PIEDMONT PREFERRED STOCK CONVERSION; STOCK OPTION EXERCISES At the Piedmont Meeting, holders of Piedmont Preferred Stock will also be asked to consider and approve an amendment to the Restated Certificate of Incorporation of Piedmont (the "Piedmont Preferred Stock Amendment"). The Piedmont Preferred Stock Amendment, if adopted, would have the effect of automatically converting each outstanding share of Piedmont Preferred Stock into two fully paid and nonassessable shares of Piedmont Common Stock as of the time (such time, the "Option Date") that is immediately prior to the CI Notes Record Date. Because holders representing in excess of a majority of the Piedmont Preferred Stock outstanding have agreed in the Piedmont Voting Agreement to vote in favor of the Piedmont Preferred Stock Amendment, approval of such amendment is virtually assured. In addition, the Merger Agreement provides that outstanding Piedmont stock options may be exercised until the Option Date, and all in-the-money Piedmont stock options not previously exercised will be automatically exercised (subject to a reduction in the number of shares received due to share withholding in respect of the exercise price and applicable tax withholding) on the Option Date. As a result of the foregoing, the number of shares of Piedmont Common Stock that will be outstanding as of the CI Notes Record Date, and therefore the portion of the aggregate principal amount of the CI Notes that will be issued to each Piedmont stockholder, cannot be finally determined until the Option Date. THE SPIN-OFF Immediately prior to the Effective Time, the Board of Directors of Piedmont intends to declare and pay as a dividend (the "Spin-off") to the holders of Piedmont Common Stock as of a record date to be established by the Board of Directors which will be prior to the Effective Time and after the date of the CI Notes Dividend (the "Spin-off Record Date"), one share of common stock, par value $.01 per share (the "Lexington Common Stock"), of Lexington Global Asset Managers, Inc., a Delaware corporation ("Lexington") for each share of Piedmont Common Stock held by such holders. Lexington is currently a wholly-owned subsidiary of Piedmont which has been recently formed to serve as a holding company for Piedmont's subsidiaries involved in the asset management business (collectively with Lexington, the "Asset Management Subs"). The Asset Management Subs will not be included in the Merger but will instead be contributed to Lexington immediately prior to the Spin-off. The Spin-off will qualify as tax-free to Piedmont and its stockholders. A Preliminary Information Statement relating to Lexington and the Spin-off is also being mailed to Piedmont stockholders together with this Prospectus. CERTAIN COVENANTS The Merger Agreement contains various covenants of Piedmont and Chartwell with respect to operational and other matters in the period prior to the Effective Time. Among other things, in the Merger Agreement, Piedmont agreed that, prior to the Effective Time, RECO would increase by an aggregate of $25 million its net reserves for losses incurred but not reported under statutory accounting practices ("SAP") with respect to certain of its business, and Piedmont would correspondingly increase by an aggregate of $25 million its net reserves for losses incurred but not reported under generally accepted accounting principles ("GAAP") (such increase, the "Reserve Addition"). The Reserve Addition was recorded in RECO's financial statements in the quarter ended September 30, 1995. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Piedmont--Consolidated Results of Operations." TERMINATION The Merger Agreement may be terminated prior to the Effective Time by either Piedmont or Chartwell, among other circumstances, if the required stockholder approval of either company has not been obtained, if any governmental entity issues a non-appealable order permanently enjoining or otherwise prohibiting the Merger, if the Board of Directors of either Piedmont or Chartwell has withdrawn or modified its approval of the Merger, or in the event of certain material adverse changes with respect to Piedmont or Chartwell. See "THE MERGER--The Merger Agreement-- Termination." DIRECTORS AND OFFICERS FOLLOWING THE MERGER The Merger Agreement provides that the Board of Directors of Chartwell as of the Effective Time will consist of Richard E. Cole, the Chairman and Chief Executive Officer of Chartwell, Steven J. Bensinger, the President of Chartwell, and Jacques Q. Bonneau, the Executive Vice President and Chief Underwriting Officer of Chartwell, six additional persons who are currently directors of Chartwell, and four persons who are currently directors of Piedmont. The officers of Chartwell at the Effective Time will be officers of the Surviving Corporation immediately after the Merger. See "DIRECTORS AND EXECUTIVE OFFICERS." CERTAIN FEDERAL INCOME TAX CONSEQUENCES The distribution of the CI Notes will be taxable as a dividend to each Piedmont stockholder that receives CI Notes. See "FEDERAL INCOME TAX CONSIDERATIONS." All Piedmont stockholders should read carefully the foregoing discussion and are urged to consult their own tax advisors as to the specific consequences to them of receiving, holding and disposing of the CI Notes under Federal, state, local or any other applicable tax laws. THE CI NOTES <TABLE> <S> <C> SECURITIES DISTRIBUTED....................... $1,000,000 aggregate principal amount of Contingent Interest Notes due 2006. INTEREST..................................... The CI Notes will accrete interest at the rate of 8% per annum, compounded annually. Such interest will not be payable until maturity or earlier redemption of the CI Notes. In addition, the CI Notes will entitle the holders thereof to receive Contingent Interest in an aggregate amount of from $0 up to approximately $55 million. ISSUER....................................... Piedmont Management Company Inc. Upon the Effective Time of the Merger, Chartwell will assume all obligations of Piedmont under the CI Notes. MANNER OF DISTRIBUTION....................... The Board of Directors of Piedmont intends to declare and distribute the CI Notes as a dividend to each holder of record of Piedmont Common Stock on the CI Notes Record Date. The CI Notes Dividend has not yet been declared by the Board of Directors of Piedmont, and, accordingly, the CI Notes Record Date has not yet been established. The CI Notes Record Date will be established by the Board of Directors of Piedmont and is expected to be a date occuring immediately after the conversion of the Piedmont Preferred Stock into Piedmont Common Stock pursuant to the Piedmont Preferred Stock Amendment (which conversion will occur after the Piedmont Meeting) and prior to the record date established for the Spin-off and the Effective Time of the Merger. The CI Notes Dividend is not contingent upon satisfaction of the conditions to the Spin-off or the Merger. The Board of Directors is not obligated to declare the dividend of or distribute the CI Notes, although the CI Notes Dividend is a condition to both the Spin-off and the Merger. MATURITY DATE................................ June 30, 2006, subject to extension in limited circumstances. </TABLE> <TABLE> <S> <C> DETERMINATION OF THE CONTINGENT INTEREST..... The Indenture provides that Ernst & Young LLP will initially be appointed as actuary to represent the interests of the holders of the CI Notes under the Indenture (the "Holder Actuary"). Upon maturity or earlier settlement of the CI Notes, the Indenture provides that an actuary appointed by Chartwell and the Holder Actuary will each independently calculate the Contingent Interest pursuant to the formula set forth in the Indenture. If the Holder Actuary's calculation of the Contingent Interest differs from the Chartwell actuary's calculation by $3 million or less, then the Contingent Interest calculated by Chartwell will be used for purposes of settling the CI Notes. If, however, the two calculations vary by more than $3 million, following a required period of consultation between the Holder Actuary and the Chartwell actuary, a third actuary will be appointed as arbitrator (the "Independent Actuary"). The Independent Actuary will perform its own calculation of the Contingent Interest and, based thereon, will determine which of the Chartwell actuary's or the Holder Actuary's calculation of the Contingent Interest is, in the judgment of the Independent Actuary, the best estimate of the Contingent Interest. The amount so selected shall be the Contingent Interest for purposes of settling the CI Notes. CALCULATION OF THE CONTINGENT INTEREST....... The Contingent Interest will be calculated under a complex formula set forth in the Indenture. In general, assuming the CI Notes are settled at maturity, the Contingent Interest will be equal to $55 million (a) less an amount equal to (i) the amount of any adverse development of the loss and LAE reserves and related accounts (including certain reinsurance recoverables, commissions and unearned premiums) of RECO recorded as of March 31, 1995, minus (ii) $25 million, (b) plus the amount of certain tax benefits received or recorded by Chartwell as a result of the amount determined pursuant to clause (a) above. The amount so calculated may not be greater than $55 million nor less than a minimum amount equal to the lesser of (a) $10 million less the Fixed Amount and (b) the tax benefits referred to above. The Contingent Interest will in any event be reduced by part of the costs of any Independent Actuary and by part or all of the costs of the Holder Actuary. </TABLE> <TABLE> <S> <C> In the event that the CI Notes are settled prior to maturity, the foregoing formula will in general apply, except that the $55 million maximum amount of the CI Notes will be reduced to an amount equal to $55 million discounted back from June 30, 2006 at a discount rate of 8% per annum, compounded annually, and the tax benefits will be calculated in a prescribed manner. See "DESCRIPTION OF CONTINGENT INTEREST NOTES--Determination of the Payment Amount." RANKING...................................... The CI Notes will be senior unsecured obligations of Piedmont and, following the Merger, of Chartwell, in each case ranking pari passu in right of payment with all existing and future senior unsecured obligations of such company. Chartwell conducts its operations through its subsidiaries and, accordingly, the CI Notes will be effectively subordinated to all indebtedness and other liabilities of its subsidiaries, including reinsurance obligations. MANDATORY REDEMPTION......................... None. OPTIONAL REDEMPTION.......................... The CI Notes will not be redeemable prior to the third anniversary of their date of issue. Thereafter, the CI Notes will be redeemable in whole but not in part, at a redemption price, on a per note basis, equal to (i) the Fixed Amount as of the redemption date, plus (ii) the Contingent Interest as of the redemption date. Upon delivery of the redemption notice, the Contingent Interest shall be determined. See "DESCRIPTION OF CONTINGENT INTEREST NOTES--Optional Redemption." CHANGE OF CONTROL............................ Upon the occurrence of a Change of Control, Chartwell will be required to make an offer to purchase all of the outstanding CI Notes at an aggregate purchase price (expressed on a per note basis) equal to (i) the Fixed Amount as of the Change of Control payment date, plus (ii) the Contingent Interest as of that date. See "DESCRIPTION OF CONTINGENT INTEREST NOTES--Repurchase at the Option of Holders Upon a Change of Control." </TABLE> <TABLE> <S> <C> CERTAIN COVENANTS............................ The Indenture will contain covenants restricting the incurrence of indebtedness by subsidiaries of Chartwell, the incurrence of liens to secure indebtedness of Chartwell and the merger or consolidation of Chartwell or the transfer of all or substantially all of its assets. Such covenants are subject to important exceptions and qualifications. See "DESCRIPTION OF CONTINGENT INTEREST NOTES--Certain Covenants." TRANSFER RESTRICTIONS........................ During the first 90 days after issuance, the CI Notes may be transferred without restriction of any kind, subject to compliance with the Securities Act. After such 90 day period, the CI Notes will be transferable only in certain limited circumstances. See "RISK FACTORS" and "DESCRIPTION OF CONTINGENT INTEREST NOTES--Transfer Restrictions." FORM......................................... The CI Notes will be issued only in definitive form. Permitted transfers thereof may be effected only by delivery of CI Notes with properly executed instruments of transfer to the transfer agent for the CI Notes (the "Transfer Agent"). LISTING...................................... The CI Notes will not be listed on any stock exchange or on NASDAQ. </TABLE> SUMMARY PRO FORMA FINANCIAL DATA (UNAUDITED) The summary pro forma financial data consolidates the historical balance sheets of Chartwell and Piedmont (after giving effect to the Spin-off, the CI Notes Dividend and certain other items) as of September 30, 1995, as if the Merger and related transactions had been consummated at September 30, 1995 and consolidates the statements of operations of Chartwell and Piedmont for the nine months ended September 30, 1995 and the year ended December 31, 1994, as if the Merger and related transactions had been consummated on January 1, 1994 in each case giving effect to the Merger and related transactions under the purchase method of accounting. This pro forma data is presented for illustrative purposes only and is not necessarily indicative of the results of operations or financial position that would have been reported if the Merger had been consummated at the dates indicated or that may be reported in the future. This pro forma data is derived from the unaudited Condensed Consolidated Pro Forma Financial Statements appearing herein under "PRO FORMA FINANCIAL INFORMATION" and should be read in conjunction with those statements and the notes thereto. <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 1995 1994 ------------- ------------ (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> Pro Forma Statement of Operations Data: Gross premiums written........................................ $ 260,988 $ 348,226 ------------- ------------ Net premiums written.......................................... 187,842 255,997 ------------- ------------ Net premiums earned........................................... 180,346 232,070 Net investment income......................................... 30,045 33,969 Net realized capital gains (losses)........................... 5,141 (3,044) Other income.................................................. 1,080 1,573 ------------- ------------ Total revenues................................................ 216,612 264,568 ------------- ------------ Loss and LAE.................................................. 161,889 192,302 Policy acquisition costs...................................... 49,396 48,679 Other expenses................................................ 12,383 31,460 Interest and amortization..................................... 8,986 10,069 ------------- ------------ Loss before taxes........................................... (16,042) (17,942) Income tax benefit.......................................... (5,777) (6,315) ------------- ------------ Loss from continuing operations............................. ($ 10,265) ($ 11,627) ------------- ------------ ------------- ------------ Loss from continuing operations per common share............ ($ 1.50) ($ 1.65) ------------- ------------ ------------- ------------ Weighted average shares outstanding........................... 6,859,017 6,864,390 ------------- ------------ ------------- ------------ Ratio of earnings to fixed charges(1)......................... -- -- </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1995 ---------------------- (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) ---------------------- <S> <C> Pro Forma Balance Sheet Data: Total investments and cash........................................... $ 709,966 Total assets......................................................... 1,159,174 Loss and LAE reserves................................................ 744,360 Common stockholders' equity.......................................... 142,870 Book value per common share.......................................... $ 20.83 Common shares outstanding............................................ 6,859,017 </TABLE> - ------------ (1) For purposes of computing the ratio of earnings to fixed charges, earnings consists of income before income taxes plus fixed charges. Fixed charges consist of interest expense on indebtedness, amortization of deferred debt issue costs and the portion of rental expense under operating leases which has been deemed to be representative of the interest factor, all on a pre-tax basis. For the nine months ended September 30, 1995 and the year ended December 31, 1994, pro forma earnings were insufficient to cover fixed charges by approximately $16.0 and $18.0 million, respectively. COMPARATIVE PER SHARE DATA The following unaudited table sets forth certain historical per share information for Chartwell and Piedmont, certain pro forma per share information for Piedmont giving effect to the Spin-off, the CI Notes Dividend and certain other items, certain pro forma information for Chartwell giving effect to the Merger and related transactions, and equivalent pro forma per share information of Piedmont. The data is based upon and should be read in conjunction with the historical consolidated financial statements of Chartwell and Piedmont and the unaudited Condensed Consolidated Pro Forma Financial Statements and the notes thereto appearing herein under "PRO FORMA FINANCIAL INFORMATION." <TABLE> <CAPTION> PRO FORMA -------------------------------------------------------- CHARTWELL PIEDMONT EQUIVALENT HISTORICAL MERGER WITH MERGER WITH CHARTWELL(3) --------------------- PIEDMONT AS PIEDMONT AS ASSUMING CONVERSION CHARTWELL PIEDMONT ADJUSTED(1) ADJUSTED(2) NUMBER IS --------- -------- ----------- ----------- -------------------------- 0.5319 0.5778 0.5109 ------ ------ ------ <S> <C> <C> <C> <C> <C> <C> <C> NINE MONTHS ENDED SEPTEMBER 30, 1995: Income (loss) per common share...................... $ 1.21 $(2.48) $ (3.06) $ (1.50) $(0.80) $(0.87) $(0.77) Dividends per common share...................... -- -- -- -- -- -- -- YEAR ENDED DECEMBER 31, 1994: Income (loss) per common share(4)................... $ (0.84) $(0.69) $ (1.70) $ (1.65) $(0.88) $(0.95) $(0.84) Dividends per common share...................... -- -- -- -- -- -- -- AS OF SEPTEMBER 30, 1995: Book value per common share...................... $ 18.82 $19.36 $ 14.33 $ 20.83 $11.08 $12.04 $10.64 </TABLE> - ------------ (1) Gives pro forma effect to the Spin-off of Lexington, the CI Notes Dividend, and the other items for which adjustments are made in the pro forma financial information of Piedmont appearing in "PRO FORMA FINANCIAL INFORMATION" assuming such transactions were consummated on January 1, 1994 for the income (loss) per share and dividends paid per common share data and on September 30, 1995 for the book value per common share data. (2) Gives pro forma effect to the Merger after the transactions described in footnote (1) assuming all such transactions were consummated on January 1, 1994 for the income (loss) per common share and the dividends paid per common share data and on September 30, 1995 for the book value per common share data. The loss per common share for the nine months ended September 30, 1995 includes the effect of Piedmont's $25 million Reserve Addition, a $2.37 charge per share after tax. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Piedmont-- Consolidated Results of Operations." (3) Represents the pro forma equivalent of one share of Piedmont Common Stock calculated by multiplying the pro forma Chartwell data by assumed Conversion Numbers of 0.5319 (based on the actual number of shares of Chartwell Common Stock and the actual number of shares of Piedmont stock outstanding at October 20, 1995, assuming all vested outstanding Piedmont stock options with an exercise price of less than $15.00 are exercised for cash prior to the Option Date and that all other Piedmont stock options are automatically exercised on the Option Date based on an assumed average closing price over the relevant period of $15.00 per share and a 28% tax withholding rate), 0.5778 and 0.5109 (the highest and lowest possible Conversion Numbers in the absence of a Financial Adjustment). The actual Conversion Number will depend on the number of shares of Piedmont Common Stock outstanding immediately prior to the Effective Time and on whether a Financial Adjustment occurs with respect to either party. See "THE MERGER--Merger Consideration."

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+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCE IS MADE TO THE INDEX OF TERMS FOR THE LOCATION HEREIN OF CAPITALIZED TERMS USED IN THIS PROSPECTUS. <TABLE> <S> <C> Issuer......................... Puget Power Conservation Grantor Trust 1995-1 formed by the Seller pursuant to the Pooling and Servicing Agreement between Puget, as Seller and Servicer, and the Trustee. Securities Offered............. $202,250,000 principal amount of % Conservation Pass- Through Certificates, Series 1995-1. Certificate Rate............... % per annum, payable in arrears and calculated on the basis of a 360-day year comprised of twelve 30-day months (the "Certificate Rate"). The Certificates............... The Certificates will be issued in an initial aggregate principal amount of $202,250,000. Each Certificate represents an undivided fractional interest in the assets of the Trust. The Certificates will be available for purchase in minimum denominations of $1,000 and integral multiples thereof. The Certificates will initially be represented by one or more Certificates registered in Cede's name, as nominee of DTC. Definitive Certificates will be issued only under the limited circumstances described herein. See "Description of the Certificates -- General," "-- Book-Entry Registration" and "-- Definitive Certificates." Seller and Servicer............ Puget Sound Power & Light Company is an investor-owned utility providing electric service within a 4,500-square-mile territory in the state of Washington, principally in the Puget Sound region of western Washington. During December 1994, Puget provided electric service to an average of approximately 823,100 Customers (as hereinafter defined). The Certificates do not represent interests in or obligations of Puget or any of its affiliates. Trustee........................ Chemical Bank, a New York banking corporation. Statute........................ The Certificates will be entitled to the benefit of the Statute. The Statute, among other things, (i) grants Puget (as well as other utilities in the state of Washington with respect to their conservation investment) the right to include in rate base and thereby recover from Customers an amount (the "Conservation Asset Transaction Amount") equal to the Bondable Conservation Investment Amount plus related costs of capital, including principal of and interest on securities issued to finance or refinance such expenditures, the Trustee Fee (as hereinafter defined) and the Servicing Fee (as hereinafter defined) and (ii) expressly defines this statutory right as an item of property that may be sold, pledged or otherwise made the basis for the issuance of securities. The issuance and sale of the Certificates is conditioned upon receipt of the Initial Order (as hereinafter defined) from the Commission. Under the Statute, once the issuance of the Certificates has been authorized by the Commission, this statutory right to repayment through rates cannot be rescinded or adversely changed by the Commission. </TABLE> <TABLE> <S> <C> Tariff......................... Puget has made application to the Commission for an order (the "Initial Order") that, among other things, (i) authorizes the sale of the Purchased Assets to the Trust by Puget, including the right to recover in rates the Bondable Conservation Investment Amount aggregating $202,494,850, plus interest thereon at the Certificate Rate, (ii) finds that the Certificates are securities entitled to the benefits of the Statute, (iii) approves the Tariff, which allocates revenues to the Trust in an aggregate amount equal to the Conservation Asset Transaction Amount, (iv) approves the methodology and mechanism for periodically implementing a Revised Tariff if a shortfall or surplus in collections results in a Variance (as hereinafter defined) as of any Calculation Date (as hereinafter defined), and (v) approves the Pooling and Servicing Agreement and the transactions contemplated thereby. The Bondable Conservation Investment Amount represents the unamortized balance of amounts previously expended by Puget on conservation measures and included in Puget's rate base by order of the Commission. As a result, amounts that provide for amortization of the Bondable Conservation Investment Amount through rates are presently being billed to Customers. The Tariff created by the Initial Order will establish amounts intended to provide for the amortization of the Bondable Conservation Investment Amount in accordance with a pro forma amortization schedule (the "Pro Forma Schedule," which is set forth on page 27), based on certain assumptions, including, but not limited to, projected numbers of Customers and expected delinquencies. The Tariff specifically identifies, for each class of Puget's retail residential, commercial, industrial and certain other energy customers (the "Customers"), a dollar amount of each Customer's regular electric bill that will be allocated to the Trust from bills sent during each Regulatory Year (as hereinafter defined). Such amounts will be collected by Puget as part of its normal collection activities and will be deposited into an account maintained with the Trustee for the benefit of the Certificateholders (the "Collection Account") on each Remittance Date (as hereinafter defined). The Trust's right under the Tariff to receive allocations from Customer payments ranks PARI PASSU with Puget's right to collect amounts from Customers under other tariffs. Amounts collected that represent partial payment of a Customer's electric bill will be proportionately allocated between the Trust and Puget based on the ratio of the portion of the billed amount allocated under the Tariff to the total billed amount. On each September 30, beginning in 1996 and ending in 2003, and also on March 31, 2004 (each, a "Calculation Date"), the Servicer is required to compare the unamortized Bondable Conservation Investment Amount (the "Bondable Conservation Investment Balance") to the balance set forth in the Pro Forma Schedule as of such date (the "Projected Bondable Conservation Investment Balance"). If the Bondable Conservation Investment Balance at such Calculation Date differs from the Projected Bondable Conservation Investment Balance for such Calculation Date by more than 2% (a "Variance"), the Servicer is required to apply for (and the </TABLE> <TABLE> <S> <C> Initial Order provides that the Commission will approve within 30 days of the application) a revised Tariff (a "Revised Tariff") that will allocate revenues to the Trust in an amount (the "Revised Tariff Amount") intended to be sufficient so that the (i) Bondable Conservation Investment Balance on the next September 30 will equal the Projected Bondable Conservation Investment Balance as of such date and (ii) thereafter, will provide for the amortization of the remaining Bondable Conservation Investment Balance in accordance with the Pro Forma Schedule. The Revised Tariff will be based on updated assumptions by the Servicer, including, but not limited to, the projected number of Customers and the expected rate of delinquencies. Distributions and Cash Flow.... No amounts billed to Customers prior to the issuance of the Certificates (the "Closing Date") will be transferred to the Trust. The Trust will have the statutory right to amounts payable pursuant to the Tariff and any Revised Tariff from bills mailed by the Servicer on the day following the Closing Date and, based on historical experi- ence, such amounts would begin to be received by the Servicer within 15 days after such date. See "Puget Customers and Collections." On each Distribution Date, all funds held in the Collection Account will be distributed as follows: FIRST, to the Trustee in the amount of the fee payable to the Trustee pursuant to the Pooling and Servicing Agreement (the "Trustee Fee"); SECOND, to the Servicer in the amount of the Servicing Fee; THIRD, to the Certificateholders as interest an amount equal to the product of the Certificate Rate and the aggregate Certificate balance as of the first day of the related Distribution Period (calculated on the basis of the number of days in such Distribution Period assuming a 360-day year comprised of twelve 30-day months); and FOURTH, to the Certificateholders, the balance remaining in the Collection Account as principal to reduce the aggregate Certificate balance. Overcollateralization.......... The Statute gives the Servicer the right to recover from Customers an amount equal to the Bondable Conservation Investment Amount, which is $202,494,850, plus interest thereon at the Certificate Rate. The initial aggregate Certificate balance is $202,250,000 and interest thereon is calculated at the Certificate Rate. The portion of the Bondable Conservation Investment Amount in excess of the initial aggregate Certificate amount represents overcollateralization (the "Overcollateralization Amount"). On each Distribution Date, the amount received by the Trust from amounts collected from Customers equal to interest at the Certificate Rate on the Bondable Conservation Investment Balance as of the first day of the preceding Distribution Period will be used to pay the Trustee Fee, the Servicing Fee and interest on the Certificates. All other amounts collected from Customers will constitute pay- ments in respect of the Bondable Conservation Investment Balance and will be used to pay principal of the Certificates. Accordingly, amortization of the aggregate Certificate balance in any period will equal the reduction of the Bondable Conservation Investment Balance during such period. As a result, the Bondable </TABLE> <TABLE> <S> <C> Conservation Investment Balance should always exceed the aggregate Certificate balance by the Overcollateralization Amount. The Overcollateralization Amount is intended to cover any shortfall in receipt of the Bondable Conservation Investment Amount that may occur after the final Calculation Date that is not anticipated and provided for in a Revised Tariff, as described below. While the Bondable Conservation Investment Amount (including that portion attributable to the Overcollateralization Amount) represents the statutory right to recover those amounts, the amounts actually billed may be less if, for example, the actual number of Customers is less than the number of Customers projected by Puget for the purpose of calculating rates under the Tariff or any Revised Tariff, or the amounts actually collected may be less if, for example, the actual rate of delinquencies is greater than the rate of delinquencies projected. On each Calculation Date, the Servicer is required to determine whether a Variance has occurred. The Tariff and any Revised Tariff will be periodically revised, if Variances occur, through an adjustment to the amount of revenues allocated to the Trust in respect of the Conservation Asset Transaction Amount (a "Rate Adjustment") to take into account factors including, but not limited to, the projected number of Customers and the expected rate of delinquencies. However, after the final Calculation Date on March 31, 2004, there will be no such mechanism for the remaining term of the Certificates. Accordingly, the Overcollateralization Amount is intended to cover billing or collection shortfalls that may occur from the final Calculation Date through the Final Collection Date (as hereinafter defined) that are not addressed through the Rate Adjustment process. Trust Assets................... The assets sold to the Trust (the "Purchased Assets") will consist of (i) the right to receive the revenues allocated to the Trust pursuant to the Tariff and any Revised Tariffs, as well as the right under the Statute to have rates under the Tariff and any Revised Tariffs maintained at levels sufficient for recovery of the Bondable Conser- vation Investment Amount, plus interest on the Certificates and the Trustee Fee and the Servicing Fee, subject to the Tariff Termination Date (as hereinafter defined) for billing under the Tariff or any Revised Tariff, (ii) the right to payments under contracts ("Conservation Repayment Contracts") between Puget and certain Customers, which obligate such Customers, if they change energy suppliers, to pay Termination Fees (as hereinafter defined) generally intended to reimburse Puget for the Bondable Conservation Investment Balance arising from expenditures on conservation measures for such Customers, and (iii) upon a voluntary or involuntary sale of Puget's utility property used to serve Customers who cease to be Customers as a result of such sale, the portion of the proceeds (the "Purchased Sale Proceeds") of such sale equal to the amount, if any, of the Bondable Conservation Investment Balance that the Commission removes from Puget's rate base pursuant to the Statute as a result of such sale. </TABLE> <TABLE> <S> <C> Servicing...................... The Servicer will be responsible for billing, servicing, managing and making collections on the Purchased Assets in the same manner that it services similar assets for its own account. In the event of a Variance as of any Calculation Date, the Servicer will calculate the Revised Tariff Amount and file an application with the Commission for a Revised Tariff, as described under "Tariff" above. Under the Statute, any successor to Puget pursuant to any bank- ruptcy, reorganization or other insolvency proceeding must assume the Servicer's obligations under the Pooling and Servicing Agreement. Each month the Servicer will provide the Trustee with a certificate describing the aggregate amounts collected and the components thereof for the preceding month. On the basis of this information, the Trustee will furnish to the Certificateholders on each quarterly Distribution Date reports describing (i) the aggregate amounts collected and the components thereof for the preceding Distribution Period, (ii) the amounts to be distributed, (iii) the remaining aggregate Certificate balance after giving effect to all distributions of principal to the Certificateholders, (iv) the Bondable Conservation Investment Balance as of the end of the preceding Distribution Period, and (v) if the last day of the preceding Distribution Period is a Calculation Date, a comparison between the Bondable Conservation Investment Balance and the Projected Bondable Conservation Investment Balance, together with a statement as to whether a Variance exists. In addition, within a reasonable period of time after the end of each calendar year, the Trustee will furnish to each person who at any time during the calendar year was a Certificateholder, a statement of the aggregate amounts distributed during the year. Certificate Owners will receive such reports as are required in accordance with DTC procedures. The reports described above will be available to any Certificate Owner upon request to the Trustee or the Servicer. The Servicer will also act as custodian of all documents and instruments relating to the Purchased Assets. Servicing Fee.................. The servicing fee for the period from the Closing Date through September 30, 1995, and each three-month period thereafter ending March 31, June 30, September 30 and December 31 through the Final Collection Date (each, a "Distribution Period") will be an amount equal to the sum of (i) $ in respect of the first Distribution Period and $ in respect of all subsequent Distribution Periods and (ii) the investment earnings on amounts depos- ited in the Collection Account during such Distribution Period (the "Servicing Fee"). The interest in respect of the Overcollateralization Amount is expected to be sufficient to pay the fixed portion of the Servicing Fee as well as the Trustee Fee. Such fees will be payable on each Distribution Date prior to any distributions on the Certificates. Collections.................... The Servicer will deposit, on or before each Remittance Date, to the Collection Account all amounts received by the Servicer in respect of the Purchased Assets during such calendar month. </TABLE> <TABLE> <S> <C> Distribution Dates............. The Trustee will make quarterly distributions to Certificateholders on the 11th day of January, April, July and October of each year commencing October 11, 1995, or, if such day is not a business day, the next succeeding business day. Final Distribution Date........ The Tariff or any Revised Tariff then in effect will expire on September 30, 2004 (as such date may be extended as described herein under "The Tariff and the Trust Assets," the "Tariff Termination Date"), and the Servicer will cease to include amounts allocable to the Trust in Customers' electric bills after the Tariff Termination Date. The portion of receivables outstanding on the Tariff Termina- tion Date allocable to the Trust under the Tariff or any Revised Tariff then in effect will continue to be collected by the Servicer through the Final Collection Date and remitted to the Collection Account. The scheduled final Distribution Date will be April 11, 2005 (as such date may be extended as described herein under "The Tariff and the Trust Assets," the "Final Distribution Date"). Billings and collections in respect of the Purchased Assets will not cease upon the reduction of the aggregate Certificate balance to zero. Any collections through the Final Collection Date in excess of the aggregate Certificate balance will be distributed to the Certificateholders on the next succeeding Distribution Date. As a result, any portion of the Overcollateralization Amount that is actually collected prior to the Final Collection Date, and that is not required to cover billing or collection shortfalls not recovered through a Revised Tariff, will be distributed to the Certificateholders on or prior to the Final Distribution Date. Customers...................... The source of payment on the Purchased Assets will be amounts collected from Puget's Customers. Only the portion of amounts collected from Customers attributable to the Tariff or any Revised Tariff will be available for payment on the Purchased Assets. In addition, any amounts collected that represent partial payment of a Customer's electric bill will be proportionately allocated between the Trust and Puget based on the ratio of the portion of the billed amount allocated under the Tariff to the total billed amount. During December 1994, Puget had approximately 823,100 Customers, including 731,700 residential Customers, 86,200 commercial Customers, 3,900 industrial Customers and 1,300 other Customers. For the year ended December 31, 1994, the largest Customer represented approximately 3.3% of Puget's revenues and the 10 largest Customers represented approximately 10.0% of Puget's revenues. Tax Status..................... In the opinion of Perkins Coie, counsel to the Seller, the Trust will constitute a grantor trust for federal income tax purposes and will not be subject to federal income tax. Certificate Owners must report their respective allocable shares of all income earned on the Trust assets, and, subject to certain limitations on the deduction of miscellaneous expenses by individuals, estates and trusts, may deduct their respective allocable shares of the Servicing Fee and the Trustee Fee. Individuals should consult their own tax advisors with respect to their own individual tax situations to determine the federal, state, local and other tax consequences of the purchase, </TABLE> <TABLE> <S> <C> ownership and disposition of the Certificates. Prospective investors should note that no rulings have been or will be sought from the Internal Revenue Service (the "IRS") with respect to any of the federal income tax consequences discussed herein, and there can be no assurance that the IRS will not take a contrary position. See "Federal Income Tax Consequences." ERISA Considerations........... The acquisition of the Certificates by employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), may result in a violation of the prohibited transaction rules under Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"). See "ERISA Considerations."

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+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT REQUIRES OTHERWISE, "TULTEX" OR THE "COMPANY" REFERS TO TULTEX CORPORATION AND ITS CONSOLIDATED SUBSIDIARIES. "GUARANTORS" REFERS TO ALL OF THE COMPANY'S SUBSIDIARIES. CAPITALIZED TERMS USED IN THIS SUMMARY UNDER THE CAPTION "THE OFFERING" AND NOT OTHERWISE DEFINED ARE DEFINED BELOW UNDER THE CAPTION "DESCRIPTION OF THE NOTES -- CERTAIN DEFINITIONS." REFERENCES TO "YEAR END" REFER TO THE COMPANY'S FISCAL YEAR END. THE COMPANY Tultex Corporation is one of the world's largest marketers and manufacturers of activewear and licensed sports apparel for consumers and sports enthusiasts. The Company's diverse product line includes fleeced sweats, jersey products (outerwear T-shirts), and decorated jackets and caps. These products are sold under the Company's own brands led by the DISCUS ATHLETIC and LOGO ATHLETIC premium labels and under private labels, including Nike, Levi Strauss, Reebok and Pro Spirit. In addition, the Company has numerous professional and college sports licenses to manufacture and market embroidered and screen-printed products with team logos and designs under its LOGO ATHLETIC and LOGO 7 brands. The Company is a licensee of professional sports apparel, holding licenses from the National Football League, Major League Baseball, the National Basketball Association and the National Hockey League to manufacture a full range of sports apparel for adults and children. Historically a producer of quality fleecewear, in recent years Tultex has initiated a strategy to enhance its competitiveness and to capitalize on growth opportunities by becoming a consumer-oriented apparel maker able to compete in a changing industry. This strategy includes the following elements: (Bullet) INCREASING EMPHASIS ON HIGHER-MARGIN PRODUCTS. The Company is strengthening its competitiveness in the activewear business through the development of branded and private label, higher-quality and higher-margin products to supplement its traditionally strong position in the lower-priced segment of the business. The Company is developing its own brands, promoting DISCUS ATHLETIC for its premium products and using the TULTEX label for the value-oriented segment of the market. DISCUS ATHLETIC'S highly visible advertising during televised broadcasts of college football and basketball on the ESPN and ABC television networks and of Atlantic Coast Conference basketball has contributed to significant annual increases in sales of this brand since 1992. In addition, Tultex has partnering arrangements to supply higher-quality, private label products to companies such as Reebok, Levi Strauss and Nike, none of which accounted for more than 10% of the Company's consolidated sales during 1994. To complement its development of higher-margin products, the Company began manufacturing jersey products in 1991. (Bullet) EXPANDING INTO LICENSED APPAREL BUSINESS TO COMPLEMENT ACTIVEWEAR BUSINESS. Tultex's 1992 acquisitions of Logo 7, a marketer of licensed sports apparel, and Universal Industries, Inc. ("Universal"), a marketer of sports and entertainment licensed headwear, enabled the Company to achieve the fourth largest market share (13.7%) in the higher-margin licensed apparel business in 1993, and have created opportunities for significant manufacturing and distribution synergies with the Company's activewear business. The promotion of the LOGO ATHLETIC brand of licensed apparel through television and print advertising, as well as promotional arrangements featuring Dallas Cowboys' quarterback Troy Aikman, San Francisco 49ers' quarterback Steve Young, Miami Dolphins' quarterback Dan Marino, the Chicago Blackhawks' Chris Chelios and the Washington Bullets' Chris Webber, among others, has helped to increase the visibility and sales of LOGO ATHLETIC products. (Bullet) INCREASING DISTRIBUTION CHANNELS AND STRENGTHENING CUSTOMER RELATIONSHIPS. Tultex actively pursues strong relationships with department, sporting goods and other specialty stores, such as Sears, JC Penney, Modell's, Dillard's, Foot Locker, Champs and Sports Authority, to distribute its higher-margin branded and private label products. In addition, the Company continues to strengthen its relationships with high volume retailers such as Wal-Mart, Kmart and Target by supplying private label and TULTEX products. Tultex provides customers with exceptional service and support; as an example, its distribution capabilities are highly responsive to customers' changing delivery and inventory management requirements. (Bullet) INVESTING IN MODERN DISTRIBUTION AND PRODUCTION FACILITIES. During fiscal 1988 through fiscal 1994, Tultex invested approximately $191 million in capital expenditures, primarily in the construction of its customer service center and in high-efficiency spinning, knitting, dyeing, cutting and embroidering machinery. In 1991, Tultex began operating the customer service center, which the Company believes is the most highly automated in the industry. Having made significant investments in its distribution and production facilities, the Company's average capital expenditures are not expected to exceed approximately $20 million annually through 1997. The Company's strategy has improved its sales mix. While net sales increased 6.0% in fiscal 1994 over 1993, net sales of DISCUS ATHLETIC activewear and premium private label sweats under the Nike, Levi Strauss and Reebok names increased 49.8% to $77.6 million and net sales of LOGO ATHLETIC licensed apparel increased 198.6% to $64.5 million. Sales of jersey products were $56.8 million for the fiscal year ended December 31, 1994, representing 16.5% of the Company's activewear sales during such period compared to 11.6% for fiscal 1993. Reduced consumer demand for activewear and an oversupply of activewear in retail inventories in the first half of 1994, the MLB strike, the NHL lockout and higher raw material costs adversely affected Tultex's results of operations during 1994. THE REFINANCING Net proceeds of this Offering, together with borrowings under the Senior Credit Facility (as defined below), will be used to pay in full the Company's variable rate note due July 31, 1996 (the "Term Loan"), the Company's 8 7/8% Senior Notes due June 1, 1999 (the "8 7/8% Notes"), and related prepayment expenses. See "Use of Proceeds and Refinancing." The Company believes that the longer maturity and the increased covenant flexibility provided under the terms of the Notes will allow the Company to continue to increase its long-term investment in brand promotion and higher-margin products. Contemporaneously with the completion of this Offering, the Company and certain of its subsidiaries will enter into a $225 million, three-year revolving credit facility with a group of commercial banks (the "Senior Credit Facility" and, together with the Offering, the "Refinancing"). The Senior Credit Facility will replace the Company's existing $225 million revolving credit facility which expires on October 6, 1995. Scheduled amortization requirements prior to this Offering (excluding the Senior Credit Facility) totaled $92.3 million from January 1, 1995 through December 31, 1998. After giving effect to the Refinancing, other than under the Senior Credit Facility, there will be no material scheduled amortization requirements until the maturity of the Notes. Borrowings under the Senior Credit Facility will be general unsecured obligations of the Company and will rank PARI PASSU in right of payment with the Notes and all other unsubordinated indebtedness of the Company and will be guaranteed by certain of the Company's subsidiaries. The closings of this Offering and of the Senior Credit Facility are conditioned upon each other. See "Use of Proceeds and Refinancing." THE OFFERING <TABLE> <S> <C> SECURITIES OFFERED................. $110 million aggregate principal amount of % Senior Notes due 2005. MATURITY DATE.......................... , 2005. INTEREST PAYMENT DATES................. June 15 and December 15, commencing June 15, 1995. OPTIONAL REDEMPTION BY THE COMPANY.. The Notes are not redeemable prior to , 2000, except as set forth below. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2000, at the redemption prices set forth herein, together with accrued and unpaid interest to the redemption date. In addition, prior to , 1998, the Company may redeem up to approximately 32% of the principal amount of the Notes with the cash proceeds received by the Company from one or more sales of capital stock of the Company (other than Disqualified Stock) at a redemption price of % of the principal amount thereof, plus accrued and unpaid interest to the redemption date; PROVIDED, HOWEVER, that at least $75 million in aggregate principal amount of the Notes remains outstanding immediately after any such redemption. SINKING FUND........................... None. RANKING................................ The Notes will be general unsecured obligations of the Company and will rank PARI PASSU in right of payment with all other unsubordinated Indebtedness (including the Senior Credit Facility) of the Company. GUARANTEES............................. The Notes will be guaranteed on a joint and several basis by each of the Guarantors. The Guarantees will be general unsecured obligations of the Guarantors and will rank PARI PASSU in right of payment with all other unsubordinated indebtedness of the Guarantors. The Guarantors' liability under the Guarantees will be limited as described herein and Guarantees will be released in connection with certain asset sales and dispositions. See "Description of the Notes -- Guarantees." CHANGE OF CONTROL OFFER................ Upon a Change of Control, the Company will be required to make an offer to purchase all outstanding Notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest to the repurchase date. CERTAIN COVENANTS...................... The Indenture will contain certain covenants that, among other things, limit the ability of the Company or any of its Subsidiaries to incur additional Indebtedness, make certain Restricted Payments, make certain Investments, create Liens, engage in Sale and Leaseback Transactions, permit dividend or other payment restrictions to apply to Subsidiaries, enter into certain transactions with Affiliates or Related Persons or consummate certain merger, consolidation or similar transactions. In addition, in certain circumstances, the Company will be required to offer to purchase Notes at 100% of the principal amount thereof with the net proceeds of certain asset sales. These covenants are subject to a number of significant exceptions and qualifications. See "Description of the Notes." SENIOR CREDIT FACILITY.............. Concurrently with this Offering, the Company and certain of its subsidiaries will enter into the Senior Credit Facility, a $225 million, three-year revolving credit facility, with a group of commercial banks. The Senior Credit Facility will replace the Company's existing $225 million revolving credit facility, which expires on October 6, 1995. See "Use of Proceeds and Refinancing." </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA The following table sets forth summary consolidated financial data for the Company for each of the five fiscal years in the period ended December 31, 1994. The summary consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's Consolidated Financial Statements, related notes, and other financial data included elsewhere herein. <TABLE> <CAPTION> YEAR ENDED DEC. 31 JAN. 1 JAN. 2 DEC. 28 DEC. 29 1994 1994(1) 1993(1)(2)(3) 1991(1) 1990(1) <S> <C> <C> <C> <C> <C> IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA STATEMENT OF INCOME DATA: Net sales and other income $565,433 $533,611 $503,946 $349,910 $390,336 Cost of products sold 419,769 395,727 368,027 271,243 283,907 Depreciation 23,973 23,364 20,831 17,369 14,775 Selling, general and administrative 93,510 88,433 81,297 45,481 52,546 Income from operations 28,181 26,087 33,791 15,817 39,108 Gain on sale of facilities 4,405 -- -- 4,014 -- Interest expense 18,151 16,996 13,540 9,064 8,838 Income before income taxes and cumulative effect of accounting change 14,435 9,091 20,251 10,767 30,270 Income taxes 5,485 3,188 7,060 3,443 11,097 Income before cumulative effect of accounting change 8,950 5,903 13,191 7,324 19,173 Cumulative effect of accounting change -- -- -- 2,848(4) -- Net income $8,950 $5,903 $13,191 $10,172 $19,173 PER COMMON SHARE DATA: Income before cumulative effect of accounting change $0.26 $0.16 $0.42 $0.25 $0.66 Net income 0.26 0.16 0.42 0.35 0.66 Dividends declared 0.05 0.20 0.20 0.32 0.36 PRO FORMA DATA(5) (UNAUDITED): Pro forma income from continuing operations $6,596 Pro forma income per common share from continuing operations $0.18 BALANCE SHEET DATA (END OF PERIOD): Working capital $122,854 $243,553 $126,717 $ 85,011 $ 92,432 Total assets 456,809 474,965 435,818 314,957 328,643 Total debt 216,355 239,438 200,531 115,032 123,069 Total stockholders' equity 187,101 179,197 178,793 157,091 155,301 OTHER DATA: EBITDA(6) $53,371 $50,668 $55,559 $32,321 $53,018 Capital expenditures 8,624 22,250 30,330 14,360 21,983 Ratio of EBITDA to interest expense(6) 2.94 2.98 4.10 3.57 6.00 Ratio of EBITDA minus capital expenditures to interest expense(6) 2.47 1.67 1.86 1.98 3.51 Ratio of earnings to fixed charges(7) 1.59 1.41 2.11 1.54 2.27 </TABLE> (1) During the fourth quarter of fiscal 1993, the Company changed its method of determining the cost of inventories from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. Under the current economic environment of low inflation, the Company believes that the FIFO method will result in a better measurement of operating results. The operating results of all years prior to fiscal 1993 have been restated to apply the new method retroactively. The effect of the accounting change on net income as previously reported was to reduce net income by $4,001, $416 and $3,791 for fiscal 1992, 1991 and 1990, respectively. In addition, earnings per common share were reduced by $0.14, $0.02 and $0.13 for fiscal 1992, 1991 and 1990, respectively. See Note 3 to the Company's Consolidated Financial Statements. (2) See Note 2 to the Company's Consolidated Financial Statements for information with respect to the acquisition of Logo 7 and Universal Industries, Inc. (3) Includes 53 weeks. All other years presented include 52 weeks. (4) Reflects the Company's adoption of SFAS No. 96 "Accounting for Income Taxes" as of the beginning of the fiscal year. (5) Pro forma income from continuing operations and pro forma income per common share from continuing operations have been calculated by adjusting historical results of operations to give effect to the transactions described in "Use of Proceeds and Refinancing" as if they had been consummated at January 2, 1994. For purposes of preparing the pro forma financial information, the Company assumed interest rates of 11.5% and 5.7% on the Notes and the Senior Credit Facility, respectively. On a pro forma basis, a 1/8% increase in the Company's weighted average variable interest rate for the Senior Credit Facility would have resulted in pro forma income from continuing operations and pro forma income per common share from continuing operations of $6,458 and $0.18, respectively. (6) EBITDA represents earnings before taking into consideration interest expense, income taxes, depreciation and amortization and excludes gain on sale of facilities. EBITDA is included herein to provide additional information related to the Company's ability to service debt. EBITDA should not be considered as an alternative measure of the Company's net income, operating performance, cash flow or liquidity. After giving effect to the Refinancing, for the year ended December 31, 1994, pro forma EBITDA would have been $54,648, pro forma ratio of EBITDA to interest expense would have been 2.35 and pro forma ratio of EBITDA minus capital expenditures to interest expense would have been 1.98. (7) For purposes of computing this ratio, earnings consist of earnings before income taxes and fixed charges. Fixed charges consist of interest expense, amortization of deferred debt issuance costs and one-third of rental expense (the portion considered representative of the interest factor). After giving effect to the Offering (but without giving effect to incremental interest expense associated with borrowings under the Senior Credit Facility on a pro forma basis), the pro forma ratio of earnings to fixed charges would have been 1.41 for the year ended December 31, 1994.

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+SUMMARY The Company.... WMX Technologies, Inc. Location....... The Company's executive offices are located at: 3003 Butterfield Road Oak Brook, Illinois 60521 (708) 572-8800 Business....... The Company is a leading international provider of environmental, engineering and construction, industrial and related services. Through Waste Management, Inc., a wholly owned subsidiary of the Company, the Company provides integrated solid waste management services in North America, consisting of collection, transfer, resource recovery and disposal, to commercial, industrial, municipal and residential customers, as well as to other waste management companies. The Company's solid waste management services include Recycle America(R) and Recycle Canada(R) paper, glass, plastic and metal recycling services; recovery of methane gas from sanitary landfills for use in electricity generation; and medical and infectious waste management services. The Company also provides street sweeping and parking lot cleaning services and Port-O-Let(R) portable sanitation services to municipalities and commercial and special event customers. Chemical Waste Management, Inc., a wholly owned subsidiary of the Company ("CWM"), is a leading provider of hazardous waste management services in the United States. Its chemical waste management services, including transportation, treatment, resource recovery and disposal, are furnished to commercial and industrial customers, as well as to other waste management companies and to governmental entities. CWM also furnishes radioactive waste management services, primarily to electric utilities and governmental entities. Wheelabrator Technologies Inc., an approximately 56%-owned subsidiary of the Company ("WTI"), provides a wide array of environmental products and services in North America and abroad. WTI's clean energy group is a leading developer of facilities and systems for, and provider of services to, the trash-to-energy, energy, and independent power markets. Through the clean energy group, WTI develops, arranges financing for, operates and owns facilities that dispose of trash and other waste materials in an environmentally acceptable manner by recycling them into energy in the form of electricity and steam. WTI's clean water group is principally involved in the design, manufacture and operation of facilities and systems used to purify water, to treat municipal and industrial wastewater, to treat and manage biosolids resulting from the treatment of wastewater by converting them into useful fertilizers, and to recycle organic wastes into compost material useable for horticultural and agricultural purposes. The clean water group also designs and manufactures various products and systems used in water and wastewater treatment facilities and industrial processes, precision profile wire screens for use in groundwater wells and other industrial and municipal applications, and certain other industrial equipment. WTI's clean air group designs, fabricates and installs technologically advanced air pollution emission control and measurement systems and equipment, including systems which remove pollutants from the emissions of WTI's trash-to-energy facilities as well as power plants and other industrial facilities. Rust International Inc., a subsidiary owned approximately 56% by CWM and 40% by WTI ("Rust"), furnishes engineering, construction and environmental and infrastructure consulting services, hazardous and radioactive substances remediation services and other on-site industrial and related services, primarily to clients in government and in the chemical, petrochemical, nuclear, energy, utility, pulp and paper, manufacturing, environmental services and other industries. Rust also has an approximately 40% interest in NSC Corporation, a publicly traded provider of asbestos abatement services. The Company provides comprehensive waste management and related services internationally, primarily through Waste Management International plc, a subsidiary owned 56% by the Company, 12% by Rust and 12% by WTI ("Waste Management International"). Waste Management International provides a wide range of solid and hazardous waste management services (or has interests in projects or companies providing such services) in ten countries in Europe and in Argentina, Australia, Brunei, Hong Kong, Indonesia, Malaysia, New Zealand, Singapore and Taiwan. Waste Management International also has an approximately 20% interest in Wessex Water Plc, an English publicly traded company providing water treatment, water distribution, wastewater treatment and sewerage services. FINANCIAL INFORMATION (SEE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY BEGINNING ON PAGE F-1) (000'S OMITTED IN TABLE, EXCEPT PER SHARE AMOUNTS) <TABLE> <CAPTION> YEAR ENDED DECEMBER 31 ----------------------------------------------------------- 1990(1) 1991(2) 1992(3) 1993(4) 1994(5) ----------- ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> <C> Revenue................. $ 6,034,406 $ 7,550,914 $ 8,661,027 $ 9,135,577 $10,097,318 Net income.............. $ 684,762 $ 606,323 $ 850,036 $ 452,776 $ 784,381 Earnings per common and common equivalent share.................. $ 1.44 $ 1.23 $ 1.72 $ .93 $ 1.62 Total assets............ $10,518,243 $12,572,310 $14,114,180 $16,264,476 $17,538,914 Long-term debt, less portion payable within one year............... $ 3,139,623 $ 3,782,973 $ 4,312,511 $ 6,145,584 $ 6,044,411 Dividends per share..... $ .35 $ .42 $ .50 $ .58 $ .60 </TABLE> - --------- (1) The results for 1990 include an extraordinary charge of $24,547,000, or $.05 per share, representing the Company's percentage interest in the writedown by WTI of WTI's investment in the stock of The Henley Group, Inc. and Henley Properties Inc. to market value. (2) The results for 1991 include a special charge of $296,000,000 (before tax and minority interest) primarily to reflect then current estimates of the environmental remediation liabilities at waste disposal sites previously used or operated by the Company and its subsidiaries or their predecessors. (3) The results for 1992 include a non-taxable gain of $240,000,000 (before minority interest) resulting from the initial public offering of Waste Management International; special charges of $219,900,000 (before tax and minority interest) primarily related to writedowns of the Company's medical waste business, CWM incinerators in Chicago, Illinois and Tijuana, Mexico and Brand's investment in its asbestos abatement business and certain restructuring costs incurred by Brand and CWM related to the formation of Rust; and one time after-tax charges aggregating $71,139,000, or $.14 per share, related to the cumulative effect of adopting two new accounting standards. See Notes 2, 11 and 13 to the Company's Consolidated Financial Statements. (4) The results for 1993 include a non-taxable gain of $15,109,000 (before minority interest) relating to the issuance of shares by Rust, as well as the Company's share of a special asset revaluation and restructuring charge of $550,000,000 (before tax and minority interest) recorded by CWM related primarily to a revaluation of CWM's thermal treatment business, and a provision of approximately $14,000,000 to adjust deferred income taxes resulting from the 1993 tax law change. See Notes 2 and 13 to the Company's Consolidated Financial Statements. (5) The results for 1994 include a charge of $9,200,000 (before tax and minority interest) recorded by Rust to write off assets and to recognize costs of exiting certain of Rust's service lines and closing offices in a consolidation of its engineering and construction groups. See Note 13 to the Company's Consolidated Financial Statements. (6) Certain amounts have been restated to conform to 1994 classifications. Recent Developments.. On April 19, 1995, the Company announced operating results for the three months ended March 31, 1995. Net income for the first quarter of 1995 was $101,245,000, or $.21 per share, compared to $162,612,000, or $.34 per share, in the same quarter a year earlier. Revenue in the first quarter of 1995 rose to $2,604,909,000 from $2,284,067,000 in the first quarter of 1994. In the first quarter of 1995, CWM recorded a special charge of approximately $141,000,000 before tax primarily related to a revaluation of investments in certain hazardous waste treatment and processing technologies and facilities due to continued deterioration of the hazardous waste market.

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+SUMMARY OF PROSPECTUS The following summary is qualified in its entirety and should be read in conjunction with the more detailed information and financial statements appearing elsewhere in this Prospectus. Pro-Fac: Pro-Fac is an agricultural cooperative corporation formed in 1960 under New York law to process and market crops grown by its members. Only growers of crops marketed through Pro-Fac (or associations of such growers) can become members of Pro-Fac. A grower becomes a member of Pro-Fac through the purchase of common stock, which obligates the grower to supply, and Pro-Fac to purchase, crops for delivery to and processing by Curtice-Burns Foods, Inc. ('Curtice-Burns' or the 'Company'). The principal office of Pro-Fac is at 90 Linden Place, Rochester, New York 14625; its telephone number is (716) 383-1850. Recent Changes in Relationship with Curtice-Burns: Curtice-Burns is a producer and marketer of processed food products, including canned and frozen fruits and vegetables, canned desserts and condiments, fruit fillings and toppings, canned chilies and stews, salad dressings, pickles, peanut butter and snack foods. In addition, Curtice-Burns manufactures cans, which are both utilized by the Company and sold to third parties. Pro-Fac and Curtice-Burns were established together in the early 1960s and have had a long-standing contractual relationship under an Integrated Agreement pursuant to which Pro-Fac provided crops and financing to Curtice-Burns, Curtice-Burns provided a market and management to Pro-Fac, and Pro-Fac shared in the profits of Curtice-Burns. On November 3, 1994, Pro-Fac acquired Curtice-Burns (the 'Acquisition'), and Curtice-Burns became a wholly-owned subsidiary of Pro-Fac. In connection with the Acquisition, Agway Inc. and the other shareholders of Curtice-Burns received $19.00 per share in cash for their shares of common stock of Curtice-Burns. The purchase price and fees and expenses related to the Acquisition were financed with borrowings under a new credit agreement (the 'New Credit Agreement') with Springfield Bank for Cooperatives, predecessor to CoBank ACB (the 'Bank'), and the proceeds of the Company's 12-1/4 percent Senior Subordinated Notes due 2005 (the 'Notes'). Pro-Fac has guaranteed the obligations of the Company under the New Credit Agreement and the Notes. As a result of the indebtedness incurred in connection with the Acquisition, Curtice-Burns is a much more highly leveraged company, with higher interest expenses, than prior to the Acquisition. The New Credit Agreement and the Notes restrict the ability of Pro-Fac to amend the Pro-Fac Marketing Agreement. The New Credit Agreement and the Notes also restrict the amount of dividends and other payments that may be made by the Company to Pro-Fac. Such restrictions on the flow of cash to Pro-Fac may affect the ability of Pro-Fac to pay dividends on its common and preferred stock or to repurchase common or preferred stock. Pro-Fac Securities: Common Stock. Common stock, par value $5, is sold for cash at its par value to all growers or associations of growers who become members of Pro-Fac, and ownership of common stock is thus synonymous with membership in Pro-Fac. The common stock investment required of each new member is based upon the nature, location, and quantity of particular crops in particular locations. In determining the level of common stock investment required for a member who desires to market a specified quantity or acreage of a crop through Pro- Fac, the Board of Directors takes into account the expected Commercial Market Value ('CMV') of the crop, the level of interest in marketing that crop through Pro-Fac and other factors. Common stock may only be held by members of Pro-Fac who are growers of crops marketed through Pro-Fac (or by associations of such growers), and may only be transferred with the written consent of Pro-Fac. Any proposed purchaser of outstanding common stock must be a grower willing to assume all of the seller's obligations as a member of Pro-Fac and must be acceptable to the Board of Directors. Upon the purchase of common stock, a new member of Pro-Fac executes the General Marketing Agreement, which provides for (1) delivery of crops; (2) the availability of facilities for receiving and processing the crops; (3) the operation of a single marketing pool for all crops delivered based upon the establishment of the CMV, as defined, of each crop each year; and (4) the manner of payment by Pro-Fac to its members of the purchase price for delivered crops. Annual crop agreements supplement the General Marketing Agreement by setting forth quality specifications, terms and conditions for the production and delivery of the member's specific crop, and the relative value weighting to be given to raw product by grade category. See 'Business of Pro-Fac.' Retains. Retains are issued to reflect the retention by Pro-Fac of a portion of its proceeds, as described below. Patronage proceeds are its gross receipts derived from sources that under federal tax law qualify as patronage income, which is primarily proceeds from the sale of crops supplied by members of Pro-Fac, as well as transactions that facilitate or are directly related to such marketing activities. Under the bylaws of Pro-Fac, net proceeds from patronage income must be paid or allocated each year to each member on the basis of the business done by that member with Pro-Fac during the preceding crop year. Distribution may be made in cash or by allocating to the account of each member his interest in that portion of the proceeds retained by Pro-Fac for use as working capital or for such other purposes as may be determined by the Board of Directors ('retains'). Such retains are made up of allocations for which qualified notices have been distributed ('qualified retains') and non-qualified notices of allocations ('non-qualified retains'). Qualified retains are freely transferable and normally mature into preferred stock at its par value, $25 per share, in December of the fifth year after allocation. Although there were, for several years preceding the Acquisition, two broker-dealers making a market in Pro-Fac qualified retains, no such market currently exists, and there can be no assurance that any such market will be reestablished. Non-qualified retains may not be sold or purchased and may, in the discretion of the Board of Directors, be redeemed after five years for cash and/or preferred stock. In the past, qualified retains have been converted into Non-Cumulative Preferred Stock upon maturity, and Non-Cumulative Preferred Stock has been used to redeem non-qualified retains. It is the intention of the Board of Directors that retains maturing or redeemed in the future, commencing with the retains expected to mature or be redeemed in fiscal 1996, will be converted into, or redeemed using, Class A Cumulative Preferred Stock. With respect to retains issued prior to September 1995, however, it is expected that the Board will permit holders of such retains to elect to receive Non-Cumulative Preferred Stock rather than Class A Cumulative Preferred Stock. See 'Description of Pro-Fac Securities.' Preferred Stock. Until October 1995, all preferred stock issued by Pro-Fac has been Non-Cumulative Preferred Stock. On October 10, 1995, Pro-Fac consummated an exchange offer in which shares of Class A Cumulative Preferred Stock ('Cumulative Preferred Stock') were exchanged for outstanding shares of Non-Cumulative Preferred Stock (the 'Exchange Offer'). The purpose of the Exchange Offer was to provide stockholders with the opportunity to exchange, on a share-for-share basis, shares of Non-Cumulative Preferred Stock (which are highly illiquid) for shares of Cumulative Preferred Stock (which have been accepted for inclusion in the NASDAQ National Market System). It is the intention of the Board of Directors that retains maturing or redeemed in the future, commencing with the retains expected to mature or be redeemed in fiscal 1996, will be converted into, or redeemed using, Cumulative Preferred Stock. With respect to retains issued prior to September 1995, however, it is expected that the Board will permit holders of such retains to elect to receive Non-Cumulative Preferred Stock rather than Cumulative Preferred Stock. Holders of shares of Cumulative Preferred Stock will be entitled to receive, when, as and if declared by the Board, out of assets of Pro-Fac legally available therefor, cumulative cash dividends at a quarterly rate equal to $0.43 per share (or an annual rate of approximately 6.88% of the liquidation preference of $25.00 per share). Although the Cumulative Preferred Stock has been accepted for inclusion in the NASDAQ National Market system, there can be no assurance that an established and liquid market for the Cumulative Preferred Stock will develop or that it will continue if one develops. Holders of Non-Cumulative Preferred Stock are entitled to receive, in preference to dividends on Pro-Fac's shares of Common Stock, dividends at a rate of not less that 6% per annum, when, as and if declared by the Board of Directors out of legally available funds. The Board does not anticipate paying a dividend in excess of 6% per annum on shares of Non-Cumulative Preferred Stock. Currently, there is no active trading market for the Non-Cumulative Preferred Stock. The reduction in the number of outstanding shares of Non-Cumulative Preferred Stock as a result of the Exchange Offer and the Board's intention to issue primarily Cumulative Preferred Stock in the future as retains mature or are redeemed may result in a further reduction in the liquidity of Non-Cumulative Preferred Stock. See 'Description of Pro-Fac Securities.' Use of Proceeds: The cash retained as a result of distributing net proceeds in the form of retains rather than in cash will be used for general corporate purposes as determined by the Board of Directors at the time of receipt. No separate cash proceeds are realized from the issuance of preferred stock that results from the conversion of retains. Tax Treatment of Amounts Paid or Allocated to Members: Under the federal income tax laws, members of Pro-Fac must include currently in their taxable income calculation the purchase price for their crops, including all cash payments and allocations of qualified retains. Non-qualified retains are not subject to current taxation to the members and are taxable to the members only if and when redeemed by Pro-Fac. See 'Business of Pro-Fac.' Benefits of Membership: From the point of view of a member of Pro-Fac there are several advantages that he receives from his membership in Pro-Fac, which include the following: 1. The primary advantage is that the member has an established market for a portion of his crop in advance of the crop season. 2. A member of Pro-Fac can specialize in the production of one or a few crops, which normally tends to increase the efficiency of his operations, yet have the opportunity to participate in the potential benefits of crop and geographical diversity, since he shares in the proceeds of all crops marketed through Pro-Fac in proportion to the value of his own crops marketed through Pro-Fac. 3. Members of Pro-Fac have the satisfaction of knowing that their views will be heard in the Cooperative because at least 80 percent of the directors of Pro-Fac and all of the members of the commodity committees are also grower-members. The members of the commodity committees and all of the directors (except for directors, who may not constitute more than 20 percent of the entire board, appointed by the Board of Directors to represent the public interest) are also elected by the members of Pro-Fac on a regional basis. 4. Should Pro-Fac or Curtice-Burns need additional crops for an existing division of Curtice-Burns, qualified members are given the first opportunity to provide those crops. 5. The member obtains the benefit of the expertise of Curtice-Burns in the processing and marketing of food products. 6. Over a period of years, depending on the results of operations, the member has the opportunity to build a substantial equity investment in Pro-Fac retains and preferred stock. 7. The investment of the member in Pro-Fac common stock and the market for his products derived from that investment are transferable, subject to the approval of the Pro-Fac Board of Directors, so that should he want to reduce or terminate his production of crops, he can liquidate his common stock investment through the sale of his shares to an eligible grower or to Pro-Fac itself. To obtain these advantages the member must: 1. Purchase shares of common stock of Pro-Fac based upon the type, location, and volume of crops he agrees to market through Pro-Fac. 2. Agree to the retention by Pro-Fac of a portion of its proceeds from patronage business above the CMV of crops marketed. For example, in the 1995, 1994, and 1993 fiscal years, 80 percent of such proceeds, excluding non-qualified retains, was so retained by Pro-Fac each year. For the first five years, such amounts are retained without payment of interest or dividends. In addition, in such fiscal years, 100 percent of such proceeds allocated as non-qualified retains was so retained by Pro-Fac. A member's investment in the retains and preferred stock of Pro-Fac is relatively illiquid. Recent sales of qualified retains and preferred stock have been at prices substantially below the face amounts thereof. 3. Agree to the delayed payment of a portion of the purchase price for his crops. Such delay will exceed the industry average in many instances. 4. Include in his income for tax purposes not only the cash payments received for his crops but also the amount of qualified retains allocated to his account in that year and any non-qualified retains redeemed in that year. 5. Assume the risk that he may be paid less than CMV for his crops. See 'Risk Factors - Member's Share of Proceeds Could be Less Than CMV' and 'Business of Pro-Fac.' RISK FACTORS Member's Share of Proceeds Could be Less Than CMV: Payment for crops is based upon the CMV of such crops, which is the weighted average of the prices paid by other commercial processors for similar crops used for similar or related purposes sold under preseason contracts or in the open market in the same or similar market areas. While Curtice-Burns has agreed to pay to Pro-Fac at least the CMV of Pro-Fac crops, the total proceeds of Pro-Fac depend in large part on the overall profitability of Curtice-Burns. There can be no assurance that payment by Pro-Fac to a member for his crops from the proceeds of Pro-Fac will be equal to or greater than the CMV of those crops. Although the members of Pro-Fac have been paid more than the CMV of their crops in every year of Pro-Fac operations except 1963, 1969, and 1970, the increased indebtedness incurred by Curtice-Burns in connection with the Acquisition has increased the leverage and interest expense of Curtice-Burns, thus increasing the risk that Pro-Fac may, in one or more coming years, pay members less than the CMV of their crops. There is no relationship between the CMV of crops and the cost of producing such crops since CMV is determined by supply and demand in the marketplace. While each year Pro-Fac must, under its bylaws, pay or allocate to each member his pro rata share of the net proceeds of Pro-Fac from patronage business, Pro-Fac may retain whatever portion of such proceeds the Board of Directors may determine to be necessary for the operations of Pro-Fac, allocating the retained portion to the accounts of members. There is thus no assurance that a member of Pro-Fac will receive cash payments for his crops equal to the CMV thereof or that he will receive any cash payments in addition to CMV even if his share of the proceeds of Pro-Fac from patronage business is equal to or greater than CMV. Delayed Payments for Crops: Pro-Fac members receive delayed payment of a portion of the purchase price for their crops. The delay exceeds the industry average in many instances. See 'Business of Pro-Fac - Marketing of Members' Crops - Timing of Payments for Crops' and '- Harvest-Time Advances.' Inclusion of Certain Payments in Taxable Income: A member of Pro-Fac must include in his taxable income for federal income tax purposes his share of the net proceeds of Pro-Fac realized from patronage business which are paid to him in cash or allocated to his account as qualified retains. Non- qualified retains are included in the member's taxable income only upon redemption. See 'Business of Pro-Fac.' Increase in Leverage of Curtice-Burns: As a result of the Acquisition, Curtice-Burns is highly leveraged, and such leverage may increase as a result of further borrowings to fund capital expenditures, working capital needs or for other general corporate purposes. The degree to which the Company is leveraged is important to members of Pro-Fac because the amount paid by Curtice-Burns for crops supplied by Pro-Fac, and the amount of dividends that Curtice-Burns may pay to Pro-Fac, varies depending upon the profitability of Curtice-Burns. Such payments, in turn, affect what Pro-Fac may pay to its members for their crops and the ability of Pro-Fac to pay dividends on, or repurchase, its common and preferred stock. A high degree of leverage may make Curtice-Burns more vulnerable to economic downturns, may limit its ability to withstand competitive pressures, and may impair the Company's ability to obtain financing in the future for working capital, capital expenditures, and general corporate purposes. Non-Transferability of Non-Qualified Retains: Non-qualified retains are non-transferable and do not bear interest. See 'Description of Pro-Fac Securities.' Absence of Market for Preferred Stock and Qualified Retains: The preferred stock and qualified retains of Pro-Fac may be transferred without the consent of Pro-Fac. There were, for several years preceding the Acquisition, broker-dealers making a market in Pro-Fac Non-Cumulative Preferred Stock and qualified retains, but no such market currently exists. There is no assurance that these arrangements, or any other organized market for Pro-Fac preferred stock and qualified retains, will be re-established. The purpose of the Exchange Offer was to provide stockholders with the opportunity to exchange, on a share-for-share basis, shares of Non-Cumulative Preferred Stock (which are highly illiquid) for shares of Cumulative Preferred Stock (which have been accepted for inclusion in the NASDAQ National Market System). There can be no assurance, however, that an established and liquid market for the Cumulative Preferred Stock will develop or that it will continue if one develops. The reduction in the number of outstanding shares of Non-Cumulative Preferred Stock as a result of the Exchange Offer and the Board's intention to issue primarily Cumulative Preferred Stock in the future as retains mature or are redeemed may result in a further reduction in the liquidity of Non-Cumulative Preferred Stock. Qualified retains do not bear interest. See 'Description of Pro-Fac Securities.' Effect of Exchange Offer on Patronage Income in Fiscal 1996: Because dividends on the Non-Cumulative Preferred Stock are payable annually (with the most recent dividend having been paid in July 1995) and dividends on the Cumulative Preferred Stock are paid quarterly (with dividends expected to be paid on October 31, 1995, January 31, 1996 and April 30, 1996), the exchange of Non-Cumulative Preferred Stock for Cumulative Preferred Stock on October 10, 1995 is likely to result in the payment of 1-3/4 years of dividends to the holders of exchanged shares in fiscal 1996. Such dividends will reduce the amount of patronage income allocated to members in fiscal 1996. Possible Changes of Treatment of Retains: The current policy of Pro-Fac with regard to the maturing of qualified retains into preferred stock and the redemption of non-qualified retains for preferred stock and/or cash is described in this Prospectus under 'Description of Securities Offered.' This policy is, however, subject to change, in the discretion of the Board of Directors. Each Member Receives One Vote: Each member of Pro-Fac has one vote, regardless of the number of shares of common stock held. Further, if two or more members are joined in a single farming enterprise, the participating members receive only a single vote. Accordingly, even a member with substantial holdings of common stock will have relatively little control over the election of directors or other matters on which members may vote. See 'Description of Pro-Fac Securities.' Possible Discontinuance of Crop: Pro-Fac continuously reviews the ability of its members to produce high-quality crops, and Curtice Burns continuously reviews its ability to process and market profitably the crops it buys from Pro-Fac. As a result of such reassessment, Pro-Fac may determine to cease marketing a particular crop and terminate the marketing agreements of the members producing that crop for sale through the Cooperative. The members affected would be required to sell all of their common stock supporting that crop to Pro-Fac for cash at its par value, plus any accrued dividends. Pro-Fac may also adjust the quantity of a crop to be marketed for members, either permanently or temporarily, in several ways described herein under 'Business of Pro-Fac - Marketing of Members' Crops - Quantity of Crops

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+PROSPECTUS SUMMARY The following summary information is qualified by the more detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the term "Company" shall include Metatec Corporation and its wholly owned subsidiary, Metatec/Discovery Systems, Inc. ("Discovery Systems"), and all references in this Prospectus assume no exercise of the Underwriters' over-allotment option or of the options to purchase 469,742 Shares that are currently outstanding under the Company's stock option plans. See "Management -- Stock Option Plans." THE COMPANY Metatec Corporation is a leading provider of CD-ROM (compact disc-read only memory) manufacturing, application software consulting, and publishing services. The Company targets two principal markets: organizations seeking to publish information on CD-ROM and personal computer users who own CD-ROM equipped, multimedia computer systems. As a one-stop source of CD-ROM solutions, the Company serves approximately 200 customers in publishing, communications, high technology, government, and professional services. The Company, which has experienced compounded annual revenue growth of 29% from 1990 to 1994, is organized into three business divisions: - Manufacturing Services provides CD-ROM mastering, replication, and distribution services in addition to providing similar services to radio syndication customers for audio compact discs ("Audio CDs"). Current customers include Bell & Howell Publications Systems Company, Digital Equipment Corporation, and Research Institute of America Inc. - Software Services provides information publishers with design and development services for CD-ROM based publications which, in turn, often produce Manufacturing Services revenues for the Company. Current customers include Phillips Business Information, Inc., CompuServe Incorporated, and Harcourt Brace College Publishers. - Publishing Services produces and publishes NautilusCD, the first subscription-based monthly multimedia CD-ROM magazine, which has approximately 18,000 subscribers. CD-ROM technology combines audio, video, text, and graphics in one medium with the capability to store, search, and retrieve vast quantities of information. One CD-ROM can contain up to 650 megabytes of data, or the equivalent of approximately 800 high density floppy discs or 300,000 pages of text. The Company believes that businesses and individuals are increasingly turning to CD-ROM technology as a cost-effective means of organizing, storing, and disseminating large quantities of information quickly to widely diversified groups of users. According to published industry information, the North American installed base of CD-ROM disc drives increased from less than 1.5 million in 1991 to more than 19 million in 1994, and is estimated to be more than 37 million by the end of 1995. The Company believes that only a small percentage of applications suitable for CD-ROM have actually been implemented to date for both individuals and businesses. The Company's goal is to become the leading provider of information distribution services utilizing optical disc technology. The Company believes that the market for information distributed on CD-ROM can be expanded by the use of communication networks, such as the Internet, to provide interim database and application updates. The Company intends to begin offering such updating capability as part of its services during 1995. The principal offices of the Company are located at 7001 Metatec Boulevard, Dublin, Ohio 43017, and its telephone number is (614) 761-2000. THE OFFERING <TABLE> <S> <C> Shares offered................................. 1,500,000 Shares Shares to be outstanding after the Offering(1).................................. 6,775,964 Shares Use of proceeds................................ For repayment of bank indebtedness, expansion of manufacturing capacity, and general corporate and working capital purposes. See "Use of Proceeds." The Nasdaq Stock Market symbol................. META </TABLE> - --------------- (1) Includes 600,000 Shares which are subject to risk of forfeiture. See "Management -- Certain Transactions" and Note 7 of the Notes to Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL INFORMATION <TABLE> <CAPTION> THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, ----------------------------------------------- ----------------- 1990 1991 1992 1993 1994 1994 1995 ------- ------- ------- ------- ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA(1): Revenues............................................... $10,355 $13,615 $16,877 $21,318 $28,943 $6,007 $9,179 Earnings (loss) from continuing operations before income taxes......................................... (1,149) (1,073) (371) 1,062 2,425 172 879 Income tax benefit (expense)........................... 65 (732) (52) (336) Net earnings (loss) from continuing operations......... (1,149) (1,008) (371) 1,062 1,693 120 543 Net earnings (loss).................................... 581 (428) (371) 1,062 1,693 120 543 Net earnings (loss) per common share from continuing operations: Primary.............................................. $ (0.35) $ (0.30) $ (0.11) $ .25 $ .33 $ .02 $ .10 Fully diluted........................................ $ (0.35) $ (0.30) $ (0.11) $ .21 $ .32 $ .02 $ .10 Primary net earnings (loss) per common share........... $ 0.18 $ (0.13) $ (0.11) $ .25 $ .33 $ .02 $ .10 Weighted average primary number of common shares(2).... 3,312 3,370 3,372 4,261 5,135 5,022 5,409 Pro forma primary net earnings (loss) per common share(3)............................................. $ .25 $ .10 Weighted average shares used in computing pro forma primary net earnings (loss) per common share(3)...... 6,635 6,909 </TABLE> <TABLE> <CAPTION> MARCH 31, 1995 --------------------- AS ACTUAL ADJUSTED(4) ------- ----------- <S> <C> <C> BALANCE SHEET DATA: Working capital..................................................................................... $ 1,276 $ 5,957 Property, plant and equipment, net.................................................................. 24,689 29,689 Total assets........................................................................................ 32,110 40,902 Long-term debt and capital lease obligations (including current maturities)......................... 8,386 258 Stockholders' equity................................................................................ $18,822 $ 35,742 </TABLE> - --------------- (1) Since 1990, information distribution services have been the primary business of the Company, and, in 1992, the Company discontinued its prior real estate operations. The 1990 amounts have been reclassified to conform with the 1991 presentation which treats prior real estate operations as discontinued. (2) Includes 196,242 and 524,477 Shares for the years ended December 31, 1993 and 1994, respectively, and 212,042 and 600,000 Shares for the three months ended March 31, 1994 and 1995, respectively, which are subject to risk of forfeiture. See "Management -- Certain Transactions" and Note 7 of the Notes to Consolidated Financial Statements. (3) Assumes that on January 1, 1994, the Company issued 1,500,000 Shares at an assumed public offering price of $12.25 per share, the last reported sale price of the Shares on April 19, 1995, and used the proceeds to retire long-term debt, the outstanding balances of which at March 31, 1995 aggregated $8,128,053. See Note 3 of the Notes to Consolidated Financial Statements. Pro forma primary net earnings per common share for 1994 is calculated based upon net earnings adjusted for: a reduction in after-tax interest expense of $230,000 relating to the repayment of the long-term debt (and a former capital lease refinanced in 1994 with such debt); an increase in income tax expense of $226,000 resulting from the elimination of the use of net operating loss carryforwards; and the elimination of the after tax gain on sale of a marketable security of $64,000. Pro forma primary net earnings per common share for the three months ended March 31, 1995 is calculated based upon net earnings adjusted for a $118,000 reduction in after-tax interest expense related to the repayment of the long-term debt. See "Use of Proceeds." (4) Adjusted to give effect to the Offering at an assumed public offering price of $12.25 per share, the last reported sale price of the Shares on April 19, 1995, and the application of the estimated net proceeds by the Company. See "Use of Proceeds."

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+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this Prospectus. Continental Cablevision, Inc. is referred to herein as the "Company" or "Continental," which terms include its consolidated subsidiaries unless the context indicates otherwise. The subscriber-related information for 1995 in this Prospectus, except as otherwise provided, gives effect to (i) the acquisition on October 5, 1995 by Continental of the cable television businesses and assets of Providence Journal Company ("Providence Journal") through the merger of Providence Journal with and into Continental and related transactions (the "Merger"); (ii) the recent acquisitions of systems serving approximately 88,000 basic subscribers in Chicago, Illinois ("Cablevision of Chicago"), 74,000 basic subscribers in Michigan ("Columbia Cable of Michigan") and 12,000 basic subscribers in Northern California ("Consolidated Cablevision of California," collectively the "Recent Acquisitions"); and (iii) the pending acquisition of the remaining 66.2% interest in N-COM Limited Partnership II ("N-COM"), which owns systems serving approximately 56,000 basic subscribers in Michigan (the "Pending N-COM Buyout," collectively with the Merger and the Recent Acquisitions, the "1995 Acquisitions"). In addition, the share information in this Prospectus, except as otherwise provided, (i) gives effect to a stock dividend, effective September 29, 1995, of 24 shares of the respective class of Common Stock for each share of Class A Common Stock and Class B Common Stock outstanding on the record date for such stock dividend and (ii) assumes that the U.S. Underwriters' over-allotment option is not exercised. THE COMPANY OVERVIEW Continental is a leading provider of broadband communications services. As of June 30, 1995, the Company's systems and those of its U.S. affiliates passed approximately 7.1 million homes and provided service to approximately 4.1 million basic subscribers, making the Company the third-largest cable television system operator in the United States. In addition, Continental has pursued and continues to pursue investments that are complementary to its core business, including (i) international broadband communications ventures; (ii) interests in the telecommunications and technology industries, including companies offering competitive-access telephony and direct broadcast satellite ("DBS") service; and (iii) interests in programming services. Continental's business strategy is to capitalize on its clustered systems, technologically advanced broadband networks, management expertise and reputation for quality to compete effectively in new and existing businesses and markets. For 1994, the Company's pro forma revenues were approximately $1.6 billion and its pro forma operating income before depreciation, amortization and non-cash compensation was $675.9 million. Cable Television Systems. The Company's five management regions operate systems that are organized into 19 operating clusters in 20 states. As of June 30, 1995, approximately 55.9% of Continental's subscribers were located in the Company's seven largest operating clusters. The 1995 Acquisitions increase the total number of subscribers in these clusters by approximately 42.8%, to more than 2.2 million. Continental believes that its operating scale in key markets generates significant benefits, including lower programming costs and other operating efficiencies, and enhances its ability to develop and deploy new technologies and services. Continental's systems have channel capacity and addressability that are among the highest in the cable industry. The Company's systems are located principally in suburban communities adjacent to major metropolitan markets, as well as mid-sized cities, that generally have attractive demographics and are geographically diverse. These systems serve communities with a median household income of approximately $42,300 versus the national median of approximately $37,900. Continental believes that its technologically advanced broadband networks and the demographic profile of its subscriber base, coupled with its effective marketing, are essential to its ability to sustain pay to basic penetration rates and total monthly revenue per average basic subscriber that are among the highest in the cable industry. Continental believes that the geographic diversity of its system clusters reduces its exposure to economic, competitive or regulatory factors in any particular region. International. Continental participates in several broadband communications ventures outside the United States. The Company owns a 50% interest in Fintelco S.A. ("Fintelco"), the largest cable television system operator in Latin America, which currently serves over 620,000 subscribers in Argentina. Continental has also formed a joint venture ("Optus Vision") in Australia, in which it holds a 46.5% equity interest. Optus Vision is constructing a broadband communications network to provide local telephony, cable television and a variety of advanced interactive services to business and residential customers. Continental has a 25% equity interest in Singapore Cablevision Pte Ltd ("SCV"), a joint venture that is constructing a broadband network to provide cable television and a variety of advanced interactive services to substantially all households in Singapore. Continental also has recently signed a memorandum of understanding relating to the provision of cable television, telephony, multimedia and interactive services in Japan and continues to pursue other international opportunities, principally in Latin America and the Pacific Rim. Telecommunications and Technology. The Company has investments in the telecommunications and technology industries, including: (i) a 20% ownership interest in Teleport Communications Group Inc. ("TCG"), a provider of local telecommunications services to high-volume business customers in major metropolitan areas nationwide; (ii) controlling interests in two companies that provide local telecommunications services to business customers in Richmond, Virginia and Jacksonville, Florida; and (iii) an approximate 10% ownership interest in PrimeStar Partners, L.P. ("PrimeStar"), a provider of medium- powered, 73-channel DBS service to over 500,000 subscribers nationwide. Programming. The Company has made and continues selectively to make investments in programming services. The Company's programming investments include interests in Turner Broadcasting System ("Turner"), E! Entertainment Television ("E!"), New England Cable News, Home Shopping Network ("HSN"), Viewer's Choice, Digital Cable Radio Associates ("Music Choice"), the Golf Channel and the Food Channel. BUSINESS STRATEGY Continental's business strategy is to capitalize on its clustered systems, technologically advanced broad-band networks, management expertise and reputation for quality to compete effectively in new and existing businesses and markets. U.S. Operations. The Company's strategy in the United States is to acquire and retain customers that will subscribe to a broad range of video, high-speed data, telephony and other telecommunications services. Execution of this strategy involves the following key operating principles: (i) expansion of its nationwide operating scale (as measured by homes passed); (ii) further development of large regional system clusters in demographically attractive markets; (iii) development of technologically advanced broadband networks capable of providing expanded video, high-speed data, telephony and other telecommunications services; (iv) dedication to decentralized and locally responsive management; (v) increased focus on marketing; (vi) commitment to superior customer service and community relations; and (vii) continued leadership in regulatory and other industry matters. The telecommunications industry, including the cable television and telephony industries, is in a period of consolidation characterized by mergers, joint ventures, acquisitions, cable system exchanges and similar transactions. Management believes that the Company is well-positioned to participate in this consolidation due to its clustered systems, the technical quality of its cable plant, its management expertise and its strong relationships within the cable industry. Continental has recently acquired and will continue selectively to acquire cable television systems that are contiguous, or in close proximity, to its existing systems. The Company also reviews opportunities to exchange its systems for those of other cable television system operators in order to enlarge and enhance its regional system clusters and may acquire cable television systems that would form the basis for new system clusters. Continental generates incremental operating income from such acquisitions and exchanges through the expansion of service offerings and efficiencies resulting from system consolidation. Continental is currently rebuilding and upgrading its U.S. systems to create advanced hybrid fiber-optic and coaxial cable networks that will serve as the infrastructure for the provision of enhanced video, high-speed data, telephony and other telecommunications services. Continental anticipates making the incremental capital investment required to provide new services as regulations permit and customer demand expands. Continental anticipates that it will be a facilities-based provider of enhanced video, high-speed data and certain telephony services. The Company expects, however, to resell certain services such as wireless and long distance telephony. Continental is currently exploring various business arrangements to provide telephony services in selected markets. Continental's options, which may differ by market, include: (i) affiliating with other cable television companies; (ii) affiliating with a Regional Bell Operating Company ("RBOC") or an Interexchange Carrier ("IXC"); and (iii) entering the business independently. Continental believes that it is well-positioned to provide these services, given its national operating scale, large regional system clusters in demographically attractive markets, technologically advanced broadband networks, existing sale and service organization and reputation for quality. International Operations. Continental has made and continues selectively to pursue investments in international broadband communications networks, principally in Latin America and the Pacific Rim. These investments represent opportunities for Continental to capitalize on its managerial, technical and marketing expertise in international markets. Continental intends to apply its U.S. operating principles, as appropriate, to its international ventures. In addition, Continental receives valuable information and operating experience in businesses, such as telephony, that Continental intends to develop in the United States. In considering such investments, Continental seeks the following characteristics: (i) favorable demographics and attractive growth prospects; (ii) well-capitalized investment partners with extensive knowledge of the local markets; and (iii) favorable political, regulatory and competitive environments. THE OFFERING <TABLE> <S> <C> Class A Common Stock offered: U.S. Offering......................................... shares International Offering................................ shares ------------------ Total............................................... shares ================== Common Stock to be outstanding after the Offering: Class A Common Stock.................................. shares Class B Common Stock.................................. 109,196,050 shares ------------------ Total............................................... shares ================== Series A Preferred Stock to be outstanding after the Offering......................... 1,142,858 shares (28,571,450 shares of Class B Common Stock on a Common Stock equivalent basis) </TABLE> Voting rights...................... While each class of Class A Common Stock has identical economic rights to those of the Class B Common Stock, the voting rights differ. Each share of Class A Common Stock is entitled to one vote, and each share of Class B Common Stock is entitled to ten votes. The Class A Common Stock and Class B Common Stock vote as a single class with respect to all matters submitted to stockholders for a vote. Series A Preferred Stock is entitled to 250 votes per share and is convertible into 25 shares of Class B Common Stock, unless transferred to a person other than a permitted transferee and in certain other circumstances, in which case it is entitled to 25 votes per share and is convertible into 25 shares of Class A Common Stock. Upon completion of the Offering, Continental's Directors and officers as a group will own or control approximately % of the voting power of the outstanding voting stock of the Company. See "Description of Capital Stock." Use of proceeds.................... The net proceeds to the Company from the Offering will be used to repay a portion of indebtedness under a revolving credit facility. The Company expects to borrow under such facility in the future for general corporate purposes, including capital expenditures, investments and acquisitions. See "Use of Proceeds."

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+SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, and the related notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, (i) references to "ASI" herein include Associated Stationers, Inc. and the predecessor thereof as constituted prior to the merger thereof with and into the Company (the "Subsidiary Merger"), with the Company as the surviving corporation, (ii) references to "Associated" herein include Associated Holdings, Inc. and ASI and the respective predecessors thereof as constituted prior to the merger of Associated with and into United (the "Merger" and, together with the Subsidiary Merger, the "Mergers"), with United as the surviving corporation, (iii) references to the "Company" herein include the Company, as the surviving corporation in the Subsidiary Merger, and its consolidated subsidiaries as constituted after consummation of the Subsidiary Merger or, prior to the consummation of the Subsidiary Merger of ASI with and into the Company, the Company and its consolidated subsidiaries as constituted prior to the Subsidiary Merger, and (iv) references to "United" herein are to United, as the surviving corporation in the Merger, and its consolidated subsidiaries (including the Company) as constituted after consummation of the Merger or, prior to consummation of the Merger of Associated with and into United, United and its consolidated subsidiaries (including the Company) as constituted prior to the Merger. The Company is currently engaged in implementing its consolidation plan to integrate the two separate office products wholesale businesses conducted by the Company and ASI prior to the Acquisition (as hereinafter defined). See "Risk Factors -- Risks Inherent In Implementation of Consolidation Plan" and "Business -- Consolidation Plan and Benefits of the Acquisition." Operating data presented herein for 1994 on a pro forma basis includes calendar year 1994 data for Associated and data for the twelve months ended November 30, 1994 for United. Operating data presented herein for the six months ended June 30, 1995 on a pro forma basis includes three months ended June 30, 1995 data for post-Merger United, three months ended March 31, 1995 data for Associated and three months ended February 28, 1995 for United. THE COMPANY OVERVIEW The Company is the largest office products wholesaler in the United States. As a result of the merger of the Company with ASI on March 30, 1995, the Company's net sales on a pro forma basis for calender 1994 were approximately $2.0 billion and for the six months ended June 30, 1995 were approximately $1.1 billion. Through its extensive office products catalogs, the Company markets a full line of over 25,000 (post-consolidation) branded and private brand office and other related business products ("office products"), including traditional office supplies; office furniture and desk accessories; office machines, equipment and supplies; computer hardware, peripherals and supplies; and facilities management supplies, including sanitation products and janitorial items. These products are offered through a network of 39 (post-consolidation) strategically located distribution centers to over 14,000 resellers, consisting principally of commercial dealers and contract stationers, retail dealers, superstores, mail order companies and mass merchandisers. Although the office products distribution industry has seen many changes over the past decade, including the growth of national superstores and a consolidation among wholesalers, dealers and contract stationers, large national wholesalers have continued to perform a significant role in the distribution of office products. For manufacturers, the wholesaler provides wide market coverage, assumes credit risk, carries inventory and processes smaller orders than manufacturers can economically service. In addition, wholesalers provide resellers with prompt service and delivery, a source for filling small quantity orders and the opportunity to obtain credit, minimize investment in inventory and access marketing resources and technical support. COMPETITIVE STRENGTHS The Company believes that it has a strong competitive position attributable to a number of factors, including the following: . Largest Office Products Wholesaler. As the largest office products wholesaler in the United States, the Company has substantial purchasing power and can realize significant economies of scale. . High Level of Customer Service. The Company provides its customers with a broad product selection, a high degree of product availability, expeditious distribution and comprehensive customer assistance. . Diverse Customer Base. With over 14,000 resellers as customers, the Company has one of the broadest customer bases in the industry. . State-of-the-Art Distribution Capabilities. The Company's network of 39 (post-consolidation) distribution centers located throughout the United States employs state-of-the-art technology to efficiently distribute products to customers. . Growth of Private Brand Products. The Company offers a growing line of over 1,300 private brand products under the Universal(TM) brand name, which the Company believes is the broadest private brand product offering in the industry. . Experienced Management Team. The Company's senior management team comprises individuals who combine many years of experience in the office products distribution industry, including experience in acquiring and integrating companies in the office products industry. See "Business -- Competitive Strengths". BUSINESS STRATEGY The Company's business strategy is to seek to improve its competitive position and grow its revenues and profitability through (i) the continuation of a high level of customer service, (ii) expanding the breadth of both its product line and its customer base and (iii) continuing an emphasis on cost effective operations. There can be no assurance that the Company will be able to effect its business strategy in a timely manner, if at all. See "Business -- Business Strategy". CONSOLIDATION PLAN AND BENEFITS OF THE ACQUISITION Consistent with its business strategy, since the consummation of the Acquisition on March 30, 1995, the Company has been engaged in implementing its consolidation plan to integrate its business with the business of ASI. Through the integration of distribution facilities and product lines in a manner designed to enable the Company to offer its customers better service and selection, the Company expects to improve its competitive position. In addition, the Company plans to achieve cost savings and other benefits from the elimination of redundant or overlapping functions and facilities and by minimizing overlapping products. Elements of the consolidation plan include (i) consolidating the product offerings of ASI and the Company by minimizing overlapping products while at the same time adding more niche products, (ii) qualifying for improved terms with vendors as a result of placing higher volume purchases among fewer suppliers, (iii) consolidating distribution centers by eliminating eight redundant facilities and achieving more efficient operations in the four market areas that will continue to have two facilities, (iv) reducing corporate overhead, (v) eliminating redundant sales representatives and (vi) increasing sales of private brand products and off-shore sourcing of these and other products. Management anticipates that the implementation of its consolidation plan should result in significant cost savings and synergies which will enhance the Company's financial and operational performance. Management estimates that, upon phase-in of its consolidation plan over a 12- month period following the Acquisition, the Company expects to realize approximately $26.0 million per year in savings as a result of a successful implementation of its consolidation plan, although the Acquisition is also likely to result in a reduction in the rate of revenue growth for some period following the Acquisition as a result of the loss of some customers to competition. See "Risk Factors -- Risk Inherent In Implementation of Consolidation Plan," "Pro Forma Combined Financial Information" and "Business -- Consolidation Plan and Benefits of the Acquisition." THE ACQUISITION On March 30, 1995, pursuant to an Agreement and Plan of Merger dated as of February 13, 1995 (the "Merger Agreement"), and in accordance with the terms of Associated's related Offer to Purchase dated February 21, 1995 (the "Offer to Purchase"), Associated purchased (together with the Mergers, the "Acquisition") 92.5% of the outstanding shares of common stock, $0.10 par value (the "Shares"), of United for $15.50 per Share, or approximately $266.6 million in the aggregate, pursuant to a tender offer (the "Offer") that expired on March 22, 1995. Immediately thereafter, the Mergers were consummated, with Associated and ASI merging with and into United and the Company, respectively, and United and the Company continuing as the respective surviving corporations. As a result of share conversions in the Merger, immediately after the Merger, the former holders of Associated Common Stock (as hereinafter defined) and warrants or options to purchase Associated Common Stock owned Shares and warrants or options to purchase Shares constituting in the aggregate approximately 80% of the Shares on a fully diluted basis, while pre-Merger holders of Shares (other than Associated-Owned Shares and Treasury Shares (each as hereinafter defined)) owned in the aggregate approximately 20% of the Shares on a fully diluted basis. See "The Acquisition." To finance the Offer, refinance existing debt of ASI, United and the Company, repurchase United stock options and pay related fees and expenses, Associated, ASI, United and the Company entered into (i) the New Credit Facilities (as hereinafter defined) with a group of banks and financial institutions led by The Chase Manhattan Bank (National Association) ("Chase Bank") providing for term loan borrowings of $200.0 million and revolving loan borrowings of up to $300.0 million and (ii) a senior subordinated bridge loan facility with The Roebling Fund, whose investors comprise a group of banks and financial institutions, including Chase Bank, in the aggregate principal amount of $130.0 million (the "Subordinated Bridge Facility"). In addition, simultaneously with the consummation of the Offer, Associated obtained $12.0 million from the sale of additional shares of Associated Common Stock primarily to certain existing holders of Associated Common Stock, which proceeds were used to finance part of the purchase of Shares pursuant to the Offer. The Company used a portion of the net proceeds of the Old Notes to refinance the Subordinated Bridge Facility. See "Financing the Acquisition." The following table sets forth the approximate aggregate sources and uses of funds necessary to consummate the Acquisition: <TABLE> <CAPTION> SOURCES: (DOLLARS IN THOUSANDS) <S> <C> New Credit Facilities (1)......................... $416,537 Subordinated Bridge Facility (2).................. 130,000 Equity Investment................................. 12,000 -------- Total Sources................................... $558,537 ======== USES: Purchase Shares in Offer.......................... $266,629 Refinance Existing Company Debt................... 180,752 Refinance Existing ASI Debt....................... 78,856 Estimated Fees and Expenses (3)................... 29,300 Other (4)......................................... 3,000 -------- Total Uses...................................... $558,537 ======== </TABLE> - -------- (1) Borrowings under the New Credit Facilities at the time the Acquisition was consummated consisted of term loan borrowings of $200.0 million and revolving loan borrowings of approximately $206.8 million. Also included is approximately $9.7 million of additional revolving loan borrowings drawn to pay fees and expenses after consummation of the Acquisition. (2) Refinanced with a portion of the net proceeds of the Old Notes. (3) Excludes approximately $2.6 million borrowed by the Company and $3.2 million borrowed by ASI prior to closing of the Offer to pay fees and expenses in connection with consummation of the Acquisition. These amounts are included under "Refinance Existing Company Debt" and "Refinance Existing ASI Debt," respectively, above. Estimated Fees and Expenses include the discount received by Chase Securities, Inc. ("Chase Securities" or the "Initial Purchaser") on the Old Notes. (4) This amount was used to repurchase United stock options. This amount excludes approximately $3.2 million borrowed by the Company prior to closing of the Offer to discharge compensation and other liabilities in connection with consummation of the Acquisition. This latter amount is included under "Refinance Existing Company Debt" above. THE EXCHANGE OFFER The Exchange Offer applies to $150,000,000 aggregate principal amount of the Old Notes. The form and terms of the New Notes are the same as the form and terms of the Old Notes except that the New Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture pursuant to which the Old Notes were issued. See "Description of the New Notes." The Exchange Offer.......... $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, $150,000,000 aggregate principal amount of the Old Notes are outstanding. The terms of the New Notes and the Old Notes are substantially identical. Based on an interpretation by the staff of the Commission set forth in no-action letters issued to unrelated third parties, the Company believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any person receiving such New Notes, whether or not such person is the holder (other than any such holder or such other person which is an "affiliate" of the Company within the meaning of Rule 405 promulgated under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) such New Notes are acquired in the ordinary course of business of such holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of such New Notes and (iii) neither such holder nor such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes. See "The Exchange Offer -- Purpose and Effect." Following the consummation of the Exchange Offer (except as set forth in the second paragraph under "Exchange Offer--Purpose and Effect"), holders of Old Notes not tendered will not have any further registration rights and the Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for a holder's Old Notes could be adversely affected upon consummation of the Exchange Offer if such holder does not participate in the Exchange Offer. See "Exchange Offer--Purpose and Effect." Registration Agreement...... The Old Notes were sold by the Company on May 3, 1995 in a private placement. In connection therewith, the Company entered into a Registration Rights Agreement with the Initial Purchaser (the "Registration Agreement") providing for the Exchange Offer. See "The Exchange Offer -- Purpose and Effect." Expiration Date............. The Exchange Offer will expire at 5:00 p.m., New York City time, on September 29, 1995, or such later date and time to which it is extended. Withdrawal.................. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Conditions to the Exchange Offer...................... The Exchange Offer is subject to certain customary conditions, certain of which may be waived by the Company. See "The Exchange Offer -- Conditions." Procedures for Tendering Old Notes.................. Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Old Notes and any other required documentation, to the Exchange Agent at the address set forth herein. By executing the Letter of Transmittal, each holder will represent to the Company that, among other things, (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder, (ii) neither the holder nor any such other person is engaging in or intends to engage in a distribution of such New Notes, (iii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes and (iv) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Company. Pursuant to the Registration Agreement, the Company is required to file a registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Notes of any holder that indicates in the Letter of Transmittal that it cannot make such representations to the Company and that it wishes to have its Old Notes registered under the Securities Act. See "The Exchange Offer-- Procedures for Tendering." Acceptance of Old Notes and Delivery of New Notes...... The Company will accept for exchange any and all Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." Exchange Agent.............. The Bank of New York is serving as Exchange Agent in connection with the Exchange Offer. Federal Income Tax Consequences............... The exchange pursuant to the Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." USE OF PROCEEDS There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. The proceeds received by the Company from the offer of the Old Notes were used (i) to repay the loan (the "Bridge Loan") under the Subordinated Bridge Facility (plus accrued interest thereon), (ii) to pay down the Term Loan Facilities (as hereinafter defined) and (iii) to pay a dividend to United in an amount sufficient to repurchase all of the outstanding shares of Series B Preferred Stock (as hereinafter defined), together with accrued and unpaid dividends thereon. See "Financing the Acquisition." TERMS OF THE NEW NOTES Maturity Date............... May 1, 2005. Interest Payment Dates...... May 1 and November 1 of each year, commencing November 1, 1995. Optional Redemption......... The Notes will be redeemable at the option of the Company at any time on or after May 1, 2000, in whole or in part, at redemption prices set forth herein plus accrued and unpaid interest, if any, to the date of redemption. In addition, on or prior to May 1, 1998, the Company may redeem up to $50.0 million aggregate principal amount of the Notes with the proceeds of one or more Public Equity Offerings (as hereinafter defined) at 112.75% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of redemption; provided that Notes having an aggregate principal amount of $100.0 million remain outstanding immediately after any such redemption. See "Description of the New Notes -- Optional Redemption." Change of Control........... Upon the occurrence of a Change of Control (as defined), each holder of the Notes may require the Company to repurchase all or a portion of such holder's Notes at 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of repurchase. See "Description of the New Notes -- Certain Covenants." If a Change of Control occurs, there can be no assurance that the agreements controlling the Company's then-existing Senior Indebtedness would permit the Company to make payments pursuant to a Change of Control Offer without the prior repayment of such Senior Indebtedness or that the Company would have available funds sufficient to purchase all Notes that might be delivered by the holders thereof. Such limitations may have the effect of delaying or deterring a third-party takeover of the Company. Subordination............... The Notes and the Guarantees will be subordinated to all Senior Indebtedness of the Company and Senior Guarantor Indebtedness of each Guarantor, respectively, which will include, without limitation, all indebtedness incurred under the New Credit Facilities. After giving pro forma balance sheet effect to the repurchase of Series B Preferred Stock, together with accrued and unpaid dividends thereon, that was effected with a portion of the proceeds from the Old Notes as if such transaction had occurred on June 30, 1995, there would have been approximately $391.6 million of Senior Indebtedness and Senior Guarantor Indebtedness of United outstanding on such date, substantially all of which is secured by substantially all of the assets of the Company; in addition, after taking into account approximately $59.8 million of outstanding letters of credit, there would have been approximately $97.2 million available to be drawn by the Company as secured Senior Indebtedness under the revolving credit portion of the New Credit Facilities, which amount would have been secured Senior Guarantor Indebtedness of United; and, on a pro forma basis on such date, Indebtedness pari passu to the New Notes would have been $231.7 million, and there would not have been any Indebtedness subordinated to the New Notes. See "Risk Factors -- High Leverage," "-- Subordination" and "--Limited Practical Value of Guarantees by United" and "Capitalization." Guarantees.................. The Notes will be fully and unconditionally guaranteed on a senior subordinated basis as to payment of principal, premium, if any, and interest by United and by any future domestic Restricted Subsidiary (as hereinafter defined) of the Company. The Company has no present intention to acquire any domestic Restricted Subsidiary. United is a holding company with no significant assets, liabilities or operations other than the capital stock of the Company. See "Risk Factors-- Limited Practical Value of Guarantees by United." Certain Covenants........... The indenture governing the Notes (as amended, the "Indenture") contains certain covenants, including limitations on the incurrence of indebtedness, the making of restricted payments, transactions with affiliates, the existence of liens, disposition of proceeds of asset sales, the making of guarantees by restricted subsidiaries, transfers and issuances of stock of subsidiaries, the imposition of certain payment restrictions on restricted subsidiaries and certain mergers and sales of assets. See "Description of the New Notes -- Certain Covenants." Exchange Offer;Registration Rights..................... Pursuant to the Registration Agreement, United and the Company have agreed to use their best efforts to (i) file with the Securities and Exchange Commission (the "Commission") on or prior to June 2, 1995, and cause to become effective on or prior to August 31, 1995, a registration statement (the "Exchange Offer Registration Statement") with respect to a registered offer under the Securities Act to exchange the New Notes for the Old Notes in accordance with the terms of the Exchange Offer and (ii) cause such Exchange Offer to be consummated on or prior to September 30, 1995. In the event that either (i) the Exchange Offer Registration Statement is not declared effective on or prior to August 31, 1995, (ii) the Exchange Offer is not consummated on or prior to September 30, 1995 or (iii) changes in law or the applicable interpretation of the Commission staff do not permit the Company to effect the Exchange Offer and a shelf registration statement pursuant to the Securities Act (a "Shelf Registration Statement") with respect to the Old Notes is not declared effective under the Securities Act on or prior to the later of (x) August 31, 1995 and (y) the 45th calendar day after the publication of the change in law or interpretation, the interest rate borne by the Old Notes shall be increased by one-half of one percent per annum following the relevant date described in clause (i), (ii) or (iii), as applicable. The aggregate amount of such increase from the original interest rate pursuant to these provisions will in no event exceed one-half of one percent per annum. See "The Exchange Offer -- Adjustment to Old Notes." Such increase will cease to be effective on the date of effectiveness of the Exchange Offer Registration Statement, consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be. See "The Exchange Offer."

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+SUMMARY The following summary information is qualified in its entirety by and should be read in conjunction with the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context requires otherwise, all references to (i) "Premier" mean Premier Parks Inc. and its subsidiaries prior to the acquisition of Funtime by Premier (the "Merger") on August 15, 1995; (ii) "Funtime" mean Funtime Parks, Inc. and its subsidiaries; and (iii) the "Company" mean the combined businesses of Premier and Funtime giving effect to the consummation of the Merger. THE COMPANY The Company is a leading theme park operator which operates six parks with an aggregate 1994 attendance of approximately four million. The Company's parks are regional parks, drawing on average approximately 88% of their patrons from within a 100-mile radius. The parks are located in five geographically diverse markets: Washington, D.C./Baltimore; Buffalo/Rochester; Cleveland; Columbus; and Oklahoma City. The parks are designed to provide a complete family-oriented entertainment experience, and feature a broad selection of state-of-the-art and traditional thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues and merchandise outlets. For the twelve months ended June 30, 1995, the Company's total revenue on a pro forma basis was approximately $77.6 million. Each of the Company's parks is located in a highly populated market where there is limited direct competition. The Company believes that the combination of the limited supply of real estate appropriate for theme park development, high initial capital investment, long developmental lead-time, and zoning restrictions provides each of its parks a significant degree of protection from new competitive theme park openings. Based on its knowledge of the development of other theme parks in the United States, the Company's management estimates that it would cost at least $100 million and would take a minimum of two years to construct a new regional theme park. The Company believes that the geographic diversity of its parks limits its exposure to local economic downturns and unfavorable weather conditions. In addition, the Company believes that as a multi-park operator it benefits from numerous competitive advantages over single-park operators, including the ability to (i) exercise group purchasing power (for both operating and capital assets); (ii) achieve administrative economies of scale; (iii) attract greater sponsorship revenue and support from sponsors with nationally recognized brands; (iv) recruit and retain superior management personnel; and (v) optimize the use of its capital assets by rotating rides among its parks to provide fresh attractions at each park. The Company operates six parks: Adventure World, a combination theme and water park located three miles off the Beltway, between Washington, D.C. (15 miles away) and Baltimore, Maryland (30 miles away); Frontier City, a western themed park in Oklahoma City, Oklahoma; White Water Bay, a tropical themed water park also located in Oklahoma City; Geauga Lake, a combination theme and water park near Cleveland, Ohio; Darien Lake & Camping Resort, a combination theme and water park with an adjacent camping resort, located between Buffalo and Rochester, New York; and Wyandot Lake, a water park which also includes "dry" rides and other attractions, located adjacent to the Columbus Zoo in Columbus, Ohio. BUSINESS STRATEGY The Company's senior management team has extensive experience in the theme park industry and believes it has a proven track record in acquiring and re-positioning regional parks and in operating its parks efficiently. Since senior management assumed control in 1989, Premier has followed a strategy of selectively acquiring undermanaged parks which had lacked capital investment and marketing expertise. The Company's operating strategy is to increase revenue through attendance and per capita spending gains, while maintaining strict control of operating expenses in order to benefit from the substantial operating leverage inherent in the theme park business. The primary elements of this strategy include (i) adding rides and attractions and improving overall park quality; (ii) enhancing marketing, sponsorship and group sales programs; and (iii) generating higher ticket revenues and in-park spending. Management believes it has successfully demonstrated the effectiveness of its strategy at the Premier parks and plans to implement this strategy at the Funtime parks. Management believes that while the Funtime parks have generated strong and stable cash flows over the last five years, they lacked the sustained capital investment and creative marketing required to realize their full potential. In addition, the Company will continue to evaluate potential acquisitions of additional regional theme parks. ADD RIDES AND ATTRACTIONS AND IMPROVE PARK QUALITY. Over the past several years, the Company has made significant investments in Frontier City and Adventure World which, together with enhanced marketing, sales and sponsorship programs, have resulted in significant improvements in attendance, revenue and earnings before interest, taxes, depreciation and amortization ("EBITDA") at these parks. Frontier City--In 1990 and 1991, an aggregate of approximately $7.0 million was invested in Frontier City to add several major rides, expand and improve the children's area, significantly increase the size of and theme the group picnic facilities and construct a 12,000 square foot air-conditioned mall and main events center. These additions, combined with an aggressive marketing strategy, resulted in Frontier City's attendance, revenue and EBITDA increasing approximately 54%, 83%, and 124%, respectively, from 1989 to 1991. Adventure World--Since acquiring Adventure World in January 1992, the Company invested over $15.0 million in the park through 1994 to add numerous rides and attractions and to improve theming. These additions and improvements, combined with an aggressive and creative marketing strategy, enabled the Company to increase Adventure World's attendance by 72%, from approximately 363,000 in 1992 to over 625,000 in 1994, to more than double park revenue from $6.1 million in 1992 to $12.7 million in 1994, and to increase EBITDA from a deficit of ($410,000) to $2.1 million during the same period. As a result of these improvements, Adventure World has been voted the "Most Improved Park" in the country in each of the last three years, according to Inside Track Magazine, a recognized industry periodical. In 1995, the Company added the Mind Eraser, a $6.6 million state-of-the-art suspended steel looping roller coaster. Based on information provided by the ride's manufacturer and obtained from other theme park companies, management believes that the addition of this type of ride at other regional parks with similar demographic characteristics has resulted in annual attendance gains in the range of 100,000 to 200,000. The Company expects to recognize similar gains at Adventure World in 1995. Moreover, the addition of this ride has allowed the Company to increase ticket prices at Adventure World for the 1995 season and to realize in-park spending gains. The Company expects to spend approximately $21.5 million from the proceeds of the Transactions described below to add rides and attractions and make other improvements at its parks for the 1996 season. Approximately $4.0 million of this capital is expected to be invested in Adventure World to continue penetrating the densely populated Washington, D.C./Baltimore market (approximately 6.5 million and 10.9 million people within 50 and 100 miles, respectively). Given the size of this market, standard levels of market penetration in the industry, the performance of similarly situated parks and attendance gains achieved at the park to date, management believes that Adventure World has the potential to reach annual attendance levels in excess of 1.5 million within the next five years. The balance of the capital will primarily be used to add rides and attractions at the Funtime parks. Based on industry experience and the Company's experience at the Premier parks, the Company believes that these efforts, together with aggressive and creative marketing programs, will increase attendance and per capita spending at each of the Funtime parks. ENHANCE MARKETING, SPONSORSHIP AND GROUP SALES PROGRAMS. Premier's parks have benefitted from professional, creative marketing programs which emphasize the marketable rides and attractions, breadth of available entertainment and value provided by each park. The Company's marketing programs have a local orientation, which the Company believes is a key ingredient to successful marketing for regional theme parks. For example, Cal Ripken, Jr., the all-star shortstop for the Baltimore Orioles, serves as official spokesperson for Adventure World, making numerous appearances in radio and television commercials, and Olympic gymnast Shannon Miller, an Oklahoma City resident, has opened rides at White Water Bay. Management intends to implement similar marketing programs to promote the planned capital improvements at the Funtime parks. The Company has also successfully attracted well known sponsorship and promotional partners, such as Pepsi, McDonald's, Taco Bell, Blockbuster, 7 Eleven, Wendy's and various supermarket chains. The Company believes that its increased number of parks and annual attendance resulting from the Merger will enable it to expand and enhance its sponsorship and promotional programs. In addition, group sales and pre-sold tickets provide the Company with a consistent and stable base of attendance, representing over 40% of aggregate attendance in 1994. Premier has increased its group sales and pre-sold ticket business by approximately 65.3% from 1992 to 1994. The Company believes that it has the opportunity to continue to expand its group sales and pre-sold ticket business. GENERATE HIGHER TICKET REVENUES AND IN-PARK SPENDING. Management regularly reviews its ticket price levels and ticket category mix in order to capitalize on opportunities to implement selective price increases, both through main gate price increases and the reduction in the number and types of discounts. Management believes that opportunities exist to implement marginal ticket price increases without significant reductions in attendance levels. Such increases have successfully been implemented on a park-by-park basis in connection with the introduction of major new attractions or rides. In addition, discounts are typically offered on weekdays and evenings to encourage attendance at less popular times. As a result of these measures, the average ticket price per paid visitor at the Premier parks increased 10.2% from 1992 to 1994. The Company believes that through similar measures it will be able to increase the average ticket price per paid visitor at the Funtime parks. The Company also seeks to increase in-park spending by adding well-themed restaurants, remodeling and updating existing restaurants and adding new merchandise outlets. The Company has successfully increased spending on food and beverage by introducing well-recognized local and national brands, such as Domino's, Friendly's, TCBY and KFC. Finally, the Company has taken steps to decrease the waiting time for its most popular restaurants and merchandise outlets. As a result of these measures, average in-park spending per visitor at the Premier parks increased 14.3% from 1992 to 1994. The Company believes that through similar measures it will be able to increase average in-park spending per visitor at the Funtime parks. The Company has also developed a variety of off-season special events designed to increase attendance and revenue prior to Memorial Day and after Labor Day. Examples include Hallowscream, a Halloween event in which parks are transformed with supernatural theming, scary rides and haunting shows, and Octoberfest, the presentation of traditional German food, theming, music and entertainment. Over the last several years, Frontier City has drawn over 25,000 visitors to each of its Octoberfest and Hallowscream events. In 1994, over 50,000 visitors attended Hallowscream at Adventure World. Management intends to introduce these types of events to the Funtime parks and believes they will have a similar impact on attendance. EVALUATE POTENTIAL ACQUISITIONS. The theme park industry is highly fragmented and comprised of a large number of single-park operators. Management believes that potential acquisition opportunities will arise and intends to evaluate selective acquisitions that complement its existing operations and fit within its targeted level of attendance of up to two million annually. The Company believes that its increased size resulting from the Merger will enhance its ability to make park acquisitions for stock. The Company expects to generally be able to eliminate duplicative overhead expenses and recognize other economies of scale in connection with such acquisitions. For example, the Funtime acquisition was achieved at a purchase price multiple of approximately 4.1x Funtime's 1994 EBITDA, adjusted by approximately $2.5 million for the elimination of corporate overhead, non-recurring park operating expense savings and increases in revenue it expects to achieve after the Merger as well as $261,000 of non-recurring corporate expenses. THE MERGER Pursuant to an Agreement and Plan of Merger dated as of June 30, 1995 (the "Merger Agreement"), on August 15, 1995, Premier acquired by merger (the "Merger") all of the capital stock of Funtime from its current shareholders (the "Selling Shareholders") for approximately $60.0 million (subject to post-closing adjustment), which amount includes the repayment in full of all principal and accrued interest of Funtime's indebtedness ($37.1 million). The Merger Agreement provides that the Selling Shareholders will receive substantially all of Funtime's net operating cash flow for the 1995 season through September 30, 1995. See "The Merger." On August 15, 1995, the Company also consummated a series of related transactions (collectively, with the Merger, the "Transactions"): 1. The Company issued $90.0 million principal amount of Old Notes. 2. The Company issued to certain of Premier's stockholders, their affiliates and others in a private placement (the "Convertible Preferred Stock Offering"), 200,000 shares of its Series A 7% Cumulative Convertible Preferred Stock (the "Convertible Preferred Stock") for an aggregate purchase price of $20.0 million. See "Capital Structure--Convertible Preferred Stock." 3. Premier's $7.0 million aggregate principal amount of 9.5% Convertible Subordinated Notes (the "Convertible Notes") and $2.1 million aggregate principal amount of 8% Junior Subordinated Notes (the "Junior Notes") were converted (the "Existing Note Conversion") into its common stock (the "Common Stock"). 4. The Company repaid in full all of Premier's indebtedness ($16.1 million) under its then existing bank facilities and mortgage loans (the "Existing Bank Debt"). 5. The Company entered into a three-year, $20.0 million senior revolving credit facility (the "Senior Credit Facility"). Borrowings under the Senior Credit Facility will be secured by substantially all of the Company's assets (other than real estate) and will be required to be repaid in full for at least 45 consecutive days during the period from July 1 to November 1 of each year. The following table sets forth a summary of the sources and uses of funds associated with the Transactions. <TABLE> <CAPTION> SOURCES AMOUNT ------- ------ (DOLLARS IN THOUSANDS) <S> <C> Old Notes Offering(1)................................. $ 90,000 Convertible Preferred Stock Offering(1)............... 20,000 Issuance of Common Stock in Existing Note Conversion.. 9,100 ---------- Total........................................... $119,100 ---------- ---------- </TABLE> <TABLE> <CAPTION> USES ---- <S> <C> Acquisition of Funtime................................ $ 52,700(2) Repayment of Premier's Existing Bank Debt............. 16,100 Extinguishment of debt in Existing Note Conversion.... 9,100 Prefunding of capital expenditures(3)................. 21,500 Other cash(4)......................................... 13,700 Transaction expenses.................................. 6,000 ---------- Total........................................... $119,100 ---------- ---------- </TABLE> - ------------ (1) Reflects gross proceeds. (2) Reflects the net cash amount to be paid by Premier in the Merger, excluding (i) the aggregate of $5.3 million described in note 4 below which was deposited into escrow or paid or retained by the Company, and (ii) an estimated $2.0 million of post-closing adjustments described under the caption "The Merger." (3) See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity, Capital Commitments and Resources" and "Business--Capital Improvements." (4) Consists of (i) $8.4 million to be utilized for general corporate purposes, (ii) $2.5 million deposited into an escrow account to cover indemnification claims which may arise after the closing of the Merger, and (iii) $2.8 million paid or retained by the Company out of the Merger consideration to fund specified liabilities of Funtime. See "The Merger." THE EXCHANGE OFFER The Exchange Offer applies to $90.0 million aggregate principal amount of the Old Notes. The form and terms of the New Notes are the same as the form and terms of the Old Notes except that the New Notes have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture pursuant to which the Old Notes were issued. The Old Notes and the New Notes are sometimes referred to collectively herein as the "Notes." See "Description of The New Notes." <TABLE> <S> <C> The Exchange Offer........... $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, Old Notes representing $90.0 million aggregate principal amount are outstanding. The terms of the New Notes and the Old Notes are identical except that the New Notes have been registered under the Securities Act and will not bear any legends restricting their transfer. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to the Company and the Note Guarantors, the Company and the Note Guarantors believe that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Notes, whether or not that person is the holder of the Old Notes (other than any such holder or such other person that is an "affiliate" of the Company or any Note Guarantor 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 (i) the New Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Notes. See "The Exchange Offer--Purpose and Effect." Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where those Old Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of those New Notes. See "Plan of Distribution." Registration Rights.......... The Old Notes were sold by the Company on August 15, 1995, Agreement in a private placement. In connection with the sale, the Company and the Note Guarantors entered into an Exchange and Registration Rights Agreement with the purchasers (the "Registration Rights Agreement") providing for the Exchange Offer. See "The Exchange Offer--Purpose and Effect." Expiration Date.............. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1995, or such later date and time to which it is extended (the "Expiration Date"). See "The Exchange Offer-- Expiration Date; Extensions; Amendments." Withdrawal................... The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. See "The Exchange Offer-- Withdrawal Rights." </TABLE> <TABLE> <S> <C> Interest on the New Notes.... Interest on each New Note will accrue from the date of and Old Notes issuance of the Old Note for which the New Note is exchanged or from the date of the last periodic payment of interest on such Old Note, whichever is later. Conditions to the Exchange... The Exchange Offer is subject to certain customary Offer conditions, certain of which may be waived by the Company. See "The Exchange Offer--Conditions to the Exchange Offer." Procedures for Tendering..... Each holder of Old Notes wishing to accept the Exchange Old Notes Offer must complete, sign (together with any required signature guarantees) and date the Letter of Transmittal, or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Letter of Transmittal, or the copy, together with the Old Notes and any other required documentation, to the Exchange Agent at the address set forth herein. Persons holding Old Notes through DTC and wishing to accept the Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering participant will agree to be bound by the Letter of Transmittal. By executing or agreeing to be bound by the Letter of Transmittal, each holder will represent to the Company and the Note Guarantors that, among other things, (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder of the Old Notes, (ii) neither the holder nor any such other person is engaging in or intends to engage in a distribution of such New Notes, (iii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes, and (iv) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Company or any Note Guarantors. Pursuant to the Registration Rights Agreement, the Company and the Note Guarantors are required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Notes if (i) existing Commission interpretations are changed such that the New Notes received by holders in the Exchange Offer are not or would not be, upon receipt, transferable by each such holder (other than an affiliate of the Company or any Note Guarantor) without restriction under the Securities Act, or (ii) any holder of Old Notes either (a) is not eligible to participate in the Exchange Offer, or (b) participates in the Exchange Offer and does not receive freely transferrable New Notes in exchange for Old Notes (in each case under this clause (ii) other than as a result of applicable Commission interpretations or laws in effect on the original issue date of the Old Notes). See "The Exchange Offer--Purpose and Effect." Acceptance of Old Note....... The Company and the Note Guarantors will accept for exchange and Delivery of New Notes any and all Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Special Procedures for....... Any beneficial holder whose Old Notes are registered in the Beneficial Holders name of his broker, dealer, commercial bank, trust company or other nominee and who wishes to tender in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on his behalf. For this purpose, a registered holder shall be deemed to include DTC participants listed on a DTC security position listing. If such beneficial holder </TABLE> <TABLE> <S> <C> wishes to tender on his own behalf, such beneficial holder must, prior to completing and executing the Letter of Transmittal and delivering his Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such holder's name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. See "The Exchange Offer--Procedures for Tendering." Guaranteed Delivery.......... Holders of Old Notes who wish to tender their Old Notes and Procedures whose Old Notes are not immediately available or who cannot deliver their Old Notes and a properly completed Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date may tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures." Exchange Agent............... United States Trust Company of New York is serving as Exchange Agent in connection with the Exchange Offer. The mailing address of the Exchange Agent is P.O. Box 844 Peter Cooper Station, New York, N.Y. 10276-0843. Attention: Corporate Trust Operations. Deliveries by overnight courier should be sent to 770 Broadway, New York, N.Y. 10003 Attn: Corporate Trust Operations. By-hand deliveries should be addressed to 65 Beaver Street, New York, NY 10005 Attn: Ground Level, Corporate Trust Operations. For information with respect to the Exchange Offer, call Customer Service of the Exchange Agent at (800) 548 6565; Fax (212) 420 6152. Federal Income Tax........... The exchange pursuant to the Exchange Offer should not be a Consideration taxable event for federal income tax purposes. See "Federal Income Tax Considerations." Effect of Not Tendering...... Old Notes that are not tendered or that are tendered but not accepted will, following the completion of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. Except in limited circumstances, the Company and the Note Guarantors will have no further obligations to provide for the registration under the Securities Act of such Old Notes. </TABLE> THE OFFERING <TABLE> <S> <C> Issuer....................... Premier Parks Inc. Holding Company Structure.... Premier Parks Inc. is a holding company which derives substantially all of its operating income from its principal subsidiaries (the "Note Guarantors"). Securities Offered........... $90,000,000 aggregate principal amount of 12% Senior Notes due 2003 (the "New Notes"). Maturity..................... August 15, 2003. Interest Payment Dates....... August 15 and February 15 of each year, commencing on February 15, 1996. Optional Redemption.......... Except as described below, the Company may not redeem the New Notes prior to August 15, 1999. On or after such date, the Company may redeem the New Notes, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, at any time on or prior to August 15, 1998, the Company may redeem up to 33 1/3% of the original aggregate principal amount of the New Notes with the Net Cash Proceeds of one or more Public Equity Offerings by the Company following which there is a Public Market, at a price equal to 110% of the principal amount to be redeemed, together with accrued and unpaid interest, if any, </TABLE> <TABLE> <S> <C> provided that at least 66 2/3% of the original aggregate principal amount of the Notes remain outstanding immediately after each such redemption. Change of Control............ Upon a Change of Control, the Company will be required to make an offer to repurchase the New Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of repurchase. See "Description of the New Notes--Change of Control." Note Guarantees.............. The New Notes will be guaranteed on a senior, unsecured basis (each such guarantee being a "Note Guarantee") by the Note Guarantors. See "Description of the New Notes--Note Guarantees" and "--Certain Covenants--Future Note Guarantors." Ranking...................... The New Notes will be unsecured obligations of the Company and will be effectively subordinated to all existing and future secured indebtedness of the Company and its subsidiaries to the extent of the value of the assets securing such indebtedness. The New Notes will rank pari passu in right of payment with all other Senior Indebtedness of the Company (including the Old Notes) and will rank senior in right of payment to all existing and future Subordinated Obligations of the Company. At June 30, 1995, on a pro forma basis after giving effect to the Transactions, the aggregate amount of Senior Indebtedness of the Company and its subsidiaries would have been approximately $91.8 million, of which $1.8 million would have been secured indebtedness, and the Company would have had unused commitments of $20.0 million under the Senior Credit Facility. See "Description of the New Notes--Ranking." Restrictive Covenants........ The Indenture under which the New Notes will be issued (the "Indenture") limits (i) the incurrence of additional indebtedness by the Company and its subsidiaries, (ii) the payment of dividends on, and redemption of, capital stock of the Company and the redemption of certain Subordinated Obligations of the Company, (iii) other restricted payments, (iv) sales of assets and subsidiary stock, (v) transactions with affiliates, (vi) the creation of liens, (vii) the sale or issuance of capital stock of certain subsidiaries and (viii) consolidations, mergers and transfers of all or substantially all of the assets of the Company. The Indenture also prohibits certain restrictions on distributions from subsidiaries. However, all of these limitations and prohibitions are subject to a number of important qualifications and exceptions. See "Description of the New Notes--Certain Covenants." Use of Proceeds.............. There will be no cash proceeds to the Company from the issuance of the New Notes pursuant to the Exchange Offer. See "Use of Proceeds" for a description of the use of the proceeds of the Old Notes. </TABLE> RISK FACTORS Prospective investors should carefully consider all of the information set forth in this Prospectus and, in particular, should evaluate the specific factors set forth under "Risk Factors" for risks involved in an investment in the Notes.

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+PROSPECTUS SUMMARY The following is a summary of certain information contained in this Prospectus. The summary must be read in conjunction with and is qualified in its entirety by reference to the more detailed information and financial statements appearing elsewhere in this Prospectus. Unless the context otherwise requires, all information in this Prospectus has been adjusted to reflect a one- for-seven reverse stock split of the Company's outstanding Common Stock, which reverse stock split was effected on December 13, 1994. For purposes of simplicity, fractional shares resulting from the reverse split have been omitted throughout this Prospectus. The Company The Company was incorporated on June 20, 1980 under the laws of the State of Delaware. The Company is engaged in the design, development, manufacture, marketing, and sale of implantable cardiac pacing systems. These systems consist of single-chamber, dual-chamber and single lead atrial-controlled ventricular cardiac pacemakers together with connecting ventricular electrode leads and equipment for the external programming and monitoring of the pacemakers. The Company has received classification (clearance) from the United States Food and Drug Administration (the "FDA") to distribute commercially a line of single-chamber and dual-chamber pacemaker systems and a single-lead atrial-controlled ventricular cardiac pacing system. The equipment used for the external programming and monitoring of the Company's pacemaker products is usually loaned without charge to physicians and other purchasers of the Company's products. The Company's products are "medical devices" as defined by the FDA and thus are subject to federal regulations enforced by the FDA, including restrictions on the commercial introduction of products and clinical testing requirements. The Company's principal executive offices, production and warehouse facilities are located at 3 Commerce Boulevard, Palm Coast, Florida 32164. The Company's telephone number is (904) 445-5450. See "BUSINESS OF THE COMPANY". The Company raised $2,885,000 through a private placement of 5% convertible debentures (the "Debentures") due October 31, 1999. Of the shares of Common Stock subject to sale under this Prospectus, 1,133,382 represent the Common Stock underlying the Debentures. The Debentures may be converted to Common Stock (at a conversion rate of one share of Common Stock for every $2.80 of outstanding principal) at any time at the discretion of the Debenture holders, on or before October 31, 1999. See "DESCRIPTION OF SECURITIES". Concurrently with the issuance of the Debentures, stockholder notes and accrued interest thereon aggregating $615,630 were converted to a $250,000 debenture (said $250,000 being included in the $2,885,000 amount referenced above) and 130,582 shares of Common Stock of the Company (at $2.80 per share). As a result of this financing, Bart C. Gutekunst and Alan J. Rabin, formerly directors and executive officers of R-2 Medical Systems, Inc. (a medical equipment manufacturer which was acquired by Cardiotronics, Inc. in 1994) entered into three-year employment contracts with the Company in October 1994, pursuant to which Mr. Gutekunst was appointed Chairman of the Board and Mr. Rabin was appointed a director of the Company and its President and Chief Executive Officer. The Selling Shareholders may sell all or a portion of the Common Stock that is the subject of the Registration Statement filed in connection with this Prospectus. The Offering The Registration Statement of which this Prospectus is a part registers for resale 1,030,352 shares of Common Stock that underlie outstanding 5% convertible debentures (the "Debentures") of the Company and 103,030 additional shares to which the Debenture holders may become entitled if certain conditions are not met by the Company by September 22, 1995. See, "DESCRIPTION OF SECURITIES - 5% Convertible Debentures." It also registers for resale (a) 200,000 shares of Common Stock underlying a warrant granted to Dow Corning Enterprises, Inc., which is not affiliated with the Company, (b) 14,285 shares of Common Stock underlying an option granted to Robert R. Brownlee, Senior Executive Vice President and a Director of the Company, and (c) 5,802 shares underlying options granted to Applied Cardiac Electrophysiology, a California partnership, which is not affiliated with the Company. See, "SELLING SHAREHOLDERS." The Selling Shareholders, upon conversion of all or a portion of their Debentures warrant or options, may from time to time offer such shares of Common Stock for sale to the public in the over-the-counter market, in privately negotiated transactions, or on any stock exchange or automated quotation system on which such shares of Common Stock may be listed in the future, or otherwise at prices prevailing in such market or exchange or as may be negotiated at the time of sale. The Selling Shareholders include certain officers and directors of the Company. The Company will receive none of the proceeds from the sale of the shares offered by this Prospectus, when, as and if such shares are offered for sale. See "THE OFFERING", "PLAN OF DISTRIBUTION", "SELLING SHAREHOLDERS" and "MARKET INFORMATION". As of the date of this Prospectus, there were 1,342,819 shares of the Company's Common Stock issued and outstanding. See "CAPITALIZATION". NASD OTC Symbol The Company's securities are traded in the NASD OTC Bulletin Board Service. The Company's NASD OTC Bulletin Board symbol is "CDCS". Summary of Certain Risk Factors Prospective purchasers should carefully consider risks concerning the Company and its business discussed in this Prospectus. Historically, the Company has had losses due to insufficient capital and FDA delays. Further, the Company manufactures medical devices in a highly competitive and regulated industry. For a more comprehensive discussion of these and other risk factors involved in an investment in the Company's shares, see "RISK FACTORS". Summary Financial Information The Company had an accumulated deficit of $19,519,472 at March 31, 1995 and had net income for the fiscal year ended March 31, 1995 of $1,374,971 (due in part to an extraordinary gain) as compared to a net loss of ($1,046,657) for the fiscal year ended March 31, 1994. See "RISK FACTORS", "BUSINESS OF THE COMPANY", "MANAGEMENT'S DISCUSSION AND ANALYSIS", and "FINANCIAL STATEMENTS". The following selected financial information for each of the fiscal years ended March 31, 1993 through 1995 has been derived from the audited financial statements of the Company appearing elsewhere herein. For a more detailed summary of selected financial data for the past five fiscal years, see "SELECTED FINANCIAL DATA". This information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Prospectus. See "FINANCIAL STATEMENTS". Statement of Operations Data: <TABLE> <CAPTION> Year Ended Year Ended/(1)/ Year Ended March 31, 1995 March 31, 1994 March 31, 1993 --------------------------------------------------- <S> <C> <C> <C> Net Sales $4,817,862 $ 4,353,856 $ 4,767,677 Royalty Income 909,675 81,250 48,750 --------------------------------------------------- Revenues 5,727,537 4,435,106 4,816,427 Costs and Expenses 5,713,973 5,284,670 6,044,811 --------------------------------------------------- Operating Income (Loss) 13,564 (849,564) (1,228,384) Other Income (Expense) (295,381) (197,093) (134,162) --------------------------------------------------- Net Loss Before Extraordinary Gain (281,817) (1,046,657) (1,362,546) Extraordinary Gain 1,656,788 -- -- --------------------------------------------------- Net Income (Loss) $1,374,971 $(1,046,657) $(1,362,546) =================================================== Earnings per Common and Common Equivalent Share:/(2)/ Primary: Loss before extraordinary gain..................... $ (.21) $ (.87) $ (1.24) Extraordinary gain....... 1.21 -- -- --------------------------------------------------- Net income (loss)........ $ 1.00 $ (.87) $ (1.24) =================================================== Fully diluted: Loss before extraordinary gain..................... $ (.11) $ (.87) $ (1.24) Extraordinary gain....... .90 -- -- --------------------------------------------------- Net income (loss)........ $ .79 $ (.87) $ (1.24) =================================================== Average Number of Common Shares and Equivalents Outstanding: /(2)(3)/ Primary 1,372,099 1,206,988 1,102,526 Fully Diluted 1,834,121 1,206,988 1,102,526 - ------------------------------------------------------------------------------ </TABLE> /(1)/ As a result of recurring losses and cash flow deficits, the accountant's report on the financial statements for the year ended March 31, 1994 contained an explanatory paragraph regarding the Company's ability to continue as a going concern. See Report of Independent Certified Public Accountants of Price Waterhouse LLP, attached to the Financial Statements. Also, see "RISK FACTORS--History of Losses". /(2)/ Net loss per common share and average number of common shares outstanding for the years ended March 31, 1993 and 1994 have been restated as if the one for seven reverse stock split, effective December 13, 1994, had been effective in these prior periods. /(3)/ March 31, 1994 and 1993 do not include additional shares which may be issued upon exercise of outstanding stock options or conversion of the Debentures, since inclusion thereof would have an anti-dilutive effect on the loss per share. See "CAPITALIZATION" and "DESCRIPTION OF SECURITIES".