SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
(Amendment No. 2)
MOUNTASIA ENTERTAINMENT INTERNATIONAL, INC.
(Name of Issuer)
MEI HOLDINGS, L.P.
(Name of Person Filing Statement)
Common Stock
(Title of Class of Securities)
624547105
(CUSIP Number of Class of Securities)
Daniel A. Decker, Esq.
MEI Holdings, L.P.
4200 Texas Commerce Tower West
2200 Ross Avenue
Dallas, Texas 75201
(214) 229-4900
(Name, Address and Telephone Number of Persons Authorized to Receive Notices and
Communications on Behalf of the Persons Filing Statement)
Copies to:
Robert A. Profusek, Esq.
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
(212) 326-3939
November 14, 1996
(Date Tender Offer First Published, Sent or Given to Security Holders)
This statement is filed in connection with a tender offer.
Page 1 of 5 Pages
<PAGE>
This Amendment No. 2 to Rule 13E-3 Transaction Statement (the "Statement")
relates to a tender offer by MEI Holdings, L.P., a Delaware limited partnership
(the "Purchaser"), to purchase (i) any and all of the outstanding shares of
Common Stock (the "Shares") of Mountasia Entertainment International, Inc., a
Georgia corporation (the "Company"), not now beneficially owned by the Purchaser
at $3.50 per Share, without interest, net to the seller in cash, (ii) any and
all of the outstanding 9% Subordinated Convertible Debentures Due November 1,
1999 of the Company at par plus accrued and unpaid interest to the date of
acceptance for payment, net to the seller in cash, and (iii) all outstanding
9.1% Subordinated Convertible Debentures Due January 1, 2002 of the Company at
par plus accrued and unpaid interest to the date of acceptance for payment, net
to the seller in cash, on the terms and subject to the conditions set forth in
the Purchaser's Offer To Purchase dated November 14, 1996 (the "Offer To
Purchase"), and the related Letters of Transmittal (which together constitute
the "Offers"), and is intended to satisfy the reporting requirements of Section
13(e) of the Securities Exchange Act of 1934, as amended. Amendment No. 2 to
Schedule 14D-1 (the "Schedule 14D-1") is being filed by the Purchaser with the
Securities and Exchange Commission (the "Commission") contemporaneously with
this Statement. Filed herewith as Exhibit (d)(9) is a copy of a Supplement to
the Offer To Purchase.
CROSS REFERENCE SHEET
Item in Amendment Where located in
No. 2 to Amendment No. 2 to
Schedule 13E-3 Schedule 14D-1
- -------------- --------------
Item 5 Item 5
Item 8(a)-(f) *
- ----------
* The information requested by this Item is not required to be included in
the Schedule 14D-1.
Item 5. Plans or Proposals of the Issuer or Affiliate.
Item 5 of the Schedule 13E-3 is hereby supplemented and amended by adding
the following:
The answer to Item 5 of the Schedule 14D-1 is incorporated herein by
reference.
Item 8. Fairness of the Transaction.
Item 8 of the Schedule 13E-3 is hereby supplemented and amended by adding
the following:
(a)-(b) and (e) The information set forth in "Certain Conditions of the
Offers", "Additional Information Concerning Certain Determinations by the
Purchaser" and "Company Announces Business Plan" in the Supplement to the Offer
To Purchase is incorporated herein by reference.
(c)-(d) The information set forth in "Introduction" and "Additional
Information Concerning Certain Determinations by the Purchaser" in the
Supplement to the Offer To Purchase.
(f) Not Applicable.
-2-
<PAGE>
Item 17. Material to be Filed as Exhibits.
(d) (9) Supplement to Offer To Purchase, dated December 31, 1996
-3-
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: December 31, 1996 MEI HOLDINGS, L.P.
By: MEI GenPar, L.P.
Its General Partner
By: HH GenPar Partners
Its General Partner
By: Hampstead Associates, Inc.
Its Managing General Partner
By: /s/ Daniel A. Decker
---------------------------------
Daniel A. Decker
Executive Vice President
-4-
<PAGE>
INDEX TO EXHIBITS
Exhibits
99.(d)(9) Supplement to Offer To Purchase, dated December 31, 1996
-5-
Supplement to
Offers To Purchase for Cash
Any and All Outstanding Common Stock,
Any and All 9% Subordinated Convertible Debentures Due November 1, 1999
and
All 9.1% Subordinated Convertible Debentures Due January 1, 2002
of
MOUNTASIA ENTERTAINMENT INTERNATIONAL, INC.
at
$3.50 Per Share of Common Stock
and at
Par Plus Accrued and Unpaid Interest on Such Debentures,
Each Net to the Seller in Cash,
by
MEI HOLDINGS, L.P.
- -------------------------------------------------------------------------------
THE OFFERS HAVE BEEN EXTENDED. THE OFFERS AND WITHDRAWAL RIGHTS WILL
NOW EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 14, 1997,
UNLESS THE OFFERS ARE FURTHER EXTENDED.
- -------------------------------------------------------------------------------
THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF MOUNTASIA ENTERTAINMENT
INTERNATIONAL, INC. HAS DETERMINED THAT IT IS UNABLE TO TAKE A POSITION OR MAKE
A RECOMMENDATION TO THE HOLDERS OF SHARES OR DEBENTURES REGARDING THEIR DECISION
EITHER TO TENDER OR TO REFRAIN FROM TENDERING SHARES OR DEBENTURES PURSUANT TO
THE OFFERS. SEE ITEM 4 OF THE SCHEDULE 14D-9 PREVIOUSLY MAILED TO SHAREHOLDERS
AND DEBENTUREHOLDERS AND "ADDITIONAL INFORMATION CONCERNING CERTAIN
DETERMINATIONS BY THE PURCHASER" IN THIS SUPPLEMENT.
The Offers are not conditioned on any minimum number of Shares or
Debentures being tendered, except that the Offer for the 9.1% Debentures (but
not the 9% Debentures) is conditioned on all 9.1% Debentures (which were held by
18 registered Holders as of November 13, 1996) being validly tendered and not
withdrawn prior to the Expiration Date. The Offers are also conditioned on,
among other things, the absence of (i) certain litigation, orders or other legal
matters and (ii) any material adverse change (or any development involving a
prospective material adverse change) in the business, financial condition,
results of operations or prospects of Mountasia Entertainment International,
Inc. See "The Offers -- Certain Conditions of the Offers" in the Offer To
Purchase and "Certain Conditions of the Offers" in this Supplement. The purchase
of Shares pursuant to the Offers would reduce the number of Shares that might
otherwise trade publicly and could reduce the number of Shareholders, and
therefore could result in the delisting of the Shares from trading on the
American Stock Exchange (the "AMEX") and the Company no longer being required to
file reports and other information under the Securities Exchange Act of 1934, as
amended. Any of these effects could adversely affect the liquidity or prices
realizable in sales of the Shares and Debentures following the Offers. See
"Special Factors -- Certain Effects of the Offers" in the Offer To Purchase. If,
prior to or on the date of the expiration of the Offers (the "Expiration Date"),
MEI Holdings, L.P. (the "Purchaser") determines that it is likely that the
Offers would result in the delisting of the Shares from trading on the AMEX, the
Purchaser will make a public announcement of such determination and, if
applicable, extend the Offers so that the Expiration Date is not less than ten
business days after the date of such announcement.
----------
<PAGE>
Any Shareholder or Debentureholder (collectively, "Holders" and each, a
"Holder") desiring to tender all or any portion of such Holder's Shares or
Debentures should either (i) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it together with the certificates representing
the tendered Shares or Debentures, and any other required documents, to the
Depositary or tender such Shares or Debentures pursuant to the procedure for
book-entry transfer set forth in "The Offers -- Procedure for Tendering Shares
or Debentures" in the Offer To Purchase or (ii) request such Holder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such Holder. A Holder who has Shares or Debentures registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact that entity if such Holder desires to tender such Shares or
Debentures. Any Holder who desires to tender such Holder's Shares or Debentures
and whose certificates representing such Shares or Debentures are not
immediately available or who cannot comply with the procedures for book-entry
transfer on a timely basis may tender such Shares or Debentures by following the
procedures for guaranteed delivery set forth in "The Offers -- Procedure for
Tendering Shares or Debentures" in the Offer To Purchase.
Procedures for tendering Shares and Debentures are set forth in "The Offers
- -- Procedure for Tendering Shares or Debentures" in the Offer To Purchase.
Tendering Holders should continue to use the Letter of Transmittal and the
Notice of Guaranteed Delivery previously delivered with the Offer To Purchase.
Holders who have already tendered Shares or Debentures using the Letter of
Transmittal need not complete another Letter of Transmittal or take any
additional action for their Shares or Debentures to be tendered pursuant to the
Offers.
Any questions or requests for assistance or additional copies of this
Supplement to Offer To Purchase, the Offer To Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and other related materials may
be directed to the Information Agent at its address and telephone numbers set
forth on the back cover of this Supplement to Offer To Purchase.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
----------
The Information Agent for the Offers is MacKenzie Partners, Inc.
----------
December 31, 1996
<PAGE>
To the Holders of Common Stock, 9% Debentures and 9.1% Debentures of Mountasia
Entertainment International, Inc.:
Introduction
The following is certain additional information that supplements and amends
the Offers To Purchase, dated November 14, 1996 (the "Offer To Purchase"), of
MEI Holdings, L.P. (the "Purchaser") pursuant to which the Purchaser is offering
to purchase (i) any and all of the outstanding shares of Common Stock (the
"Shares") of Mountasia Entertainment International, Inc. (the "Company") not now
beneficially owned by the Purchaser at $3.50 per Share, without interest, net to
the seller in cash (the "Per Share Price"), (ii) any and all of the outstanding
9% Subordinated Convertible Debentures Due November 1, 1999 (the "9%
Debentures") of the Company at par plus accrued and unpaid interest to the date
of acceptance for payment, net to the seller in cash, and (iii) all outstanding
9.1% Subordinated Convertible Debentures Due January 1, 2002 (the "9.1%
Debentures" and together with the 9% Debentures, collectively, the "Debentures")
of the Company at par plus accrued interest to the date of acceptance for
payment, net to the seller in cash, in each case on the terms and subject to the
conditions set forth in the Offer To Purchase, this Supplement To the Offer To
Purchase and in the related Letter of Transmittal (which together constitute the
"Offers"). Except as set forth in this Supplement, the terms and conditions set
forth in the Offer To Purchase and related Letter of Transmittal remain
applicable in all respects to the Offers, and this Supplement should be read in
conjunction with the Offer To Purchase and the related Letter of Transmittal.
Capitalized terms used herein without definition have the meanings ascribed to
such terms in the Offer To Purchase.
Shares and Debentures Tendered
The Purchaser has been informed by the Depositary that, as of the close of
business on the last trading day immediately preceding the date of this
Supplement, 1,209,960 Shares, $500,000 principal amount of the 9% Debentures
and none of the 9.1% Debentures had been tendered and not withdrawn pursuant to
the Offers. See "Certain Other Matters Relevant to the Offers -- Intentions of
Certain Holders" in this Supplement.
Extension of the Offers
The Purchaser has extended the Offers. Upon the terms and subject to the
conditions of the Offers, the Purchaser will accept for payment, and thereby
purchase, all Shares and Debentures validly tendered prior to the Expiration
Date and not properly withdrawn in the manner described under the caption "The
Offers -- Withdrawal Rights" in the Offer To Purchase. As amended hereby, the
term "Expiration Date" means 12:00 midnight, New York City time, on January 14,
1997, unless, the Purchaser, in its sole discretion, extends the period of time
for which the Offers are open, in which event the term "Expiration Date" will
mean the latest time and date on which the Offers, as so extended by the
Purchaser, expires. For a description of the Purchaser's right to extend the
period of time during which the Offers are open, see "The Offers -- Terms of the
Offers" in the Offer To Purchase.
Company Announces Business Plan
On December 27, 1996 the Company published a press release, the substance
of which (as modified by the Company's December 30, 1996 press release) was as
follows:
"MOUNTASIA ENTERTAINMENT INTERNATIONAL, INC.
ANNOUNCES COMPREHENSIVE BUSINESS PLAN"
"Alpharetta, Georgia, December 27, 1996. Mountasia Entertainment
International, Inc. (AMEX: MBE) today announced that it has adopted a
comprehensive business plan. The plan is the culmination of months of study
of Mountasia's internal operations, industry conditions and other factors.
The principal objectives of the plan are:
o Improving the profitability of large underperforming parks and
the Company's overall results of operations
2
<PAGE>
o Repositioning, expanding or redeveloping Company parks with the
highest profit potential
o Growing the Company's business through acquisitions and the
development of new parks
o Selling or closing small, non-strategic parks
o Developing a capital structure for the Company that will allow it
to achieve its business objectives"
"The Company's plan contemplates the investment of approximately $36
million for the redevelopment and expansion of certain of the Company's
best performing parks, including the addition of new attractions, and
spending approximately $4 million to repair and upgrade other parks. The
Company also expects to pursue possible acquisitions and the development of
new parks in strategic markets. As discussed below, the funds for such
redevelopment, expansion, acquisitions and development will be obtained
from the investment by MEI Holdings, L.P., the Company's largest
shareholder, of $22.7 million in additional equity pursuant to the
recapitalization agreement entered into by the Company and MEI Holdings
last Summer and from other sources of debt and equity capital."
"In implementing the plan, the Company will seek to sell or close 16
non-strategic parks. Also, over the next few months the Company will review
for possible sale or closure eight additional parks which are not located
in markets that the Company believes are strategic in light of its future
plans or are otherwise underperforming. The 16 parks to be closed or sold
generated operating revenues of $5.0 million during the 12-month period
ended September 30, 1996 and produced an operating loss of $.4 million in
such period; the additional eight parks being reviewed for possible sale or
closure had operating revenues and an operating loss of $4.7 million and
$.8 million, respectively, in that period. The Company expects to take an
approximately $8.2 million charge against earnings in the fourth quarter of
1996 to reflect assets held for sale, to establish reserves for
discontinuation of operations, severance and other related costs and for
certain additional matters. The total charge for such purposes could
increase to approximately $15.7 million if the Company determines to sell
or close the eight additional nonstrategic parks under review. Giving
effect to the sale or closing of the 16 non-strategic parks, the Company
will operate 27 parks."
"Consistent with the Company's business plan, during the second half of
this year, the Company (i) purchased the previously syndicated equity
interests it did not own in entities owning Mountasia parks located in
Columbus, Ohio; Houston, Texas; McAllen, Texas; Miami, Florida and Las
Vegas, Nevada; (ii) purchased the underlying fee title to the Malibu park
located in Puente Hills, California which it previously operated under a
ground lease; (iii) entered into a contract to purchase a dragster
attraction for certain of the Company's parks from Superstar Dragsters,
Inc. of British Columbia; and (iv) redeemed the Company's 10% convertible
debt for $4.8 million (the funds for which, as previously announced, were
provided by MEI Holdings). The total initial investment for the purchased
parks was $26.5 million; under the dragster purchase agreement, the Company
has spent $3.6 million this year and anticipates spending an additional
approximately $24.0 million over the next three years. In connection with
its pursuit of possible acquisitions, the Company has entered into an
agreement giving it the right to acquire a park in San Antonio, Texas for
$4.9 million (less a $100,000 deposit) and has identified certain other
possible acquisitions (none of which is currently under contract). The
funds for the investment in the purchased parks and the $3.6 million under
the dragster purchase agreement were obtained partially from MEI Holdings'
initial $40.0 million investment made this Summer and partially from
borrowings under the Company's $20.0 million credit facility."
"As a part of its plan to improve its results of operations, the Company is
developing a set of "best operating practices" for every phase of park
operations and intends to institute these practices system- wide."
"In order to obtain a portion of the capital for its business plan,
Mountasia exercised its right to require MEI Holdings to purchase up to
$22.7 million in additional equity as needed. Following the above-described
investments, the Company has substantially drawn all borrowings permitted
under its existing $20.0 million loan facility and believes that it will be
required to seek, and based on preliminary discussions with the
3
<PAGE>
lender expects to receive, a waiver of certain financial covenants for the
period ended December 31, 1996 (in order to prevent a default thereunder).
Accordingly, the Company presently intends to obtain the financing for the
remainder of its business plan through other sources of debt and equity
capital. In connection with MEI Holdings' initial investment in the Company
earlier this year, MEI Holdings agreed, subject to certain conditions and
limitations, to make up to $30 million of additional equity capital
available to the Company to backstop future rights offerings made to all
stockholders."
"The shares to be issued to MEI Holdings as part of its $22.7 million
capital contribution will be non-voting Series F Preferred Stock. The
Series F Preferred Stock is convertible into voting Common Stock upon
approval by the Company's shareholders. The number of common equivalent
shares issuable upon the Company's exercise of its right to require MEI
Holdings to make the up to $22.7 million equity investment in the Company
is dependent in part on future events, including (i) whether shareholders
approve the conversion of Series F Preferred Stock into Common Stock (if
such shareholder approval is not obtained, the shares issuable to MEI
Holdings will be effectively issued at a 15% discount), (ii) the extent to
which MEI Holdings is entitled to additional shares under the post-closing
adjustment provisions of its Investment Agreement with the Company, and
(iii) whether, and the prices at which, certain outstanding securities are
converted into Common Stock. However, the Company presently estimates that,
depending primarily on the extent of adjustments finally made under the
post-closing adjustment provisions of the Company's Investment Agreement
with MEI Holdings, such number will be between 9.0 million and 9.7 million
shares, or 10.6 million and 11.4 million shares if shareholder approval as
described above is not obtained. Assuming, solely for purposes of
illustration, that (a) 9.0 million shares are issued in connection with the
$22.7 million additional investment, (b) MEI Holdings receives an
additional 1.9 million shares under the above-described post-closing
adjustment provisions, (c) shareholder approval of the issuance of Common
Stock as described above is obtained, and (d) the conversion of all
outstanding convertible debentures at $3.50 per Share, MEI Holdings would
beneficially own 28.9 million shares out of an assumed 50.4 million total
number of outstanding shares, without giving effect to any shares of Common
Stock or convertible debentures of the Company purchased pursuant to MEI
Holdings' pending tender offer. Based on such assumptions, MEI Holdings
would beneficially own 57.3% of the Company's outstanding shares. However,
the actual numbers of shares owned by MEI Holdings and issuable by the
Company is dependent in part on future events and could be materially
different from the numbers provided in the foregoing illustration."
"On November 14, 1996, MEI Holdings commenced offers to purchase any and
all shares of Common Stock not owned by it at $3.50 per share, net to the
seller in cash, and certain convertible debentures of the Company. MEI
Holdings has informed the Company that MEI Holdings does not intend to
change the terms of such offers in light of the matters described above,
except that MEI Holdings does intend to extend the expiration date of the
offers (which previously had been January 7, 1997) to permit MEI Holdings
to publish a supplement to its tender offer materials describing such
matters and providing certain additional information. The Company has been
informed that MEI Holdings intends to publish such supplement as promptly
as practicable. The extended tender offer expiration date will be set forth
in that supplement."
"Headquartered in Atlanta, Georgia, Mountasia Entertainment International,
Inc. is a leader in the family entertainment industry now operating 43
family fun centers."
For additional information relating to the Purchaser's investment in the
Company, including the 15% purchase price discount at which Series F and G Stock
is issuable if Shareholder Approval of the conversion of Series F or G Preferred
Stock into Shares is not given, see "The Recapitalization Agreements" in the
Offer To Purchase. There is no cap limiting the maximum number of Shares
issuable under the Post-Closing Adjustment Provisions of the Investment
Agreement. For additional information regarding recent developments affecting
the Company, see "Background of the Offers" in the Offer To Purchase and the
documents referred to in "Additional Information" in the Offer To Purchase.
Additional Information Concerning Certain Determinations by the Purchaser
The following is certain additional information concerning determinations
by the Purchaser relating to the Offers. For a discussion of the background of
the Offers, see "Background of the Offers" in the Offer To Purchase.
4
<PAGE>
For a discussion of the Purchaser's consideration of the fairness of the Offers,
see "Special Factors -- Certain Determinations by the Purchaser and Plans for
the Company after the Offers" in the Offer To Purchase. Additional information
concerning factors considered by, and the determinations of, the Special
Committee of the Company Board regarding the Offers is set forth in Items 3 and
4 of the Statement on Schedule 14D-9 previously furnished to Shareholders and
Debentureholders, and is incorporated herein by reference.
As discussed in the Offer To Purchase (see "Special Factors -- Certain
Determinations by the Purchaser and Plans for the Company after the Offers" in
the Offer To Purchase), the Purchaser believes that the long-term value of an
investment in the Shares or Debentures could exceed the prices offered therefor
pursuant to the Offers, although there can be no assurance with respect thereto.
The Purchaser believes that the additional material potential detriments and
adverse effects on the Company or the Shareholders or Debentureholders (other
than the Purchaser and its affiliates) are (i) the possible delisting of the
Shares from trading on the AMEX (discussed in "Special Factors -- Certain
Effects of the Offers" in the Offer To Purchase), (ii) the possible
deregistration of the Shares under the Exchange Act (discussed in "Special
Factors -- Certain Effects of the Offers" in the Offer To Purchase), and (iii)
the potential income tax effects of a sale of Shares or Debentures pursuant to
the Offers (discussed in "Special Factors -- Certain Federal Income Tax
Consequences" in the Offer To Purchase). As provided in the Offer To Purchase,
(a) if the Purchaser determines that it is likely that the Offer would result in
the delisting of the Shares from trading on the AMEX, the Purchaser will make a
public announcement of such determination and, if applicable, extend the
Expiration Date of the Offers so that the Expiration Date is not less than ten
business days after the date of such announcement and (b) the Purchaser and the
Company have agreed that (1) Purchaser will not cause the Company voluntarily to
take or fail to take any action that would result in deregistration under the
Exchange Act prior to December 31, 1997 if the Shares continue to be listed on
the AMEX or if the Company Board otherwise requests and (2) the Company will
continue voluntarily to comply with the Exchange Act reporting requirements
regardless of the outcome of the Offers until at least December 31, 1997. The
Purchaser did not consider any alternative to the Offers (other than not
initiating the Offers) in deciding whether to make the Offers.
As described in the Offer To Purchase (see "Special Factors -- Certain
Determinations by the Purchaser and Plans for the Company after the Offers"),
although the Purchaser believes that the long-term value of an investment in the
Shares or Debentures could exceed the prices offered therefor pursuant to the
Offers, the Purchaser believes that the Offers are fair to Shareholders and
Debentureholders. The principal factor considered by the Purchaser in making
this determination was that the Per Share Price proposed in the Offer was (i) in
excess of (a) the Purchaser's Per Share price for its initial investment in the
Company pursuant to the Investment Agreement (the "Initial Investment Price")
(see "Background of the Offers -- The Recapitalization" and "The
Recapitalization Agreements" in the Offer To Purchase), which had been approved
by the Company Board following arms-length negotiations and before the Purchaser
or any affiliate thereof had any equity interest in the Company and (b) of the
Purchaser's $88.0 million valuation of the equity of the Company (after giving
effect to the Purchaser's initial $40.0 million investment) at the time that the
Purchaser and the Company entered into the Investment Agreement (which $88.0
million valuation is equal to the product of the Purchaser's Initial Investment
Price of $3.41 as negotiated with the Company at that time multiplied by the
number of Shares outstanding immediately after the closing of the $40.0 million
investment, was based upon various assumptions as described in "Background of
the Offers -- The Purchaser's Reasons for the Recapitalization and the Offers"
in the Offer To Purchase and was based in substantial part on the Purchaser's
assumptions as to the value of the Company as a platform for future growth if
the Company were able to implement a plan such as that described in "Company
Announces Business Plan" in this Supplement which plan was developed since the
closing last Summer of the Purchaser's initial $40.0 million investment), and
(ii) in excess of recent market prices for Shares (see "Special Factors --
Market Prices for Shares" in the Offer To Purchase). The Purchaser's valuation
referred to in clause (i)(b) of the immediately preceding sentence was made
solely for the Purchaser's internal purposes, was based on various assumptions
as to future events, many of which are beyond the Purchaser's and the Company's
control and some of which have been or may be materially affected by subsequent
events (see "Company Announces Business Plan" in this Supplement), and may not
be relied upon to determine the value of an investment in the Shares. The
Initial Investment Price was $3.41 per Share ($0.09 below the Per Share Price);
however, such price is subject to adjustment downward to reflect issuance of
additional Shares pursuant to the Investment Agreement and the Warrant as
described in "Background of the Offers -- The Purchaser's Reasons for the
Recapitalization and the Offers" and "The Recapitalization Agreements" in the
Offer To Purchase and, based upon the factors described in "Exercise of the
Company Call Option" in this Supplement, the Purchaser presently estimates that
such price will be in the range of $2.19 to $2.52 ($1.31 to $.98 below the Per
Share Price). During the period from October 1, 1996 to November 13, 1996 (the
last trading day immediately preceding the commencement of the Offers) the
closing sales prices for Shares as reported on the NASDAQ or the AMEX (as
applicable) ranged from a high of $3.13 ($0.37 below the Per Share Price) per
Share to a low of $1.94 per Share ($1.56 below the Per Share Price). On November
6, 1996, the last full trading day preceding the public announcement of the
Purchaser's intention to make the Offers, the last reported trading on the AMEX
was $2.5625 per Share ($0.9375 below the Per Share Price). See "Special Factors
- -- Market Prices for Shares" in the Offer To Purchase. The Company's business
plan announced on December 27, 1996 (see "Company Announces Business Plan" in
this Supplement) does not affect the Purchaser's views as to the fairness of the
Offers.
5
<PAGE>
In making the determinations referred to in the immediately preceding
paragraph, the Purchaser did not give substantial consideration to any of the
following: (a) historical market prices for Shares (which were substantially
higher than recent market prices) because of the general decline therein since
the Company's initial public offering in November 1993, particularly throughout
1996 (see "Special Factors -- Market Prices for Shares" in the Offer To
Purchase), (b) net book value per Share (which had declined to $2.68 per Share
on September 30, 1996 from $4.51 per Share on September 30, 1995 primarily as a
result of the $15.4 million of losses incurred by the Company during fiscal 1996
and the issuance of Shares, including to the Purchaser and upon conversion of
the Company's convertible securities, at prices below the $4.51 book value per
Share amount at September 30, 1995), going concern value per Share (except for
the $88.0 million valuation of the equity of the Company described in the
immediately preceding paragraph), liquidation value per Share or per Share
prices paid in prior investments by third parties, or (c) any firm offer during
the preceding 18 months by any third party relating to any acquisition or other
business combination or other transaction involving the Company (including
without limitation, if it is deemed to be such an offer, the proposal announced
by the Company in December 1995 under which persons affiliated with Universal
Investment & Management Company ("UIMCo") would have acquired substantially all
of the Company's assets for $90.0 million less any assumed indebtedness or other
liabilities (which proposal the Purchaser has been informed was (x) valued by
UIMCo at approximately $6.00 per Share and (y) rejected by the Company because,
among other things, of the financing and other conditions thereof and lack of
certainty with respect thereto)). Some or all of the measures referred to in
clauses (a) through (c) of the immediately preceding sentence could produce
valuations higher than the $3.50 Per Share Price. In addition, the Purchaser did
not obtain or consider any report, opinion or appraisal of Company from an
unaffiliated third party in connection with the Offers. (For a discussion of
certain procedural aspects of the Offers, see the third last paragraph in this
Section of this Supplement.)
While the Purchaser did consider the Company's prospects in connection with
the Offers, such consideration, in general, related to the Purchaser's view of
the Company as a platform on which a substantial family entertainment business
could be built (see "Company Announces Business Plan" in this Supplement),
rather than any specific projections or forecasts of the Company in respect of
the Company's results of operations. On November 13, 1996, the Company reported
that the seasonal nature of the Company's business, the fact that certain of the
Company's parks are presently performing below expectations, the time required
to redevelop selected parks and the fact that certain parks will be closed
during redevelopment make it unlikely that the Company will return to
sustainable profitability until the effects of its previously announced steps to
improve shareholder value are realized. See "Background of the Offers -- Certain
Events Following the Recapitalization" in the Offer To Purchase and "Company
Announces Business Plan" in this Supplement. However, the primary objective of
the Company's business plan announced on December 27, 1996 was improving the
Company's results of operations and, while there necessarily can be no assurance
that this objective will be achieved or as to the timing thereof, the Purchaser
decided to make the Offers based in large part on the belief that this objective
can ultimately be achieved.
While the Purchaser believes that the Offers are fair to the Shareholders
of the Company from a financial point of view, as discussed in the Offer To
Purchase, the Purchaser also believes that the long-term value of an investment
in the Shares could exceed the Per Share Price. Accordingly, neither the
Purchaser nor, as discussed below, the Special Committee of the Company Board
expresses any opinion or makes any recommendation to the Shareholders or
Debentureholders regarding their respective decisions to tender or refrain from
tendering Shares or Debentures pursuant to the Offers. Whether or not the Per
Share Price or the prices to be paid for the 9% Debentures and the 9.1%
Debentures in the Offers represent an acceptable return on investment for any
particular Shareholder or Debentureholder will necessarily depend on such
Holder's individual investment criteria, liquidity requirements and other
circumstances, as well as such Holder's assumptions as to future events
(including the Company's future results of operations and the implementation of
its growth strategy), many of which events are outside of Company's control.
Moreover, as discussed in "Special Factors -- Certain Determinations by the
Purchaser and Plans for the Company after the Offers" in the Offer To Purchase,
any analysis of the value of an investment in the Shares or Debentures is
heavily dependent on the particular capitalization and discount rates, tax
considerations and other investment criteria an investor determines to be
appropriate for such investor's analysis. Accordingly, each Holder must make
his, her or its own decision whether to tender Shares or Debentures pursuant to
the Offers and should give careful consideration to the terms of, and
consequences resulting from, the Offers and such other factors as such Holder
determines to be relevant.
The Purchaser also believes that the Offers are procedurally fair based
primarily upon the fact that the Offers are not coercive--i.e., any Shareholder
or Debentureholder who elects to do so may retain his or her interest in the
Company. In addition, the above-described provisions made in the Offers to
extend the Expiration Date if the Purchaser determines that it is likely that
the Offers will result in the delisting of the Shares and to maintain the
6
<PAGE>
Company's status as a reporting company through at least December 31, 1997 were
added in an effort to aid in assuring the noncoercive nature of the Offers.
However, as described in the Offer To Purchase (see "Special Factors -- Certain
Determinations by the Purchaser and Plans for the Company after the Offers" in
the Offer To Purchase), no person was retained as an unaffiliated representative
to act on behalf of unaffiliated Holders for purposes of negotiating the terms
of the Offers and the Purchaser has received no report, opinion or appraisal
from an outside party relating to the consideration or the fairness of the
consideration being offered to Holders pursuant to the Offers or the fairness of
the Offers to the Company, the Purchaser and its affiliates or Holders other
than the Purchaser and its affiliates, or which is otherwise materially related
to the Offers. Except for the Offer to purchase the 9.1% Debentures, which is
conditioned on there being validly tendered and not withdrawn all outstanding
9.1% Debentures, the Offers are not conditioned upon acceptance by Holders of a
majority of the Shares or the Debentures.
The Purchaser did not rank or assign relative weights to the factors
discussed above in making its determination as to the fairness of the Offers.
However, in general, the most significant factors in such determination were the
Price Per Share and determination by the Purchaser that the Offers were not
coercive, in each case as described above. The Purchaser believes that the
factors discussed in this section of this Supplement apply, in all material
respects, equally to the Offer for Shares and to the Offer for Debentures.
On November 29, 1996, the Special Committee unanimously determined not to
recommend that Shareholders or Debentureholders tender or fail to tender Shares
or Debentures pursuant to the Offers. Instead, the Special Committee is
remaining neutral with respect to the Offers. A copy of Schedule 14D-9 relating
to such determinations has been previously mailed to Shareholders and
Debentureholders and may be obtained in the manner described under "Additional
Information" in the Offer To Purchase. None of the members of the Special
Committee is an employee of the Purchaser, the Company or any subsidiary of
either of them.
Additional Information Concerning Source and Amount of Funds
Each of Purchaser's partners has, or will have prior to the Expiration
Date, net worth adequate to fulfill its commitments to fund the capital
contributions to the Purchaser as are necessary to provide the Purchaser with
the funds to purchase the Shares and the Debentures in the Offers. The
Purchaser's obligation to consummate the Offers is not conditioned on the
Purchaser obtaining financing. See "The Offers -- Certain Conditions of the
Offers" in the Offer To Purchase.
Certain Conditions of the Offers
In "The Offers -- Certain Conditions of the Offers" in the Offer To
Purchase, the Purchaser reserved the right, among other things, to terminate the
Offers if in the "sole discretion" of the Purchaser certain events occurred. The
Purchaser hereby amends the Offers to modify that standard to the Purchaser's
reasonable discretion.
In "The Offers -- Certain Conditions of the Offers" in the Offer To
Purchase, the Purchaser reserved the right, among other things, to terminate the
Offers if "at any time at or before payment for any Shares or Debentures
tendered pursuant to the Offers (whether or not any Shares or Debentures have
theretofore been accepted for payment or paid pursuant to the Offers)" any of
the events specified under that caption occurs. The Purchaser hereby amends the
Offers so that the period during which the Purchaser reserves such right to
terminate ends on the Expiration Date (whether or not any Shares or Debentures
have theretofore been accepted for payment or paid for pursuant to the Offers)
and the first paragraph of "The Offers -- Certain Conditions of the Offers" in
the Offer To Purchase is hereby amended accordingly.
Exercise of the Company Call Option
In connection with the announcement of the adoption of its business plan on
December 27, 1996, the Company announced the exercise of its rights to require
the Purchaser to invest an additional $22.7 million in the Company pursuant to
the Company Call Option. See "Company Announces Business Plan" in this
Supplement.
7
<PAGE>
Pursuant to the Recapitalization Agreement, upon such exercise, Series F Stock
will be issued to the Purchaser in lieu of Shares. The number of shares of
Series F Stock to be issued will be determined by dividing $22.7 million by the
Purchaser's Base Price Per Share multiplied by .85 (the 15% Series F Stock
discount) and dividing the product by ten.
Assuming (i) the conversion of all of the $17.1 million aggregate principal
amount of the 9% Debentures and 9.1% Debentures (whether or not sold pursuant to
the Offers) and (ii) the anticipated issuance of approximately 400,000 Shares
(rather than 650,000 Shares, as estimated in the Offer To Purchase) in
settlement of certain claims by third parties against the Company arising out of
events occurring prior to the Purchaser's investment in the Company (the
"Settlement Shares"), the Company estimates that the total number of outstanding
Shares would increase by 5.4 million Shares. Under the Investment Agreement and
the Warrant, the issuance by the Company of 5.4 million Shares in these
circumstances would result in the Company issuing approximately 450,000 Shares
of Series F Stock (which are convertible into 4.5 million Shares upon
Shareholder Approval) to the Purchaser without the payment of additional
consideration so that the Purchaser's initial $40.0 million investment in the
Company pursuant to the Investment Agreement was not diluted. Such additional
shares of Series F Stock would have been so issued to the Purchaser under the
Warrant whether or not provision for the funding by the Purchaser of the
redemption of the 10% Debentures had been made as described in "Special Factors
- -- The Redemption Agreement" in the Offer To Purchase. After these issuances of
Shares, and assuming, solely for purposes of illustrating the potential effect
of the Investment Agreement and other documents referred to in "The
Recapitalization Agreements" in the Offer To Purchase, (a) the conversion of all
Series F and Series G Stock into Shares, (b) the conversion of the 9% Debentures
and 9.1% Debentures at an assumed conversion price of $3.50 per Share (although
$487,000 aggregate principal amount of the 9% Debentures has already been
converted at an average price of $2.28 per Share), (c) the issuance of 9.0
million Shares in exchange for the Purchaser's investment of $22.7 million
pursuant to the Company's exercise of the Company Call Option at an issuance
price of $2.52 per Share (see "Company Announces Business Plan" in this
Supplement), and (d) that 1.9 million Shares are issued under the Post-Closing
Adjustment Provisions of the Investment Agreement, the Purchaser estimates that
the Company would have outstanding a total of approximately 50.4 million Shares,
28.9 million of which (or 57.3% of the total number of outstanding Shares) would
be beneficially owned by the Purchaser. However, the foregoing computation is
based upon various estimates and assumptions, including in addition to the
factors indicated above, that (1) all the 9% Debentures are converted and that
the conversion price for the 9% Debentures and 9.1% Debentures is $3.50 per
Share (rather than a lower price, which would apply if stock market prices for
Common Stock are lower at the time of actual conversion by Holders thereof and
which does apply to 214,701 Shares previously issued upon conversion of certain
of the 9% Debentures as described above), (2) that Shareholder Approval as
described above is obtained, (3) the Purchaser's Base Price Per Share is at or
below $2.26, (4) 9.0 million Shares are issued to the Purchaser for $22.7
million pursuant to the Company's exercise of the Company Call Option, (5) the
issuance of the 400,000 Settlement Shares as described above and (6) the total
number of Shares issued under the Post-Closing Adjustment Provisions of the
Investment Agreement is 1.9 million. Accordingly, the actual number of Shares
that the Company will have outstanding in the circumstances described above
cannot be determined at this time and could be materially different from the
numbers in the foregoing illustration.
Certain Other Matters Relevant to the Offers
Early Termination of HSR Act Waiting Period. The Purchaser has been
notified that its request for early termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, with respect to
the Purchaser's purchase of Shares pursuant to the Offers has been granted. See
"The Offers -- Certain Conditions of the Offers" and "The Offers -- Certain
Legal Matters" in the Offer To Purchase.
Intentions of Certain Holders. The Purchaser has been advised by a
representative of all of the Holders of the 9.1% Debentures that such Holders
intend to tender and not withdraw their 9.1% Debentures pursuant to the Offers.
However, there can be no assurance that such 9.1% Debentures will actually be so
tendered and not withdrawn.
Dividends. The Company has not paid dividends on the Shares since Shares
were initially sold to the public in 1993 and does not currently expect to pay
dividends on the Shares at any time in the foreseeable future.
8
<PAGE>
Filings with the Commission. The Purchaser has filed with the Commission a
Tender Offer Statement on Schedule 14D-1 and has filed with the Commission a
Transaction Statement on Schedule 13E-3, together with exhibits in each case,
pursuant to Rules 14d-3 and 13e-3, respectively, under the Exchange Act,
furnishing certain additional information with respect to the Offers. Such
Statements and amendments thereto, including exhibits, may be examined and
copies may be obtained at the places and in a manner set forth under "Additional
Information" and "Miscellaneous" in the Offer To Purchase (except they will not
be available in the regional offices of the Commission).
MEI HOLDINGS, L.P.
December 31, 1996
9
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter of
Transmittal and Certificates for Shares or Debentures and any other required
documents should be sent by each Holder or his broker, dealer, commercial bank,
trust company or nominee to the Depositary at the address set forth below:
----------
The Depositary for the Offers is:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
----------
By Mail, Hand or Overnight
Courier:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
By Facsimile Transmission:
(212) 509-5150
For Information or Confirmation by Telephone:
(212) 509-4000
----------
Any questions or requests for assistance or additional copies of this Supplement
to Offer To Purchase, the Offer To Purchase, the Letter of Transmittal and the
Notice of Guaranteed Delivery may be directed to the Information Agent at the
telephone numbers and location listed below. You may also contact your broker,
dealer, commercial bank or trust company for assistance concerning the Offers.
The Information Agent for the Offers is:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll Free (800) 322-2885
