SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
(Amendment No. 1)
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. 1 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. 1 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)(1) is a copy of the Offer To
Purchase as revised to reflect certain immaterial typographical errors in the
version thereof as originally filed with the Commission.
-2-
<PAGE>
Item 17. Material to be Filed as Exhibits.
(d) (1) Offer To Purchase, dated November 14, 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: November 18, 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)(1) Offer To Purchase, dated November 14, 1996
-5-
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 AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 7, 1997,
UNLESS THE OFFERS ARE EXTENDED.
- --------------------------------------------------------------------------------
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 are 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, (i) the absence of (a) certain litigation, orders or other
legal matters and (b) 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. (the "Company") and (ii) the expiration or termination of all waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. See "The Offers -- Certain Conditions of the Offers." 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." 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.
Any Shareholder or Debenture Holder (collectively, "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 -- Procedures for Tendering Shares or Debentures" 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 -- Procedures for
Tendering Shares or Debentures."
---------------
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.
---------------
November 14, 1996
The Information Agent for the Offers is MacKenzie Partners, Inc.
<PAGE>
TABLE OF CONTENTS
INTRODUCTION .............................................................. 1
SPECIAL FACTORS ........................................................... 3
Market Prices for Shares ......................................... 3
Certain Determinations by the Purchaser and Plans for the
Company after the Offers ....................................... 4
Certain Effects of the Offers .................................... 4
Interests of Certain Persons in the Offers ....................... 5
Redemption Agreement ............................................. 6
Certain Federal Income Tax Consequences .......................... 7
BACKGROUND OF THE OFFERS .................................................. 8
The Company's Financial Position Prior to the Recapitalization ... 8
The Recapitalization ............................................. 9
Certain Events Following the Recapitalization .................... 9
The Company's Reasons for the Recapitalization ................... 11
The Purchaser's Reasons for the Recapitalization and the Offers .. 11
DESCRIPTION OF DEBENTURES ................................................. 13
9% Debentures .................................................... 13
9.1% Debentures .................................................. 13
THE RECAPITALIZATION AGREEMENTS ........................................... 14
General .......................................................... 14
Warrant .......................................................... 14
Post-Closing Adjustment Provisions ............................... 15
Company Call Option and Purchaser Option ......................... 15
Series F Stock ................................................... 16
Representation on the Company Board .............................. 16
Certain Rights Offerings ......................................... 16
Indemnification .................................................. 17
Registration Rights Agreement .................................... 17
Standstill Agreement ............................................. 18
THE OFFERS ................................................................ 19
Terms of the Offers .............................................. 19
Acceptance for Payment and Payment for Shares and Debentures ..... 20
Procedure for Tendering Shares or Debentures ..................... 21
Withdrawal Rights ................................................ 23
Source and Amount of Funds ....................................... 24
Certain Conditions of the Offers ................................. 24
Dividends and Interest on Debentures ............................. 26
Certain Legal Matters ............................................ 27
Fees and Expenses ................................................ 27
CERTAIN INFORMATION CONCERNING THE COMPANY ................................ 28
General .......................................................... 28
Financial Information ............................................ 28
ADDITIONAL INFORMATION .................................................... 29
CERTAIN INFORMATION CONCERNING THE PURCHASER .............................. 30
MISCELLANEOUS ............................................................. 31
ANNEX A Certain Information With Respect to the Purchaser ........ A-1
<PAGE>
INTRODUCTION
MEI Holdings, L.P. (the "Purchaser") hereby offers 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, on the terms and subject to the conditions set forth herein and in the
related Letter of Transmittal (which together constitute the "Offers"). As of
November 14, 1996, the Purchaser (a) beneficially owned 11,727,970 Shares, or
41.8% of the outstanding Shares, (b) is entitled, upon the occurrence of certain
future events outside the Purchaser's control, to purchase from the Company or
to receive from the Company without payment of additional consideration,
additional Shares or other securities (see "The Recapitalization Agreements --
The Warrant;" and "-- Post-Closing Adjustment Provisions"), (c) has agreed to
purchase certain additional securities which, if shareholder approval for such
conversions is obtained (see "Background of the Offers -- Certain Events
Following the Recapitalization"), would be convertible into 2,032,565 additional
Shares, and (d) has certain other rights in respect of its investments in the
Company and the purchase of securities from the Company. See "Special Factors --
The Redemption Agreement; "Background of the Offers -- The Recapitalization" and
"The Recapitalization Agreements."
The 9% Debentures are convertible into Shares after February 1, 1997 at the
lesser of $4.50 and 95% of the average of the last reported sales prices for
Shares for the three trading days prior to the Company's receipt of notice of
conversion (the "9% Conversion Price"), except for $925,000 aggregate principal
amount of 9% Debentures that are presently convertible at the 9% Conversion
Price (the "Presently Convertible 9% Debentures"). The 9.1% Debentures are
convertible into Shares after April 4, 1997 (and the Company may require
conversion after such date) at the lesser of $5.00 per Share and the average of
the last reported sales prices for Shares for the 30 days prior to the date of
conversion (the "9.1% Conversion Price"). See "Description of Debentures." A
sale of Debentures in the Offers will (i) permit Debenture Holders to obtain
accrued and unpaid interest under the Debentures through the date of acceptance
for payment ("Debenture Interest") and (ii) have the effect of permitting
Debenture Holders to convert the Debentures into Shares and then receive the Per
Share Price for such Shares. Assuming the purchase of Debentures pursuant to the
Offers on January 7, 1997, holders of 9% Debentures would be entitled to $16.52
of Debenture Interest per $1,000 of 9% Debenture principal and holders of 9.1%
Debentures would be entitled to a nominal amount of Debenture Interest (interest
having been prepaid on the 9.1% Debentures).
The Purchaser has agreed to vote all Shares acquired pursuant to the Offers
(so long as they are held by the Purchaser or its affiliates and to the extent
that the Shares beneficially owned by the Purchaser and its affiliates exceed
49.9% of all outstanding Shares at the time in question (the "49.9% Level")) in
the same proportion as Shares are voted by other Shareholders unless and until
such time as (i) Shareholders have approved ("Shareholder Approval") the
issuance of Shares to the Purchaser, directly or upon conversion of non-voting
preferred stock of the Company issued pursuant to the Recapitalization
Agreements, in excess of the 49.9% Level (see "Special Factors -- The Redemption
Agreement" and "The Recapitalization Agreements -- Series F Stock") or (ii) if
earlier, the time at which the Standstill Agreement entered into in connection
with the Recapitalization is no longer in effect. See "The Redemption Agreement"
and "The Recapitalization Agreements -- Standstill Agreement."
Holders who tender their Shares or Debentures will not be obligated to pay
brokerage fees or commissions on the purchase by the Purchaser of Shares or
Debentures pursuant to the Offers. The Company will pay or reimburse all fees
and expenses of Continental Stock Transfer & Trust Company, the Depositary for
the Offers (the "Depositary"), MacKenzie Partners, Inc., Purchaser's Information
Agent (the "Information Agent"), and all other costs and expenses in connection
with the Offers. See "The Offers -- Fees and Expenses."
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 upon all 9.1%
<PAGE>
Debentures (which are held by 18 registered Holders as of November 13, 1996)
being validly tendered and not withdrawn prior to the Expiration Date (the
"Minimum 9.1% Debenture Condition"), and the purchase of Shares pursuant to the
Offers is not conditioned on the purchase of Debentures pursuant to the Offer,
or vice versa. The Offers are conditioned on, among other things, (i) the
absence of (a) certain litigation, orders or other legal matters and (b) any
material adverse change (or any development involving a prospective material
adverse change) in the business, financial condition, results of operations or
prospects of the Company and (ii) the expiration or termination of all waiting
periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the regulations thereunder (the "HSR Act"). See "The Offers --
Certain Conditions of the Offers." The Purchaser reserves the right to waive any
one or more of the conditions to the Offers.
As of November 13, 1996, there were 28,058,958 Shares outstanding and there
were 190 holders of record of the Shares. As of November 13, 1996, the principal
amount of the outstanding 9% Debentures was $5,163,000 and the principal amount
of the outstanding 9.1% Debentures was $11,422,422. Except as set forth in
"Special Factors -- Interests of Certain Persons in the Offers," none of the
directors or executive officers of the Purchaser or its affiliates beneficially
owns any Shares or Debentures. For additional information regarding the
Purchaser and certain of its affiliates and other related persons, see "Certain
Information Concerning the Purchaser" and Annex A hereto.
The Offers will enable Shareholders who would like to sell their Shares at
a premium to recent market prices for Shares the opportunity to do so and to
enable Debenture Holders the opportunity to have their Debentures and Debenture
Interest effectively paid prior to maturity. The Purchaser does not have any
present plans to propose or otherwise seek to effect a merger or other
transaction in which non-tendering Holders would have their Shares or Debentures
converted into cash or other consideration, but reserves the right to propose or
seek to effect such a transaction following the completion of the Offers. The
Purchaser has agreed to convert any Debentures purchased pursuant to the Offers
at a conversion price of $3.50 per share. See "Special Factors -- The Redemption
Agreement."
The Board of Directors of the Company (the "Company Board") has established
a committee (the "Special Committee") comprised of the members of the Company
Board who are not affiliated with the Purchaser or employed by the Company or
any of its subsidiaries ("Independent Directors") to evaluate the Offers. The
Special Committee will determine on behalf of the Company Board whether the
Company Board recommends that Holders tender their Shares or Debentures pursuant
to the Offers or not so tender their Shares or Debentures, or is remaining
neutral with respect thereto. Under applicable law, such recommendation is
required to be made and disseminated not later than ten business days after the
commencement of Offers. The Purchaser has been informed, however, that none of
the members of the Company Board intends to tender Shares beneficially owned by
him pursuant to the Offers and that no such person beneficially owns any
Debentures.
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 AMEX and the Company no longer being required to file reports and
other information under the Exchange Act. Any of these events could adversely
affect, among other things, the liquidity or prices realizable in sales of the
Shares or Debentures following the completion of the Offers. If, prior to the
Expiration Date the Purchaser determines that it is likely that the Offers will
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. See "Special Factors -- Certain Effects of the
Offers" for a discussion of these and other possible effects of the Offers.
On November 6, 1996, the last full trading day preceding the public
announcement of the Purchaser's intention to commence the Offers, the last
reported sales price of the Shares on the AMEX was $2.5625 per Share. On
November 13, 1996, the last full trading day preceding the commencement of the
Offers, the last reported sales price of the Shares on the AMEX was $3.03125 per
Share. Holders are urged to obtain current market quotations for the Shares. See
"Special Factors -- Market Prices for Shares" and "-- Certain Determinations by
the Purchaser."
2
<PAGE>
Holders are urged to read the Offer To Purchase and the related Letter of
Transmittal carefully before deciding whether to tender their Shares or
Debentures pursuant to the Offers.
SPECIAL FACTORS
Market Prices for Shares
The Shares are listed on the AMEX under the symbol "MBE." Shares were
initially sold to the public in 1993 at a price of $8.00 per Share and were
quoted on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") from such date until August 1, 1996, at which time the Shares
were listed and traded on AMEX. The price per Share realizable on the NASDAQ
and, subsequently, the AMEX, since the initial public offering has, in general,
trended down. The following table sets forth the closing sales prices for the
Shares as reported on the NASDAQ or the AMEX for the quarterly periods
indicated.
1996 High Low
- ---- ---- ----
October 1 to November 13, 1996 $ 3.13 $ 1.94
Quarter ended September 30, 1996 $ 3.56 $ 2.38
Quarter ended June 30, 1996 $ 3.69 $ 2.38
Quarter ended March 31, 1996 $ 5.31 $ 3.13
1995
Quarter ended December 31, 1995 $ 8.25 $ 4.19
Quarter ended September 30, 1995 $ 8.50 $ 6.25
Quarter ended June 30, 1995 $ 9.25 $ 5.88
Quarter ended March 31, 1995 $ 9.25 $ 7.00
1994
Quarter ended December 31, 1994 $11.00 $ 7.00
Quarter ended September 30, 1994 $11.50 $ 9.50
Quarter ended June 30, 1994 $11.63 $ 9.00
Quarter ended March 31, 1994 $11.75 $ 9.00
On November 6, 1996, the last full trading day preceding the public
announcement of the Purchaser's intention to commence the Offers, the last
reported sales price on the AMEX was $2.5625 per Share. On November 13, 1996,
the last full trading day preceding the commencement of the Offers, the last
reported sales price on the AMEX was $3.03125 per Share. Shareholders are urged
to obtain current market quotations for the Shares.
The 9% Debentures were issued by the Company on November 15, 1994 and the
9.1% Debentures were issued by the Company on August 28, 1996, each in private
transactions. The Debentures are not listed for trading or quoted on any
securities exchange or quotation system. See "Description of Debentures."
Certain Determinations by the Purchaser and Plans for the Company after the
Offers
The Purchaser does not have any present plans to propose or otherwise seek
to effect a merger or other transaction in which non-tendering Holders would
have their Shares or Debentures converted into cash or other consideration, but
reserves the right to propose or seek to effect such a transaction following the
completion of the Offers.
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,
as of November 14, 1996, the Special Committee has not announced whether or not
it recommends that Holders tender their Shares or Debentures pursuant to the
Offer or not so tender their Shares or Debentures, or whether the Special
Committee will remain neutral with respect to the Offers. The Purchaser has
received no report, opinion or appraisal from an outside party relating to the
3
<PAGE>
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.
Based on the Company's business, financial condition, results of operations
and prospects, recent market prices for the Shares, the Purchaser's evaluation
of the existing terms of the Debentures and other factors, the Purchaser
believes that the Offers are fair to Holders who desire liquidity for their
Shares or Debentures at this time. However, the Purchaser also believes that the
long-term value of an investment in Shares could exceed the Per Share Price. For
a discussion of the Purchaser's reasons for the Offers and the transactions in
which the Purchaser obtained its initial equity interest in the Company (the
"Recapitalization"), and the Company's present business plan and outlook, see
"Background of the Offers -- Purchaser's Reasons for the Recapitalization and
the Offers." Any analysis of the value of an investment in the Shares or the
Debentures is necessarily uncertain, is based in substantial part on future
events, including the Company's future operating performance and the
implementation of its growth strategy, many of which are outside the control of
the Company, and is heavily dependent upon 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.
Certain Effects of the Offers
The Purchaser does not believe that the Offers give rise to any right of
appraisal under applicable law.
The Shares are currently listed on the AMEX. Depending upon the aggregate
market value of Shares not acquired pursuant to the Offers and the number of
Shares held by other parties, the Shares may no longer meet the requirements for
continued listing on the AMEX and may be delisted from the AMEX. AMEX-published
guidelines indicate that the AMEX would consider delisting the Shares in the
event that, among other things, the number of record holders of 100 or more
Shares fell below 300, the number of publicly held Shares (exclusive of
concentrated holdings and those of officers and directors) fell below 200,000 or
the aggregate market value of the publicly held Shares fell below $1.0 million.
As of November 13, 1996, there were 190 holders of record of Shares, holding
16,330,988 Shares (exclusive of 11,727,970 Shares held by the Purchaser and its
affiliates).
If the AMEX were to delist the Shares, it is possible that the Shares would
trade on another securities exchange or in the over-the-counter market and that
price quotations for the Shares would be reported by such exchange or by other
sources. The Company does not, however, meet the criteria for listing on the New
York Stock Exchange and the Company does not believe that it could obtain the
National Association of Securities Dealers' consent to having the shares quoted
on NASDAQ. If the Shares were to trade on another exchange or market, the extent
of the public market for the Shares and availability of such quotations would
depend upon such factors as the number of holders of Shares and the aggregate
market value of the Shares remaining publicly held at such time, the interest of
securities firms in maintaining a market in the Shares, the possible termination
of registration of the Shares under the Exchange Act, as described below, and
other factors.
If, prior to the Expiration Date the Purchaser determines that it is likely
that the Offers will 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.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board").
Among other things, this has the effect of allowing brokers to extend credit on
the collateral of the Shares. Depending upon factors similar to those described
above with respect to listing and market quotations, following the purchase of
Shares pursuant to the Offers, it is possible that the Shares would no longer
constitute "margin securities" for purposes of the Federal Reserve
4
<PAGE>
Board's margin regulations, in which event Shares could no longer be used as
collateral for margin loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the Securities
and Exchange Commission (the "Commission") if the Shares are not listed on a
national securities exchange or are held by less than 300 holders of record of
the Shares. The termination of the registration of the Shares under the Exchange
Act would substantially reduce the information required to be furnished by the
Company to the Holders and to the Commission and would render inapplicable
certain provisions of the Exchange Act, including requirements that the Company
file periodic reports and furnish Shareholders proxy materials regarding
meetings of Shareholders of the Company, the requirements of Rule 13e-3 under
the Exchange Act with respect to "going private" transactions, requirements that
the Company's executive officers and directors and persons owning more than 10%
of the Shares outstanding file certain reports concerning ownership of the
Company's equity securities and provisions that any profit by such executive
officers, directors and other persons through purchases and sales of the
Company's equity securities within any six-month period may be recaptured by the
Company. In addition, the ability of "affiliates" of the Company and other
persons to dispose of Shares which are "restricted securities" under Rule 144 of
the Securities Act of 1933, as amended (the "Securities Act"), may be impaired
or eliminated. If registration of the Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities" or eligible for
trading on the AMEX. The Purchaser and the Company have agreed that (i)
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 (ii) 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.
Any of the foregoing effects could adversely affect the liquidity or prices
realizable in sales of Shares following the completion of the Offers.
Interests of Certain Persons in the Offers
Holders should be aware that the Purchaser and the executive officers and
directors of the Company have interests that present them with actual or
potential conflicts in connection with the Offers.
The Purchaser (i) beneficially owns 11,727,970 Shares, or 41.8% of the
total outstanding Shares, (ii) is entitled, upon the occurrence of certain
future events outside the Purchaser's control, to purchase from the Company, or
to receive from the Company without the payment of additional consideration,
additional Shares or other securities (see "The Recapitalization Agreements --
General;" "-- Warrant;" "-- The Company Call Option and Purchaser Option;" "--
Post-Closing Adjustment Provisions;" "-- Series F Stock;" "-- Series G Stock"),
(iii) has agreed to purchase certain additional securities which would be
convertible into 2,032,565 additional Shares if Shareholder Approval of such
conversion is obtained, and (iv) has certain other rights in respect of its
investments in the Company and the purchase of securities from the Company. See
"Background of the Offers -- The Recapitalization;" "Special Factors -- The
Redemption Agreement;" "Background of the Offers -- The Recapitalization" and
"-- Certain Events Following the Recapitalization" and "The Recapitalization
Agreements." To the Purchaser's knowledge, none of the directors or executive
officers of the Purchaser or its affiliates beneficially owns any Shares except
insofar as any of the foregoing persons may be deemed to own beneficially Shares
owned by the Purchaser or its affiliates. Neither the Purchaser nor any of its
affiliates will tender any Shares pursuant to the Offers. See "Certain
Information Concerning the Purchaser." In addition, the Purchaser has been
informed that none of the current members of the Company Board intends to tender
any Shares beneficially owned by him pursuant to the Offers and that no such
person beneficially owns any Debentures.
The Company announced a realignment of its senior management on November 7,
1996. In connection therewith, Robert A. Whitman, the Chairman of the Board of
the Company and Co-Chief Executive Officer of The Hampstead Group, L.L.C., an
affiliate of the Purchaser ("Hampstead"), is currently serving as interim Chief
Executive Officer (without compensation) of the Company until a new Chief
Executive Officer is appointed and Richard M. FitzPatrick, the Chief Financial
Officer of Hampstead, is currently serving as the interim Chief Financial
Officer of the Company.
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Redemption Agreement
Under the Recapitalization Agreements, the Purchaser has the right to
acquire any Debentures presented for conversion at the redemption price therefor
and thereafter to convert such Debentures at the conversion prices applicable
thereto (the "Stated Debenture Conversion Prices"). The Company and the
Purchaser have entered a Redemption Agreement ("Redemption Agreement") pursuant
to which the Purchaser agreed to fund the redemption of the Company's 10%
Convertible Subordinated Debentures Due January 1, 1998 (the "10% Debentures")
in order for the Company to comply with AMEX requirements. The Purchaser also
agreed to commence the Offers and to convert any Debentures purchased pursuant
to the Offers at a conversion rate of $3.50. Unless and until Shareholder
Approval for conversion of Series F Preferred Stock ("Series F Stock") of the
Company into Shares has been obtained, Debentures so purchased will be
convertible by the Purchaser into Series F Stock at a conversion rate of $35.00
per share of Series F Stock (each share of Series F Stock being substantially
the equivalent of ten Shares except that Series F Stock is nonvoting (see "The
Recapitalization Agreements--Series F Stock")). Accordingly, Debentures
purchased pursuant to the Offers will be converted into 28.571 shares of Series
F Stock for every $1,000 of Debenture principal and accrued interest purchased
in the Offers for a total of 476,306 shares of Series F Stock if all of the
Debentures were so purchased (which total number of shares of Series F Stock
will be convertible into 4,763,064 Shares if such Shareholder Approval is
obtained).
Under the Warrant entered into in connection with Recapitalization, the
conversion of such Debentures will entitle Purchaser to the issuance of an
additional 23.808 shares of Series F Stock for every $1,000 of Debenture
principal and accrued interest purchased in the Offers for a total of 396,906
shares of Series F Stock if all of the outstanding Debentures were so purchased
(which shares of Series F Stock would be convertible into 3,969,061 Shares if
Shareholder Approval is obtained as described above).
The terms of the Series F Stock make each share of Series F Stock
substantially equivalent to ten Shares (except that the Series F Stock (i) does
not have voting rights other than in certain limited circumstances and (ii) is
convertible in certain circumstances into ten Shares). On any liquidation,
voluntary or otherwise, dissolution or winding up of the Company, the holders of
Series F Stock will receive an amount equal to accrued and unpaid dividends and
distributions thereon to the date of such payment and an aggregate amount per
share equal to ten times the aggregate amount to be distributed per share to
holders of Shares.
The Redemption Agreement also provides that, in consideration of the
Purchaser's providing the Company the capital to fund the redemption by the
Company of its 10% Debentures, the Company will issue to Purchaser 203,257
shares of Series G Preferred Stock of the Company ("Series G Stock") which will
be convertible into 2,032,565 Shares if Shareholder Approval therefor is
obtained. The Purchaser anticipates that it is likely that such Shareholder
Approval will be obtained inasmuch as the Purchaser owns outright 11,727,970
Shares, which it intends to vote in favor of such Shareholder Approval, and
other Shareholders have agreed to vote 1,715,812 shares in favor of such
Shareholder Approval. Those Shares, taken together, constitute 47.9% of the
Company's presently outstanding Shares. The consummation of the redemption of
the 10% Debentures by the Company and the issuance of the Series G Stock to
Purchaser is expected to occur prior to the Expiration Date. The Purchaser has
agreed not to sell the 203,257 shares of Series G Stock or Shares received upon
conversion of such Series G Stock prior to May 31, 1997 other than in a private
transaction exempt from the registration requirements of the Securities Act of
1933 ("Securities Act").
The Series G Stock will (i) be non-voting, (ii) have a liquidation
preference equal to the amount received by the Company for its issuance, (iii)
have a dividend rate of 7% per annum with unpaid dividends to accrue but be
payable only at such time as dividends are declared and paid on the Company's
Shares, and (iv) not be convertible into Shares unless and until Shareholder
Approval is obtained as described in the immediately preceding paragraph.
Dividends accrued but not declared would be lost upon conversion of the Series G
Stock into Shares. Accordingly, Purchaser does not presently expect that any
dividends will actually be paid on the Series G Stock. If Purchaser's all-in
effective net price per Share (after giving effect to Purchaser's anti-dilution
protections, including valuation adjustments, for the Shares purchased by
Purchaser in its initial $40 million investment described in "The
Recapitalization Agreements -- Warrant" and "-- Post-Closing Adjustment
Provisions" ("Purchaser's Base Price Per Share")) at the time of the conversion
of the Series G Stock is not
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determinable or is later determined to be different than it was at the time of
such conversion and, in either case, is higher than $2.26, then Purchaser will
return to the Company such number of Shares as is necessary so that the number
of Shares into which the Series G Stock is converted is equal to the number of
Shares into which the 10% Debentures would have been convertible if their
conversion price had been equal to Purchaser's Base Price Per Share. See
"Background of the Offers -- Redemption of 10% Debentures."
If Shareholder Approval therefor is obtained, the holders of Series G Stock
will have the right to convert each share of Series G Stock into ten shares.
Regardless of whether Shareholder Approval has been obtained, holders of Series
F Stock and Series G Stock will have the right at any time to convert each share
of Series F Stock or Series G Stock into ten Shares under any of the following
circumstances: (i) as long as the shares of Series F Stock or Series G Stock to
be converted are beneficially owned by a person, entity or "group" within the
meaning of Section 13(d) of the Exchange Act (collectively, a "Person"), other
than and which does not include the Purchaser or any "affiliate" (within the
meaning of Rule 12b-12 under the Exchange Act) of the Purchaser (collectively,
the "Purchaser Group"), unless, as of the time of transfer of Series F Stock or
Series G Stock by any member of the Purchaser Group to any Person who or which
is not a member of the Purchaser Group, both (a) the restrictions set forth in
the Standstill Agreement described in "The Recapitalization Agreement --
Standstill Agreement" continue to apply to limit ownership by the Purchaser to
less than a majority of the total voting power (based upon the aggregate number
of votes which may be cast in the election of directors) and (b) such Person,
after giving effect to such transfer, would be the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of a majority of the shares of
capital stock of the Company entitled to vote generally in the election of
members of the Company Board (any such shareholder, a "Controlling
Shareholder"), (ii) by any member of the Purchaser Group, so long as after
giving effect to such conversion, the Purchaser Group, taken as a whole would
not be a Controlling Shareholder, or (iii) with the approval of a majority of
the members of the Company Board who are not designated for election to the
Company Board by, or employed by any member of the Purchaser Group or employed
by the Company or any subsidiary of the Company.
The Redemption Agreement contains Purchaser's agreement to vote all Shares
acquired pursuant to the Offers (so long as they are held by the Purchaser and
its affiliates and to the extent that the Shares beneficially owned by the
Purchaser and its affiliates exceed the 49.9% Level) in the same proportion as
Shares are voted by other Shareholders until such time as Shareholder Approval
of the issuance of Shares to the Purchaser, directly or upon conversion of
non-voting preferred stock of the Company issued pursuant to the
Recapitalization Agreements, in excess of the 49.9% Level has been obtained or,
if earlier, the Standstill Agreement is no longer in effect. See "The
Recapitalization Agreements -- Standstill Agreement."
Certain Federal Income Tax Consequences
Introduction. The following summary is a general discussion of certain
federal income tax consequences to Holders as a result of the sale of Shares or
Debentures to the Purchaser pursuant to the Offers and does not purport to cover
in detail all federal income tax consequences that may arise. As a result, each
Holder should consult his, her or its own tax advisor. The summary is based upon
the Internal Revenue Code of 1986, as amended (the "Code"), treasury regulations
thereunder, rulings and other pronouncements, and decisions now in effect, all
of which are subject to change.
The following discussion is limited to the material federal income tax
aspects of the Offers for a Holder who is a citizen or resident of the United
States and who holds the Shares as a "capital asset" (generally, property held
for investment) within the meaning of Section 1221 of the Code. The summary does
not discuss all aspects of federal income taxation that may be relevant to a
person disposing of Shares or Debentures in the Offers in light of such person's
personal investment circumstances or to certain types of persons subject to
special treatment under the federal income tax laws (for example, trusts, life
insurance companies, tax-exempt organizations, financial institutions or S
corporations) and does not discuss any aspects of state, local or foreign tax
laws.
Principal Federal Income Tax Consequences of the Offers. The receipt of
cash for Shares or Debentures pursuant to the Offers will be a taxable
transaction for federal income tax purposes under the Internal Revenue Code of
1986, as amended (the "Code"), and also may be a taxable transaction under
applicable state, local, foreign and other tax laws. In general, a Holder will
recognize gain or loss equal to the difference between the
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tax basis for the Shares or Debentures sold and the amount of cash received in
exchange therefor, except that Debenture Interest will be interest income for
federal income tax purposes. Such gain or loss will be capital gain or loss if
the Shares or Debentures are capital assets in the hands of the Holder and will
be long-term capital gain or loss if the holding period for the Shares or
Debentures is more than one year.
The foregoing discussion may not apply to Shares acquired by a Holder
pursuant to an employee stock plan or otherwise as compensation, to Holders who
are not citizens or residents of the United States or to other categories of
Holders subject to special treatment under federal income tax laws, such as
dealers in securities banks, insurance companies and tax-exempt entities.
The foregoing summary of certain federal income tax consequences of the
Offers is included for general information only. Because of the individual
nature of tax consequences, each Holder is strongly urged to consult such
Holder's own tax advisor with respect to the specific tax consequences of the
Offers, including the application and effects of applicable state, local,
foreign and other tax laws and of changes in the tax laws under the Code.
Back-Up Withholding. Under the federal income tax backup withholding rules,
unless an exception applies under the applicable laws and regulations, the
Depositary will be required to withhold, and will withhold, 31% of the gross
proceeds otherwise payable to a Holder or other payee pursuant to the Offers,
unless the Holder or other payee provides such Holder's taxpayer identification
number ("TIN") (social security number or employer identification number) and
certifies that such number is correct and that such Holder is not subject to
backup withholding. Therefore, unless each tendering Holder and, if applicable,
each other payee, should complete and sign the Substitute Form W-9 included as
part of the Letter of Transmittal in order (if applicable) to avoid backup
withholding. See the information under the caption "Federal Income Tax
Consequences" in the Letter of Transmittal.
BACKGROUND OF THE OFFERS
The Company's Financial Position Prior to the Recapitalization
In 1995, the Company defaulted under certain covenants under the 9%
Debentures. In an effort to cure those defaults and to raise funds necessary to
pay indebtedness created in connection with the Company's 1994 acquisition of
Malibu Grand Prix Corporation ("Malibu") and to fund its operations, the Company
issued substantial additional convertible debt and convertible preferred stock
in 1995. All such securities were convertible into Shares at various prices and
at various times commencing in 1996. However, the Company did not have the
capital resources from internally generated funds to redeem these securities and
did not have the right to compel the conversion of these securities into Shares.
As a result of these and other factors, including continuing declines in the
Company's results of operations, the Company's financial position continued to
deteriorate and the market prices for Shares began to erode significantly. See
"Special Factors -- Market Prices for Shares." Accordingly, beginning in January
1996, the Company Board began considering possible alternatives to recapitalize
the Company.
Among the alternatives considered by the Company Board were the possible
spin-off of the Company's management operations and various types of equity and
debt financings. In March 1996, the Company commenced an exchange offer pursuant
to which the Company offered to exchange one share of a newly issued Series E
Preferred Stock for each Share (the "Exchange Offer"). As part of the Exchange
Offer, the Company also sought to obtain required consents to the amendment of
the 9% Debentures and the outstanding 10% Debentures to convert those debentures
into Shares and permit those debentures to be tendered for Series E Preferred
Stock pursuant to the Exchange Offer.
Prior to the expiration of the Exchange Offer, representatives of the
Purchaser contacted representatives of the Company regarding a possible
investment by the Purchaser in the Company. Following extensive negotiations
among representatives of the parties, on June 6, 1996, the Company terminated
the Exchange Offer and the Company and the Purchaser entered into an Investment
Agreement (the "Investment Agreement") and
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related documents, including the Warrant and the Standstill Agreement (together
with the Investment Agreement, collectively, the "Recapitalization Agreements").
The Recapitalization was consummated on August 28, 1996 (the "Closing Date").
The Recapitalization
In connection with the Recapitalization, (i) the Purchaser acquired
11,727,970 Shares for $40.0 million and (ii) the Company arranged a $20.0
million revolving credit facility from an institutional lender (the "Credit
Facility"). In addition, the Company and the Purchaser entered into the Warrant
and the Standstill Agreement (described in "The Recapitalization Agreements --
Warrant" and "-- Standstill Agreement") and six persons designated by the
Purchaser were elected to the Company Board (which has 14 members), one of whom
was elected Chairman of the Board, in accordance with the Investment Agreement.
As a part of the Recapitalization, the Company obtained the Company Call Option
pursuant to which the Company has the right to compel the Purchaser to invest up
to an additional $22.7 million (less any amount invested under the Purchaser
Option) in the Company, the Purchaser obtained the Purchaser Option pursuant to
which the Purchaser has the right to invest up to an additional $22.7 million
(less any amount invested under the Company Call Option) in the Company, the
Purchaser agreed to provide up to an additional $30.0 million to backstop future
rights offerings and the terms of the Debentures and the 10% Debentures were
amended to permit them to be payable in Shares rather than in cash. See "The
Recapitalization Agreements."
Certain Events Following the Recapitalization
Redemption of 10% Debentures. As publicly announced by the Company on
November 7, 1996, at the request of the Company in order for the Company to
comply with AMEX requirements, the Purchaser will provide the capital required
for the Company to redeem the $4.6 million aggregate principal amount of the
Company's 10% Debentures (plus accrued and unpaid interest thereon, estimated at
$4.8 million). Had they not been previously redeemed, the 10% Debentures would
have become convertible into Shares on November 7, 1996 at a conversion price
that would have been $2.25 per share on such date (the "11/7/96 10% Debenture
Conversion Price"), such conversion price being subject to change based on
future market prices had the 10% Debentures not been redeemed. In consideration
of the funding of such capital required for such redemption, the Purchaser will
receive 203,257 shares of Series G Stock. If the Purchaser's Base Price Per
Share at the time of the conversion of the Series G Stock into Shares is not
determinable or is later determined to be different than it was at the time of
such conversion and, in either case, is higher than $2.26, or 1(cent) higher
than the 11/7/96 10% Debenture Conversion Price, then the Purchaser will return
to the Company such number of Shares as is necessary so that the number of
Shares into which the Series G Stock is converted is equal to the number of
Shares into which the 10% Debentures would have been convertible if their
conversion price had been equal to the Purchaser's Base Price Per Share. The
Purchaser has agreed not to sell any Series G Stock or Shares so received in the
market before May 31, 1997 other than in a private transaction exempt from the
registration requirements of the Securities Act.
Assuming (i) the redemption of the 10% Debentures as described above, (ii)
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
(iii) the anticipated issuance of approximately 650,000 Shares 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 7.7 million shares. Under the Investment Agreement and the
Warrant, the issuance by the Company of 7.7 million Shares in these
circumstances would result in the Company issuing approximately 640,000 Shares
of Series F Stock (which are convertible into 6.4 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 above. After these
issuances of Shares and assuming the conversion of all Series F and Series G
Stock into Shares and the conversion of the 9% Debentures and 9.1% Debentures at
a conversion price of $3.50 per share, the Purchaser estimates that the
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Company would have outstanding a total of approximately 42 million Shares.
However, the foregoing computation is based upon various estimates and
assumptions, including, in addition to the factors indicated above, that (i) all
the 9% Debentures and 9.1% 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 could apply if stock market prices for Common Stock are
lower at the time of actual conversion by Holders thereof), (ii) the Purchaser's
Base Price Per Share is at or below $2.26, (iii) the issuance of the 650,000
Settlement Shares as described above, (iv) that Shareholder Approval as
described above is obtained, and (v) there are no post-closing adjustments under
the Post-Closing Adjustment Provisions of the Investment Agreement except for
those required as a result of the issuance of the Settlement Shares.
Accordingly, the actual number of Shares that the Company will have outstanding
in the circumstances described above cannot be determined at this time.
When convertible, each share of Series G Stock is convertible into ten
Shares (subject to customary antidilution protections). The terms of the Series
G Stock were structured so that one share of Series G Stock is substantially
equivalent (except as to voting) to ten Shares. See "Special Factors -- The
Redemption Agreement."
Certain Management Changes. On November 7, 1996, the Company also announced
certain changes in its senior management, including among others, the election
of Robert A. Whitman, the Chairman of the Board of the Company and Co-Chief
Executive Officer of Hampstead, as interim Chief Executive Officer (without
compensation) of the Company until a new Chief Executive Officer is appointed (a
search therefor being underway) and the election of Richard M. FitzPatrick,
currently Chief Financial Officer of Hampstead, as the interim Chief Financial
Officer of the Company. L. Scott Demerau, the Company's founder, president and
chief executive officer, will become the full-time president of a division of
the Company, the focus of which will be on acquiring existing parks, companies,
sites for new parks and on identifying and pursuing new entertainment concepts
for the Company. Mr. Demerau will remain a member of the Company's Board and its
executive committee. Julia Demerau, Executive Vice President of the Company, in
order to devote additional time to family commitments, will transition to
working on a part-time basis and will focus on the Company's efforts to develop
substantial sponsorship relationships.
Development of Business Plan. In a November 7, 1996 announcement, the
Company stated that, since the completion of the Recapitalization, the Company
has been involved in a comprehensive review of its operations. As a result of
this review, the Company has identified a number of opportunities for improving
operational results and achieving internal growth through the redevelopment,
repositioning and expansion of existing parks. The Company intends to begin the
implementation of these actions this Winter and expects these actions to be
completed in phases over the next several years. The Company has also adopted a
strategy of seeking external growth through acquisitions and through the
development of additional parks. In furtherance of the latter objective, over
the past few months the Company purchased the limited partnership interests
which it did not already own in three existing Mountasia parks, began
negotiations for the potential purchase of the interests that the Company does
not presently own in another Mountasia park, reacquired certain domestic and
international development rights which the Company had previously sold, entered
into a contract to purchase a large existing family entertainment center in San
Antonio, Texas and began to pursue other growth opportunities. The Company
believes that its opportunities for external growth are substantial. Because the
Company's cash generated by operations is not sufficient to finance substantial
internal or external growth, the pursuit of the above-described internal and
external initiatives will require that the Company obtain additional capital
resources. See "-- The Purchaser's Reasons for the Recapitalization and the
Offers." Assuming the continued availability of borrowings under the Credit
Facility, and the availability of the Company Option and the Purchaser's
commitment to provide up to $30.0 million to backstop future rights offerings
made to all Shareholders (see "The Recapitalization Agreements -- Company Call
Option and Purchaser Option" and "-- Certain Rights Offerings"), the Company
believes that it will have access to sufficient capital resources to fund its
growth strategy, although the Company expects to consider additional capital
markets and other financing transactions from time to time.
Results of Operations. On November 13, 1996, the Company reported a third
quarter net loss of $2.0 million, or $0.10 per Share (including an extraordinary
loss item for early extinguishment of debt of $.5 million, or $.03 per share),
compared to a net loss of $1.5 million, or $0.18 per Share, for the comparable
period last
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year. See "Certain Information Concerning the Company -- Financial Information"
for additional information with respect to the Company's results of operations.
The Company also stated that the seasonal nature of its business, the fact that
certain of its parks are presently performing below expectations, the time
required to redevelop selected parks and the fact that certain parks will need
to be closed during redevelopment makes it unlikely that the Company will return
to sustainable profitability until the effects of its previously announced steps
to improve shareholder value are realized.
The Company's Reasons for the Recapitalization
The Purchaser has been informed that the Company entered into the
Recapitalization Agreements in order to refinance existing indebtedness and to
obtain the capital necessary to cure defaults under then-outstanding
indebtedness, to obtain funds to satisfy other existing obligations and to fund
its existing operations and pursue possible growth opportunities. The Purchaser
has been informed that, in connection with its consideration of the
Recapitalization, the Company Board determined that it would be extremely
difficult, if not impossible, for the Company to raise equity capital in the
public markets for these purposes.
The Purchaser's Reasons for the Recapitalization and the Offers.
The Purchaser is an entity formed by Hampstead. Hampstead has sponsored
several other recapitalizations of, or substantial investments in, other
companies operating site-based businesses, including Forum Group, Inc. ("FGI"),
an owner-operator of retirement communities, the stock of which was traded on
the NASDAQ until FGI was sold to Marriott International, Inc. in 1996, Bristol
Hotel Company, a New York Stock Exchange ("NYSE")-listed owner-operator of
hotels, and Bedrock Partners, L.L.C., an owner of 18 garden hotels managed by
Wyndham Hotel Company, a NYSE-listed owner-operator of hotels in which a
Hampstead affiliate owns an 11% common stock interest. During the Winter and
Spring of 1996, Hampstead was considering possible investments in the family
entertainment business. Representatives of the Purchaser originally contacted
representatives of the Company regarding a potential investment in the Company
in furtherance of this interest.
Based on its financial analyses and due diligence examinations conducted in
connection with the Recapitalization, the Purchaser determined that the total
value of the Company's equity after the Purchaser's $40.0 million initial
investment was $88.0 million. Accordingly, the Purchaser conditioned its
willingness to make its initial $40.0 million investment in the Company on the
fundamental assumption that the Purchaser would obtain a 45.5% equity interest
in the Company (prior to purchases of Shares by employees) for its $40.0 million
investment. As part of the negotiated valuation of the Company, the Purchaser's
valuation assumed that the Debentures and the 10% Debentures would be converted
into Shares and that the Company would not use any of its cash resources to
redeem or otherwise pay its obligations thereunder but rather to fund its
operations and pursue possible growth opportunities, and that such indebtedness
would be converted into equity. However, the Purchaser's willingness to rely on
these and other assumptions was conditioned on the Company's agreement to
certain protective covenants under the Recapitalization Agreements, including
protections pursuant to the Warrant from any dilution ability from results from
the conversion of the Company's outstanding 10.0% Debentures, 9% Debentures or
9.1% Debentures (collectively, the "Outstanding Convertible Securities"), the
conversion, exercise or exchange of outstanding warrants, options and other
securities into Shares at prices below $3.75 (subject to adjustment) per Share
and if the Outstanding Convertible Securities were redeemed for or paid in cash
rather than equity (because the Company did not have cash available for this
purpose). In addition, the parties agreed to certain assumptions as to various
matters which could affect the value of an investment in the Company and
provisions relating to post-Closing adjustments to assure that the Purchaser's
percentage equity interest in the Company (without regard to Shares sold to the
employees) would continue to have a value equal to the amount of the Purchaser's
$40.0 million investment (when multiplied by the above-described $88 million
total assumed value of the Company's equity after the Purchaser's initial $40
million investment) if these assumptions proved incorrect. See "Recapitalization
Agreements -- The Warrant" and "-- Post-Closing Agreements -- The Warrant" and
"-- Post-Closing Adjustment Provisions" for a discussion of these protections.
The Offers will enable Shareholders who would like to sell their Shares at
a premium to recent market prices for Shares the opportunity to do so and to
enable Debenture Holders the opportunity to have their
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Debentures and Debenture Interest effectively paid prior to maturity. The
Purchaser does not have any present plans to propose or otherwise seek to effect
a merger or other transaction in which non-tendering Holders would have their
Shares or Debentures converted into cash or other consideration, but reserves
the right to propose or seek to effect such a transaction following the
completion of the Offers. The Purchaser has agreed to convert any Debentures
purchased pursuant to the Offer at a conversion price of $3.50 per share. See
"Special Factors -- The Redemption Agreement."
The Purchaser was willing to make the Offers because the Purchaser believes
that the long-term value of an investment in the Company could exceed the prices
at which the Purchaser would obtain Shares pursuant to the Offers (and the
subsequent conversion of the Outstanding Debentures) and to provide liquidity to
the market for Shares during a period in which market prices had declined from
their levels at the time the Purchaser made its initial $40.0 million investment
in the Company. The Purchaser believes that, in general, the Company has
talented operational management personnel, good penetration of the markets in
which it currently has operations, a sufficient number of existing assets and
systems such that it could add additional parks by acquisition or development
without having to incur substantial additional overhead costs and opportunities
to increase operating margins by the adoption of standardized operational
procedures and other actions. In addition, the Purchaser believes that the
Company could develop sponsorship and other third-party relationships that could
substantially improve the Company's results of operations without any
significant increase in administrative expense, and that there are substantial
opportunities for internal growth through capital investment in a substantial
number of the Company's existing parks and for external growth through
acquisitions and development of new parks.
However, while the Company's strategy is designed to restore the Company to
profitability and to create long-term sustainable growth, the Company presently
expects to continue to report losses for the remainder of 1996 and through at
least 1997 (not taking into account possible acquisitions). The Company
presently intends to perform previously deferred maintenance and otherwise
rehabilitate most of the family entertainment centers ("FECs") it expects to
retain, to dispose of FECs (which have not yet been identified) that the Company
determines do not have significant growth potential or which otherwise do not
fit with the Company's business plan and substantially to redevelop
approximately 15-20 FECs. The Company plans to develop a prototype facility for
expected roll-out commencing late in 1997 or in 1998 and for use in the
redevelopment of the approximately 15-20 FECs expected to be substantially
redeveloped. The redevelopment of the 15-20 FECs is expected to be completed in
phases commencing this Winter with respect to eight to ten FECs. In addition,
while the Company is pursuing possible acquisition opportunities, there can be
no assurance that it will be able successfully to effect any such acquisitions
or, if so, as to the timing or terms thereof. Accordingly, while the Purchaser
believes that the long-term value of an investment in the Shares could exceed
the Per Share Price, the Purchaser does not presently expect that the Company's
results of operations will begin to show sustainable improvement as a result of
internal growth opportunities until at least 1998 and, inasmuch as the
Purchaser's belief as to the potential long-term value of an investment in the
Shares is based upon future events, many of which are outside the control of the
Company, there can be no assurance in respect thereof.
Any analysis of the value of an investment in the Shares or the Debentures
is necessarily uncertain, is based in substantial part on future events,
including the Company's future operating performance and the implementation of
its growth strategy, many of which are outside the control of the Company, and
is heavily dependent upon 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.
DESCRIPTION OF DEBENTURES
The following is a summary of the material terms of the Debentures, forms
of which (together with the 9% Indenture described below) have been filed as
exhibits to the Company's filings with the Commission and can be obtained as
described in "Additional Information."
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The following summary of the terms of the Debentures is qualified in its
entirety by reference to the full text thereof as so filed.
9% Debentures
The 9% Debentures were issued under an Indenture, dated as of November 15,
1994, between the Company and Continental Stock Transfer & Trust Company, as
Trustee. The 9% Debentures are unsecured obligations which are subordinate to
all senior indebtedness (as defined in the 9% Indenture) of the Company
(estimated at $9.8 million as of September 30, 1996). The 9% Debentures mature
on November 1, 1999 and bear interest at a rate of 9% per annum, payable
semiannually on May 1 and November 1 of each year. The 9% Debentures are payable
in Shares valued at the 9% Conversion Price or, if the Purchaser consents
thereto under the Investment Agreement, in cash. The Company may redeem the 9%
Debentures, on not less than 30 days prior notice, in whole or in part, at a
redemption price of 108% from November 14, 1996 to November 14, 1997, 105% from
November 14, 1997 to November 14, 1998 and 103% thereafter. The 9% Debentures
are convertible, in whole or in part, into Shares at the option of the Holder at
any time after February 1, 1997 (except for the $925,000 aggregate principal
amount Presently Convertible 9% Debentures which are now convertible) at the 9%
Conversion Price (subject to customary antidilution adjustments).
9.1% Debentures
The 9.1% Debentures are unsecured obligations which are subordinate to all
senior indebtedness (as defined in the 9.1% Debentures) of the Company
(estimated at $9.8 million as of September 30, 1996). The 9.1% Debentures mature
on January 1, 2002 and bear interest at a rate of 9.1% per annum, payable
quarterly in arrears on January 8, April 8, July 8 and October 8 of each year.
The 9.1% Debentures are payable in Shares valued at the 9.1% Conversion Price
or, if the Purchaser consents thereto under the Investment Agreement, in cash.
The 9.1% Debentures are not subject to redemption or prepayment without the
consent of the Holders. The 9.1% Notes are convertible, in whole or in part,
into Shares at the option of the Holder, at any time after April 4, 1997 at the
9.1% Conversion Price (subject to customary antidilution adjustments).
THE RECAPITALIZATION AGREEMENTS
General
Pursuant to the Investment Agreement, among other things, (i) the Purchaser
initially invested $40.0 million in the Company and (ii) the Company (a) sold to
the Purchaser 11,727,970 Shares, or 45.45% of the then-outstanding Shares after
giving effect to such issuance (and prior to the sale of Shares to employees),
and (b) issued to the Purchaser a Warrant (the "Warrant" and, together with the
Investment Agreement and the other agreements entered into in connection
therewith, the "Recapitalization Agreement") to acquire additional Shares or
shares of Series F Stock automatically upon the happening of certain events.
(See "-- Series F Stock" for a description of the terms of the Series F Stock.)
In addition, the Purchaser is entitled to additional Shares (or Series F Stock)
under certain provisions of the Investment Agreement (the "Post-Closing
Adjustment Provisions") if certain events occur which vary adversely from the
Purchaser's assumptions relating thereto. See "-- Post-Closing Adjustment
Provisions" for a description of these provisions. The purpose of the Warrant
and the Post-Closing Adjustment Provisions is to protect the Purchaser against
(i) any dilution of its percentage interest in the Company acquired by Purchaser
pursuant to its initial $40.0 million investment, the Company Call Option and
the Purchaser Option (each as defined below) that is due to the exercise or
conversion of outstanding warrants, options and other securities at prices below
$3.75 or the conversion or deemed conversion of the Debentures or the 10%
Debentures and (ii) the economically dilutive effects of any decrease in the
value of the Company assumed by the Purchaser at the time of the
Recapitalization by reason of adverse variations from certain assumptions made
by the Purchaser in its valuation and pricing of its investment in the Company.
See "Special Factors -- The Purchaser's Reasons for the Recapitalization and the
Offers." In addition, as part of the Recapitalization, the parties agreed to the
other matters described in this section of the Offer To Purchase.
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Warrant
The Warrant provides for the issuance of additional Shares (or Series F
Stock) to the Purchaser without payment by the Purchaser of additional
consideration if the Company issues Shares (i) under options, warrants or
convertible securities outstanding on August 28, 1996 ("Subject Securities") at
prices below $3.75 per Share (subject to adjustment as described below) and (ii)
upon conversion of the Debentures or the 10% Debentures regardless of the
conversion price. Any Debentures or 10% Debenture that have not previously
converted into Shares, will be deemed for purposes of the Warrant to have been
converted into Shares on the earlier of (i) the date of payment or redemption
thereof and (ii) August 7, 1997. If any Debentures or 10% Debentures have been
deemed converted and remain outstanding on August 7, 1998, then the Purchaser
will have the right to receive additional Shares under the Post-Closing
Adjustment Provisions.
The number of Shares issued to Purchaser upon the conversion of a Subject
Security is equal to the number of Shares received by the holder of the Subject
Security as a result of such conversion less the number of Shares which would
have been received by the holder of the Subject Security as a result of such
conversion had the person converted the Subject Security at $3.75 (subject to
adjustment as described below) (the "Trigger Price"), multiplied by the sum of
(i) the number of Purchaser Shares then acquired by Purchaser pursuant to the
Recapitalization Agreement and (ii) ten multiplied by the number of shares of
Series F Stock acquired by Purchaser in lieu of any Shares issuable under the
Recapitalization Agreement (collectively, the "Holder Shares"), divided by the
sum of (a) the total number of Shares issued and outstanding on the date of such
conversion and (b) ten multiplied by the total number of shares of Series F
Stock outstanding on such date (collectively, the "Outstanding Shares"). The
number of Shares issued to Purchaser in connection with the conversion of
Debentures or 10% Debenture will be equal to the total number of Shares issued
in connection with such conversion multiplied by a fraction, the numerator of
which is the number of Holder Shares divided by the number of Outstanding Shares
(with the quotient being the "Ratio") and the denominator of which is one minus
the Ratio. The Trigger Price, the number of Holder Shares and the number and
class of shares to be issued pursuant to the Warrant are subject to customary
antidilution protections.
The Company's issuance pursuant to the Redemption Agreement of 203,257
shares of Series G Stock to Purchaser in connection with the redemption of the
10% Debentures entitled Purchaser to the issuance of 169,374 shares of Series F
Stock under the Warrant (which Series F Stock will be convertible into 1,693,740
Shares if Shareholder Approval therefor is obtained). See "-- Series F Stock"
and "Special Factors -- The Redemption Agreement." The conversion of the
Debentures purchased by the Purchaser pursuant to the Offers will entitle the
Purchaser (assuming all of the outstanding Debentures were purchased), under the
Warrant, to the issuance of an additional 396,909 shares of Series F Stock
(which Series F Stock will be convertible into 3,969,061 Shares if Shareholder
Approval therefor is obtained). See "The Redemption Agreement."
Post-Closing Adjustment Provisions
In connection with the Recapitalization Agreements, the Purchaser made
certain assumptions as to various matters in valuing the equity of the Company
at $88 million (including the $40.0 million initially invested by the Purchaser)
including (i) that the Company had rights to develop Malibu and Mountasia family
entertainment centers worldwide, subject to certain specified exceptions, (ii)
that the Company would be successful in acquiring certain properties used in
significant parks which are currently subject to ground leases which expire in
the near future and acquiring certain facilities for prices not exceeding the
specified purchase prices, (iii) that the Company's actual liability for
litigation, legal compliance, environmental and certain other contingent
liabilities as of the Closing did not, in the aggregate, exceed $1.5 million
(the "Contingency Hurdle Amount"), (iv) all Convertible Debt would be converted
into Shares on or before August 7, 1997 and will no longer be outstanding on
August 7, 1998, (v) that the Company would obtain consents and waivers of
certain third party registration rights, and (vi) the accuracy of the Company's
representations and warranties in the Investment Agreement. The Investment
Agreement provides that, if any such assumption was, is or becomes incorrect in
a manner adverse to the value of Company, the Purchaser is entitled under the
Post-Closing Adjustment Provisions to the issuance of additional Shares in
recognition of the adverse impact on the assumed equity value.
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The Purchaser currently estimates that the amount of the Company's
contingent liabilities as of the Closing exceeded the Contingency Hurdle Amount
by at least the value of the Settlement Shares. Such excess could be
substantially higher. However, the Company has not agreed as of the date of this
Offer To Purchase to any adjustment under the Post-Closing Adjustment
Provisions, and the ultimate amount of any adjustment thereunder cannot
presently be ascertained. All determinations on the part of the Company with
respect to the Post-Closing Adjustment Provisions are required to be made by
the Independent Directors.
Company Call Option and Purchaser Option
The Investment Agreement provides that, for a period of three years from
the Closing, the Company has the right to compel the Purchaser to invest up to
an additional $22.7 million (less any amount invested upon exercise of the
Purchaser Option described below) to purchase Shares at a purchase price of
$3.41 per share, subject to adjustment as described below (the "Company Call
Option"), and that, for a period of five years from the Closing, the Purchaser
has the right to require the Company to sell to it additional Shares at $3.41
per share, subject to adjustment as described below for an aggregate of not more
than $22.7 million (less any amount invested upon exercise of the Company Call
Option) (the "Purchaser Option"). The $3.41 per Share initial exercise price
under the Company Call Option and the Purchaser Option is subject to adjustment
so that is it equal to the Purchaser's net effective price per Share on its
original $40.0 million investment after taking into account any Shares or Series
F Stock issued to the Purchaser without additional consideration pursuant to the
Warrant and the Post-Closing Adjustment Provisions described above. In the event
that Shareholder Approval has not been obtained, the shares issuable upon
exercise of either the Company Call Option or the Purchaser Option will be
shares of Series F Stock. The proceeds from the exercise of either such options
may only be used to fund equity required for new investments approved by the
Company Board.
Series F Stock
If the Company has not obtained Shareholder Approval for conversion of
Series F Stock into Shares, the shares of capital stock of the Company issued as
a result of the exercise of the Company Call Option and the Purchaser Option
will be Series F Stock. If such Shareholder Approval has not been obtained and
the issuance of Shares would result in the Purchaser owning a majority of the
Shares, the shares of capital stock of the Company issued under the Warrant or
the Post-Closing Adjustment Provisions will be Series F Stock. Any Series F
Stock issued upon exercise of the Company Call Option or the Purchaser Option
will be issued at a 15% discount from the price at which it would otherwise be
issued or, if issued without consideration, 15% more shares of Series F Stock
will be so issued than would otherwise be issuable and such Series F Stock will
be convertible into Shares after Shareholder Approval of the issuance of Shares
pursuant to the Recapitalization Agreement is obtained or under certain other
circumstances. See "Special Factors -- Redemption Agreement" for a description
of the terms of the Series F Stock.
Representation on the Company Board
Pursuant to the Investment Agreement, the Purchaser has the right to
designate up to six of the 14 members of the Company Board, including the
Chairman of the Board. In addition, the Standstill Agreement entered into by the
Purchaser with the Company as part of the Recapitalization Agreement provides
that at each meeting of the Shareholders of the Company persons designated by
the Purchaser and the Company will vote all management proxies (other than those
that specifically indicate to the contrary) in favor of such nominees. The
number of persons designated by the Purchaser to serve on the Company Board must
at all times be sufficient so that the number of Purchaser designees relative to
the whole Company Board is proportional to the Purchaser's beneficial ownership
of the outstanding voting securities in relation to the total outstanding voting
securities, except (i) that for so long as the Purchaser owns more than 10% of
the outstanding voting securities of the Company, the Purchaser is entitled to
designate two directors, (ii) in no event is the Company required to take any
action that would result in the number of the Purchaser's designees exceeding
more than one less than a majority of the Company Board, and (iii) so long as
the number of directors comprising the Company Board is between seven and 14,
the number of Purchaser designees will not exceed 40% of the total number of
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directors. In addition, the Standstill Agreement provides that, for so long as
the Purchaser holds more than 10% of the total outstanding voting securities,
the Company Board will ensure that at least one director designated by the
Purchaser is a member of each committee of the Company Board and such director
may designate an alternate director to act in his or her stead.
In accordance with the foregoing, the Company increased the size of the
Company Board to 14 members and elected Daniel A. Decker, Richard M.
FitzPatrick, James T. Hands, Donald J. McNamara, Kurt C. Read and Robert A.
Whitman to fill the vacancies created thereby, with Mr. Whitman assuming the
position of Chairman of the Board. The terms of office of each of these
individuals expire at the next annual meeting of shareholders of the Company.
For information as to Messrs. Decker, McNamara and Whitman, see Annex A. Messrs.
FitzPatrick, Hands and Read are each employed by Hampstead.
Certain Rights Offerings
The Recapitalization Agreement provides that, if the Company determines to
seek additional equity capital during the 18-month period following the Closing,
then the Company will use its best efforts to raise such capital through the
exercise of the Company Call Option or through one or more rights offerings to
the holders of Shares. The Purchaser agreed to exercise all rights to purchase
Shares issued to it in connection with any such rights offerings and if the
rights offered by the Company are non-assignable, the Purchaser has agreed to
acquire any and all Shares not purchased by distributees of such unexercised
rights; provided, however, that the Purchaser will not be obligated to pay more
than $30.0 million for the exercise of all such rights and such purchases.
Indemnification
The Company has agreed in the Recapitalization Agreement and the Redemption
Agreement to indemnify and hold harmless the Purchaser and each of its
affiliates and associates (each as defined under Rule 405 of the Securities Act)
and their respective partners, officers, directors, employees, attorneys,
advisors and agents and any person controlling, controlled by or in common
control with any of the foregoing ("Indemnified Parties"), from and against all
losses, claims, liabilities, damages, costs (including without limitation
attorneys' fees and expenses) and expenses or actions in respect thereof or
arising out of any actual or threatened claim against such Indemnified Party by
a person or entity related to or arising out of or in connection with the
Investment Agreement, the Warrant, the Standstill Agreement, the Redemption
Agreement, the Offers or any other agreement prepared and delivered in
connection with the transactions contemplated hereby or thereby or any actions
taken by any Indemnified Party in connection with the transactions contemplated
thereby (collectively, "Transactional Losses"), except that the Company will not
be liable to any Indemnified Party for any Transactional Losses to the extent
such Transactional Losses resulted primarily from such Indemnified Parties'
material breach of the Investment Agreement or the Redemption Agreement or a
misstatement or omission contained in a report filed by such Indemnified Party
pursuant to the Exchange Act unless such misstatement or omission relates to
information furnished or confirmed by or on behalf of the Company. The Company
has also agreed to indemnify and hold harmless each Indemnified Party from and
against any loss, damage or expense (including without limitation reasonable
attorneys' and accountants' fees and charges) suffered, directly or indirectly,
as a result of any inaccuracy in or breach of any of the representations,
warranties, covenants or agreements of the Company in the Investment Agreement,
the Redemption Agreement or any other document contemplated by the Investment
Agreement, or any inaccuracy or misrepresentation by the Company or any
subsidiary of the Company in any document, certificate or affidavit delivered by
the Company at the closing under the Investment Agreement. Notwithstanding the
foregoing, no Indemnified Party is entitled to indemnification with respect to
any claims for breaches of representations and warranties until the aggregate
amount of all such losses, damages or expenses (other than Transactional Losses)
suffered by the Indemnified Parties in the aggregate exceeds $100,000
("Threshold"), whereupon the Indemnified Parties will be entitled to
indemnification from the Company for the full amount of all such losses (other
than Transaction Losses) up to an aggregate total amount of $40.0 million
("Cap"). The Threshold and the Cap do not apply with respect to any loss
relating directly or indirectly to claims of any nature relating to claims (i)
relating to, resulting from or arising out of any breach of any covenant or
agreement under the Investment Agreement or the Redemption Agreement or in any
other document contemplated thereby or (ii) against any Indemnified Party made
by or on behalf of any director or
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officer for the Company or any of its subsidiaries. The Purchaser has
indemnified the Company's Indemnified Parties on terms similar to the Company's
indemnification of the Purchaser's Indemnified Parties for breaches of the
Purchaser's representations, warranties and covenants contained in the
Investment Agreement and such indemnification is subject to the Threshold and
the Cap.
Registration Rights Agreement
Pursuant to the Investment Agreement, the Purchaser has the right to
require the Company to register for sale to the public under the Securities Act
(each a "Demand Registration") all or a portion (but not less than 5%) of the
Shares acquired by the Purchaser pursuant to the Investment Agreement or
otherwise and any other shares of capital stock of the Company or securities
that are exercisable to purchase, convertible into, or exchangeable for shares
of capital stock of the Company owned by the Purchaser of any affiliate of the
Purchaser, including any Shares or Debentures (or capital stock into which the
Debentures are convertible) acquired by Purchaser pursuant to the Offers. The
Purchaser is entitled to five Demand Registrations and has the right to
participate in other registrations by the Company of its equity securities (a
"Piggyback Registration"). The Company has agreed to pay the registration
expenses of the Purchaser in connection with any Demand or Piggyback
Registration.
Standstill Agreement
Pursuant to the Standstill Agreement, the Purchaser agreed not to acquire
beneficial ownership of any Company securities entitled to vote in the election
of directors of the Company ("Voting Securities"), except as contemplated by the
Recapitalization Agreement, if after such acquisition the Purchaser would
beneficially own 50% or more of the aggregate number of votes which may be cast
by the holders of the Voting Securities unless such acquisition received the
prior approval of the Independent Directors.
In connection with the Purchaser's agreement to fund the redemption of the
10% Debentures and the Company's announcement of the Purchaser's intention to
make the Offers, the Company and the Purchaser amended the Standstill Agreement
to permit the Purchaser to purchase Shares and Debentures pursuant to the
Offers. As amended, Shares may be purchased pursuant to the Offer, but all such
Shares, so long as they are held by the Purchaser Group and to the extent they
exceed 49.9% of all outstanding Shares at the time in question, must be voted in
the same proportion as Shares voted by Shareholders other than the Purchaser
unless or until Shareholder Approval for the conversion of Series F stock into
Shares is obtained or the Standstill Agreement is no longer in effect.
The restrictions on the Purchaser under the Standstill Agreement terminate
after ten years or, if earlier, upon the occurrence of certain events, including
(i) if any Person (other than the Purchaser or its Affiliates) announces an
intention to commence a tender offer for more than 10% of the Voting Securities
or the Company enters into an agreement (including an agreement in principle)
providing for a merger or other business combination transaction involving the
Company and (ii) the Purchaser's acquisition, pursuant to the Investment
Agreement, the Warrant, the Company Call Option, the Purchaser Option or the
conversion of Series F Stock or Series G Stock into Shares, of Shares or
such other Voting Securities representing a majority of the total voting power
of the Company.
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THE OFFERS
Terms of the Offers
On the terms and subject to the conditions of the Offers, including, with
respect to the 9.1% Debentures, the Minimum 9.1% Debenture Condition (see "--
Certain 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 in "--
Withdrawal Rights." The term "Expiration Date" means 12:00 midnight, New York
City time, on January 7, 1997 , unless and until the Purchaser, in its sole
discretion, has extended 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. If, at any time
prior to or on the date of the expiration of the Offers the Purchaser determines
that it is likely that the Offer will result in the delisting of the Shares from
trading on the AMEX, the Purchaser will make a public announcement of such
determination and extend the Offers for an additional period of not less than
ten business days following such announcement (unless the Expiration Date for
the Offers was already more than ten business days after the date of such
announcement).
The Purchaser expressly reserves the right, at any time or from time to
time, and regardless of the circumstances, to (i) extend the period of time
during which the Offers are open and thereby delay acceptance for payment of,
and the payment for, any Shares and Debentures, by giving oral or written notice
of such extension to the Depositary and (ii) amend the Offers in any respect by
giving oral or written notice of such amendment to the Depositary. The rights
reserved by the Purchaser in this paragraph are in addition to the Purchaser's
right to extend, amend or terminate the Offers as described in "-- Certain
Conditions of the Offers." Any extension, amendment or termination will be
followed as promptly as practicable by public announcement thereof, such
announcement, in the case of an extension, to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of Rule
14d-4(c) under the Exchange Act. Without limiting the obligation of the
Purchaser under such Rule or the manner in which the Purchaser may choose to
make any public announcement, the Purchaser currently intends to make
announcements by issuing a release to the Dow Jones News Service. If the
Purchaser extends the Offers, then, without prejudice to the Purchaser's rights
under the Offers, the Depositary may retain tendered Shares and Debentures on
behalf of the Purchaser, and such Shares and Debentures may not be withdrawn,
except to the extent tendering Shareholders are entitled to withdrawal rights as
described in "-- Withdrawal Rights."
If the Purchaser makes a material change in the terms of the Offers or the
information concerning the Offers or waives a material condition of the Offers,
the Purchaser will disseminate additional tender offer materials and extend the
Offers to the extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange
Act. The minimum period during which an offer must remain open following
material changes in the terms of the offer or information concerning the offer,
other than a change in price or a change in percentage of securities sought,
will depend upon the facts and circumstances, including the relative materiality
of the terms or information changed. In a public release, the Commission has
stated that, in its view, a tender offer must remain open for a minimum period
of time following a material change in the terms of the offer and that a waiver
of a material condition is a material change in the terms of the offer. The
release states that an offer must remain open for a minimum of five business
days from the date a material change is first published, sent or given to
security holders and that, if material changes are made with respect to
information not materially less significant than the offer price and the number
of shares being sought, a minimum of 10 business days may be required to allow
adequate dissemination and investor response. The requirement to extend the
Offers will not apply to the extent that the number of business days remaining
between the occurrence of the change and the then-scheduled expiration time
equals or exceeds the minimum extension period that would be required because of
such amendment. As used in this Offer To Purchase, "business day" means any day,
other than Saturday, Sunday, or a federal holiday, and consists of the time
period from 12:01 a.m. through 12:00 midnight New York City time.
If, at any time prior to or on the date of the expiration of the Offers the
Purchaser determines that it is likely that the Offers will result in the
delisting of the Shares from trading on the AMEX, the Purchaser will make a
public announcement of such determination and extend the Offers for an
additional period of not less than ten business days following such announcement
(unless the Expiration Date for the Offers was already more than ten business
days after the date of such announcement).
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The Purchaser has requested and obtained from the Company the Company's
list of Debenture Holders, the Company's Shareholder list, a non-objecting
beneficial owners list and security position listing for the purpose of
disseminating the Offers to Holders. The Offer To Purchase, the Letter of
Transmittal and other relevant materials are being mailed by the Purchaser to
record holders of Shares and Debentures and are being furnished to brokers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the Company's Shareholder lists or Debenture
Holders list or, if applicable, who are listed as participants in a clearing
agency's security position listing, for subsequent transmittal to beneficial
Holders.
Acceptance for Payment and Payment for Shares and Debentures
On the terms and subject to the conditions of the Offers (including, if the
Offers are extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment, and thereby purchase, and
will pay for all Shares and Debentures validly tendered prior to the Expiration
Date (and not properly withdrawn in the manner described in "-- Withdrawal
Rights") as soon as practicable after the later of (i) the Expiration Date and
(ii) the satisfaction or waiver of the conditions described in "-- Certain
Conditions of the Offers." In all cases, payment for Shares and Debentures
purchased pursuant to the Offers will be made only after timely receipt by the
Depositary of (a) debentures representing such Debentures and Certificates
representing such Shares, or timely confirmation (a "Book-Entry Confirmation")
of the book-entry transfer of such Shares or Debentures into the Depositary's
account at the Philadelphia Depository Trust Company or The Depository Trust
Company (collectively, the "Book-Entry Transfer Facilities") in accordance with
the procedures described in "-- Procedure for Tendering Shares or Debentures,"
(b) a properly completed and duly executed Letter of Transmittal or facsimile
thereof, with any required signature guarantees, or an Agent's Message (as
hereafter defined) in the case of a book-entry transfer, and (c) all other
documents required by the Letter of Transmittal. The term "Agent's Message"
means a message, transmitted by a Book-Entry Transfer Facility to, and received
by, the Depositary and forming a part of a Book-Entry Confirmation, which states
that such Book-Entry Transfer Facility has received an express acknowledgment
from the participant in such Book-Entry Transfer Facility tendering the Shares
or Debentures which are the subject of such Book-Entry Confirmation, that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal, and that the Purchaser may enforce such agreement against such
participant.
For purposes of the Offers, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, tendered Shares and Debentures if, as and
when the Purchaser gives oral or written notice to the Depositary of its
acceptance of such Shares and Debentures for payment. Payment for Shares and
Debentures accepted for payment pursuant to the Offers will be made by deposit
of the purchase price therefor with the Depositary, which will act as agent for
the tendering Shareholders for purposes of receiving payment from the Purchaser
and transmitting payments to the tendering Shareholders. Payments for the
Debentures will include accrued interest through the date of payment for such
Debentures. Under no circumstances will interest on the purchase price for
Shares be paid.
If any tendered Shares and Debentures are not accepted for payment pursuant
to the terms and conditions of the Offers for any reason, or if Certificates
representing more Shares, or debentures representing more Debentures, than are
tendered are submitted to the Depositary, Certificates or debentures for such
unpurchased or untendered Shares or Debentures will be returned, without expense
to the tendering Holder (or, in the case of Shares tendered by the book-entry
transfer of such Shares into the Depositary's account at a Book- Entry Transfer
Facility in accordance with the procedures set forth in "-- Procedure for
Tendering Shares or Debentures," such Shares will be credited to an account
maintained within such Book-Entry Transfer Facility), as promptly as practicable
following the expiration, termination, or withdrawal of the Offers.
If, prior to the Expiration Date, the Purchaser increases the consideration
offered to Holders pursuant to the Offers, such increased consideration will be
paid to all Holders whose Shares or Debentures are purchased pursuant to the
Offers whether or not such Shares or Debentures have been tendered prior to such
increase in consideration.
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The Purchaser reserves the right, in its sole discretion, to transfer or
assign to any person, in whole or from time to time in part, Shares or
Debentures now or hereafter beneficially owned by it. Any transfer or assignment
contemplated in this paragraph will not relieve the Purchaser of its obligations
under the Offers and will in no way prejudice the rights of tendering Holders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offers.
Procedure for Tendering Shares or Debentures
For Shares and Debentures to be validly tendered pursuant to the Offers, a
properly completed and duly executed Letter of Transmittal or facsimile thereof,
with any required signature guarantees, or an Agent's Message in the case of a
book-entry transfer, and all other documents required by the Letter of
Transmittal, must be received by the Depositary at its address set forth on the
back cover of this Offer To Purchase on or prior to the Expiration Date. In
addition, either (i) Certificates representing Shares and debentures must be
received by the Depositary, together with the Letter of Transmittal, at such
address, or such Shares or Debentures must be tendered pursuant to the
procedures for book-entry tender described below and a Book-Entry Confirmation
received by the Depositary, in each case prior to the Expiration Date, or (ii)
the guaranteed delivery procedure described below must be complied with.
Delivery of documents to an account established by the Depositary at a
Book-Entry Transfer Facility does not constitute delivery to the Depositary.
The Depositary will establish accounts with respect to the Shares at the
Book-Entry Transfer Facilities for purposes of the Offers within two business
days after the date of this Offer To Purchase. Any financial institution that
is a participant in a Book-Entry Transfer Facility's system may make book-entry
delivery of Shares by causing such Book-Entry Transfer Facility to transfer such
Shares into the Depositary's account in accordance with such Book-Entry Transfer
Facility's procedure for such transfer. Although delivery of Shares may be
effected through book-entry at a Book-Entry Transfer Facility, a properly
completed and duly executed Letter of Transmittal or facsimile thereof, with any
required signature guarantees, or an Agent's Message in the case of a book-entry
transfer, and all other documents required by the Letter of Transmittal, must,
in any case, be transmitted to and received by the Depositary at its address set
forth on the back cover of this Offer To Purchase prior to the Expiration Date,
or the guaranteed delivery procedure described below must be complied with.
If Shares or Debentures are tendered otherwise than (i) by a registered
holder of such Shares or Debentures or (ii) for the account of a financial
institution that is a participant in the Securities Transfer Agents Medallion
Program, the Stock Exchange Medallion Program or the New York Stock Exchange,
Inc. Medallion Signature Program (each an "Eligible Institution"), all
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 1 of the Letter of Transmittal. If the Certificates
representing Shares or Debentures are registered in the name of a person other
than the signer of a Letter of Transmittal, the Certificates representing Shares
or Debentures must be endorsed or accompanied by appropriate unit powers, in
either case signed exactly as the name or names of the registered holder or
holders appear on the Certificates or debentures, with the signatures on the
Certificates or debentures or unit powers guaranteed as provided in the Letter
of Transmittal. See Instruction 1 of the Letter of Transmittal.
The method of delivery of all required documents is at the election and
risk of each Holder. If delivery is by mail, the use of registered mail with
return receipt requested, properly insured, is recommended.
If a Holder desires to tender Shares or Debentures pursuant to the Offers
and such Holder's Certificates representing Shares or Debentures are not
immediately available or such Holder cannot deliver such Holder's Certificates
or Debentures and all other required documents to the Depositary on or prior to
the Expiration Date, or if the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all of
the following guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
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<PAGE>
(iii) the Certificates for all physically delivered Shares or
Debentures in proper form for transfer or a Book-Entry Confirmation,
together with a properly completed and duly executed Letter of Transmittal
or facsimile thereof, with any required signature guarantees, or an Agent's
Message in the case of a book-entry transfer, and all other documents
required by the Letter of Transmittal, are received by the Depositary
within five business days after the date of such Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
signature guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery.
In all cases, payment for Shares and Debentures tendered and accepted for
payment pursuant to the Offers will be made only after timely receipt by the
Depositary of Certificates representing such Shares or Debentures or of a
Book-Entry Confirmation relating to such Shares or Debentures and a properly
completed and duly executed Letter of Transmittal or facsimile thereof, with any
required signature guarantees, or an Agent's Message in the case of a book-entry
transfer, and all other documents required by the Letter of Transmittal.
By executing a Letter of Transmittal as set forth above, a tendering
Shareholder irrevocably appoints designees of the Purchaser as such Holder's
attorneys-in-fact and proxies, each with full power of substitution and
resubstitution, in the manner set forth in the Letter of Transmittal, to the
full extent of such Shareholder's rights with respect to the Shares tendered by
such Holder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities issued or issuable in respect of such
Shares on or after the date of this Offer To Purchase. All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, the Purchaser accepts such
Shares for payment pursuant to the Offers. Upon such appointment, all prior
proxies given by such Shareholder (with respect to such Shares and such other
Shares and securities) will be revoked, without further action, and no
subsequent proxies may be given by such Shareholder (and, if given, will not be
deemed effective). The designees of the Purchaser will be empowered, among other
things, to exercise all voting and other rights of such Shareholder as they in
their sole discretion may deem proper at any meeting of the Shareholders or
otherwise. In order for Shares to be validly tendered, upon the acceptance for
payment of such Shares the Purchaser must be able to exercise full voting rights
with respect to such Shares (or other securities or rights), including voting at
any meeting of Shareholders, whether or not scheduled, and consenting to any
action to be taken by Shareholders in the absence of a meeting.
In order for any tender of Shares and Debentures to be valid, it must be in
proper form. All questions as to the form of documents and the validity,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares and Debentures, and all other determininations by the Purchaser
contemplated by the Offers, including in respect of the conditions to the Offers
and the determination as to continued listing of the Shares on the AMEX as
described in "-- Terms of the Offers", will be determined by the Purchaser, in
its sole discretion, which determination will be final and binding on all
parties. The Purchaser reserves the right to waive any defect or irregularity in
the tender of any Shares or Debentures. No tender of Shares or Debentures will
be deemed to have been validly made until all defects and irregularities have
been cured or waived. None of the Purchaser, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for failure to give
any such notification. The Purchaser's interpretation of the terms and
conditions of the Offers (including this Offer To Purchase, the Letter of
Transmittal and instructions thereto) will be final and binding.
The sale of Shares or Debentures pursuant to the Offers will also
constitute a sale of all rights relating to the Holder's ownership of Shares or
Debentures, including any rights in respect of claims against the Company or any
other Person, including without limitation the Purchaser (except that nothing
herein will relieve any Person, including without limitation the Purchaser, from
any liability arising under the federal securities laws in connection with the
Offers). Without limiting the generality or effect of the foregoing, upon the
purchase of Debentures pursuant to the Offers, the Purchaser shall have thereby
obtained the right to all Debenture Interest.
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The tender of Shares and Debentures pursuant to one of the procedures
described above will constitute a binding agreement between the tendering Holder
and the Purchaser on the terms and subject to the conditions of the Offers,
including the tendering Holder's representation and warranty that (i) such
Holder has full power and authority to tender, sell, assign and transfer such
Shares or Debentures and (ii) when the same are accepted for payment by the
Purchaser, the Purchaser will acquire good, marketable, and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
will not be subject to any adverse claim.
Withdrawal Rights
Except as otherwise stated below, tenders of Shares and Debentures made
pursuant to the Offers are irrevocable. Shares and Debentures tendered pursuant
to the Offers may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by the Purchaser pursuant to the Offers,
may also be withdrawn at any time after January 13, 1997.
For a withdrawal to be effective, a written, telegraphic or facsimile
notice of withdrawal must be timely received by the Depositary at its address
set forth on the back cover of this Offer To Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares or
Debentures to be withdrawn, the number of Shares or Debentures to be withdrawn
and the names in which the Certificates representing the Shares or Debentures to
be withdrawn are registered, if different from that of the person who tendered
such Shares. If Certificates representing Shares or Debentures have been
delivered or otherwise identified to the Depositary, then, prior to the release
of such Certificates, the tendering Holder must also submit the serial numbers
shown on the particular Certificates representing the Shares or Debentures to be
withdrawn and, unless such Shares or Debentures have been tendered for the
account of an Eligible Institution, the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution. If Shares or Debentures have been
tendered pursuant to the procedures for book-entry transfer set forth in "--
Procedure for Tendering Shares or Debentures," any notice of withdrawal must
also specify the name and number of the account at the appropriate Book-Entry
Transfer Facility to be credited with the withdrawn Shares or Debentures.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination will be final and binding on all parties. None
of the Purchaser, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give such
notification.
Withdrawals may not be rescinded, and any Shares or Debentures properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offers, but may be retendered at any subsequent time prior to the Expiration
Date by again following one of the procedures described in "-- Procedure for
Tendering Shares or Debentures."
Source and Amount of Funds
Assuming that all Shares and Debentures are validly tendered and not
withdrawn, the maximum amount of funds required to purchase Shares and
Debentures pursuant to the Offers to pay related fees and expenses is estimated
to be $74.1 million. Purchaser will obtain these funds from capital
contributions, pursuant to funding commitments of its partners. Neither of the
Purchaser nor its partners intends to incur substantial borrowings to fund the
purchase of Shares pursuant to the Offers.
The Company is required under the Redemption Agreement to pay or reimburse
Purchaser for all reasonable documented fees, costs and expenses incurred in
connection with the Offers, whether or not the Offers are consummated.
Certain Conditions of the Offers
Notwithstanding any other provision of the Offers, the Purchaser will not
be required to accept for payment, purchase or pay for any Shares or Debentures
tendered, and may postpone the acceptance for payment,
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<PAGE>
the purchase of and/or the payment for, Shares or Debentures and/or may amend or
terminate the Offers if, (i) as to the 9.1% Debentures, the Minimum 9.1%
Debenture Condition is not satisfied and (ii) as to the Shares, the 9%
Debentures and the 9.1% Debentures, 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 for pursuant to
the Offers) any of the following events shall occur:
(a) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the Offers, the Recapitalization
Agreements or the Redemption Agreement, or any subsequent merger,
consolidation or other business combination or other transaction involving
the Purchaser and the Company, or any other action shall have been taken,
proposed or threatened, by any domestic or foreign court, legislative body
or governmental agency, or other regulatory or administrative agency or
commission, or any other person or entity, which (i) challenges or seeks to
challenge the Offers or any transaction contemplated by the Recapitaliation
Agreements or the Redemption Agreement, makes or seeks to make illegal,
delays or seeks to delay, or otherwise directly or indirectly restrains or
prohibits or seeks to restrain or prohibit the making or consummation of
the Offers or the acceptance for payment of, or payment for, any Shares or
Debentures by the Purchaser (or any of its affiliates), or the consummation
of any subsequent merger, consolidation or other business combination
transaction or other transaction involving the Purchaser and the Company,
or any transaction contemplated by the Recapitalization Agreements or the
Redemption Agreement, (ii) prohibits or restricts or seeks to prohibit or
restrict the ownership or operation by the Purchaser (or any of its
affiliates) of all or any material portion of its own or the Company's
securities (including Shares and Debentures), business or assets, or
compels or seeks to compel the Purchaser (or any of its affiliates) to
dispose of or hold separate all or any portion of the Shares or other
securities of the Company or the Company's business or assets, (iii)
imposes or seeks to impose limitations on the ability of the Purchaser or
any of its affiliates to acquire or hold or to exercise full rights of
ownership of the Shares, Debentures or other securities of the Company,
including, but not limited to, the right to vote the Shares purchased by
them on all matters properly presented to the Company, (iv) imposes or
seeks to impose any limitations on the ability of the Purchaser (or any of
its affiliates) effectively to control in any respect the holding, voting,
sale or any other matter pertaining to Shares or any other securities of
the Company or the business and operations of the Company, (v) in the sole
judgment of the Purchaser, might result in a limitation of the benefits
expected to be derived by the Purchaser as a result of the transactions
contemplated by the Offers, the value of the Shares or the Debentures to
the Purchaser, the Recapitalization Agreements or the Redemption Agreement,
(vi) imposes or seeks to impose any material condition to the Offers
unacceptable to the Purchaser, or (vii) otherwise directly or indirectly
relates to the Offers, the Recapitalization Agreements, the Redemption
Agreement or any transaction contemplated by any of the foregoing, or any
business combination or other transaction with or involving the Company, or
which otherwise, in the sole judgment of the Purchaser, might adversely
affect the Purchaser, the Company or any of their respective affiliates; or
(b) any litigation, application, claim, counterclaim or similar
proceeding shall have been threatened or commenced in or before any
domestic or foreign court, legislative body or governmental agency, or
other regulatory or administrative agency or commission, which, in the sole
judgment of the Purchaser, could result in any of the consequences referred
to in clauses (i) through (vii) of paragraph (a) above or which obtains or
seeks to obtain any damages, or otherwise relates directly or indirectly to
the transactions contemplated by the Offers, the Recapitalization
Agreements or the Redemption Agreement, or any subsequent merger,
consolidation or other business combination with or involving the Company,
or there has occurred a development in any litigation, application, claim,
counterclaim or proceeding commenced prior to the time of the commencement
of the Offers which could have any such effect; or
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<PAGE>
(c) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, financial condition,
results of operations or prospects of the Company or in respect of the
Purchaser's rights under the Recapitalization Agreements or the Redemption
Agreement, which, in the sole judgment of the Purchaser, is, or may be,
materially adverse to the Company, or the Purchaser shall become aware of
any fact (including without limitation any such change or development)
which, in the sole judgment of the Purchaser, has, or may have, materially
adverse significance with respect to the Company or the Purchaser's
investments therein or in securities thereof; or
(d) there shall have occurred (i) the declaration of any banking
moratorium or suspension of payments in respect of banks in the United
States, (ii) any general suspension of trading in, or limitation of prices
for, securities on any United States national securities exchange or in the
over-the-counter market, (iii) the commencement of a war, armed hostilities
or any other national or international crisis directly or indirectly
involving the United States, (iv) any limitation (whether or not mandatory)
by any governmental, regulatory or administrative agency or authority on,
or any event which, in the Purchaser's sole judgment, might affect, the
extension of credit by banks or other lending institutions in the United
States, (v) any significant change in the market price of the Shares or in
the general level of market prices of equity securities in the United
States or abroad that, in the sole judgment of the Purchaser, could have a
material effect on the Company's business, financial condition, results of
operations or prospects or the value of the Shares or any other securities
of the Company or that, in the sole judgment of the Purchaser, makes it
inadvisable to proceed with the Offers, or (vi) in the case of any of the
foregoing existing at the time of the commencement of the Offers, in the
Purchaser's sole judgment, a material change therein; or
(e) a tender offer or exchange offer for some portion or all of the
Shares or Debentures shall have been commenced or publicly proposed to be
made by any other person or entity, or it shall have been publicly
disclosed or the Purchaser shall have learned or the Purchaser shall have
cause to believe that any other person or entity shall have entered into a
definitive agreement or an agreement in principle or made a proposal with
respect to a tender offer or exchange offer for some portion or all of the
Shares or Debentures, a merger, consolidation or other business combination
or sale of assets (other than in the ordinary course of business), or a
recapitalization or other transaction outside the ordinary course of
business of the Company, with or involving the Company or any other
transaction involving the issuance of securities of the Company, or the
Company shall have authorized, recommended or proposed, or shall have
announced an intention to authorize, recommend or propose, any other
material change in its capitalization; or
(f) the Purchaser and the Company shall have reached an agreement or
understanding that the Offers be terminated or amended or the purchase or
payment for Shares or Debentures be postponed pursuant thereto; or
(g) any waiting period under the HSR Act applicable to the purchase of
Shares pursuant to the Offers or otherwise shall not have expired or been
terminated; or
(h) the Company shall breach any provision of the Recapitalization
Agreements or the Redemption Agreement.
The foregoing conditions may be asserted by the Purchaser regardless of the
circumstances and are for the sole benefit of the Purchaser and its affiliates.
The foregoing conditions may be waived by the Purchaser in whole or in part at
any time and from time to time in its sole discretion. The failure by the
Purchaser at any time to exercise any of the foregoing rights will not be deemed
a waiver of any other rights and each such right will be deemed an ongoing right
which may be asserted at any time and from time to time. Any determination by
the Purchaser concerning the events described above will be final and binding
upon all parties.
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Dividends and Interest on Debentures
The Company has not paid a dividend on the Shares since the Company has
been publicly owned. Whether or not the Purchaser increases its equity ownership
in the Company, the Purchaser has no current plans or proposals to seek to
modify the Company's current dividend policy, although it reserves the right to
do so. Accordingly, there can be no assurance as to whether or when, or at what
levels, any future cash distributions to Holders will be made.
If, on or after November 14, 1996, the Company should (i) split, combine or
otherwise change the Shares or its capitalization, (ii) issue or sell any
additional securities of the Company or otherwise cause an increase in the
number of outstanding securities of the Company, or (iii) acquire currently
outstanding Shares or otherwise cause a reduction in the number of outstanding
Shares, then, without prejudice to the Purchaser's rights described "-- Terms of
the Offers" and "-- Certain Conditions of the Offers," the Purchaser, in its
sole discretion, may make such adjustments in the purchase price and other terms
of the Offers as it deems appropriate to reflect such split, combination or
other change, including the amount and type of securities offered to be
purchased.
If, on or after November 14, 1996, the Company should declare or pay any
dividend or other distribution on the Shares or make any distribution (including
without limitation the issuance of additional Shares pursuant to a Share
distribution or Share split, the issuance of other securities or the issuance of
rights for the purchase of any securities) with respect to the Shares that is
payable or distributable to Holders of record on a date prior to the transfer to
the name of the Purchaser or its nominee or transferee on the Company records of
the Shares purchased pursuant to the Offers, then, without prejudice to the
Purchaser's rights described under "Terms of the Offers" and "Certain Conditions
of the Offers," (i) the purchase price per Share payable by the Purchaser
pursuant to the Offers will be reduced by the amount of any such cash
distribution in respect of the Shares and (ii) any such non-cash distribution or
right to be received by the tendering Holders will be received and held by the
tendering Holders and delivered to the Depositary for the account of the
Purchaser, accompanied by appropriate documentation of transfer. Pending such
remittance and subject to applicable law, the Purchaser will be entitled to all
rights and privileges as owner of any such non-cash distribution or right and
may withhold the entire purchase price or deduct from the purchase price the
amount or value thereof, as determined by the Purchaser in its sole discretion.
Interest under any of the Debentures payable as of an interest payment date
prior to the date of acceptance for payment of Debentures tendered pursuant to
the Offers will be retained by the registered owner of the Debentures on which
such interest was paid as of such date. For purposes of the Offers, "Debenture
Interest" constitutes interest on the Debentures which is accrued and unpaid as
of the date of acceptance for payment pursuant to the Offers.
Certain Legal Matters
Except as described below, the Purchaser is not aware of any license or
other regulatory permit which appears to be material to the business of the
Company and that might be adversely affected by the Purchaser's acquisition of
Shares or Debentures pursuant to the Offers any approval or other action by any
domestic or foreign governmental or administrative agency that would be required
prior to the acquisition of Shares or Debentures by the Purchaser pursuant to
the Offers or any state takeover statute that is applicable to the Offers.
Should any such approval or other action be required, or any such state takeover
statute be applicable, the Purchaser will evaluate at such time whether such
approval or action will be sought or compliance with such takeover statute will
be effected. There can be no assurance that any such approval, action or
compliance, if needed, would be obtained or effected or, if obtained or
effected, would be obtained or effected without substantial conditions or
adverse consequences. The Purchaser's obligation to purchase and pay for the
tendered Shares or Debentures is subject to certain conditions, including
conditions relating to the legal matters discussed herein. See "-- Certain
Conditions of the Offers."
Under the HSR Act, and the rules and regulations that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain
25
<PAGE>
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the FTC and certain waiting period
requirements have been satisfied. Purchaser expects to file a Notification and
Report Form with respect to the acquisition of Shares pursuant to the Offers and
other transactions contemplated by the Recapitalization Agreements and the
Redemption Agreement as promptly as practicable after commencement of the
Offers. At any time before or after the Expiration Date or the consummation of
the Offers, notwithstanding that the waiting period under the HSR Act has
expired, the FTC, the Antitrust Division or any state could take such action
under the antitrust laws of the United States or such state, as the case may be,
as it deems necessary or desirable in the public interest, including seeking to
enjoin the consummation of the Offers. State governmental authorities or private
persons may also seek to take legal action under the antitrust laws under
certain circumstances. Any such actions could result in the extension, amendment
or termination of the Offers.
Fees and Expenses
The Purchaser has retained Continental Stock Transfer & Trust Company to
act as the Depositary and MacKenzie Partners, Inc. to act as the Information
Agent in connection with the Offers. The Information Agent may contact holders
of Shares and Debentures by mail, telephone, telex, telegraph and in person and
will request brokers, dealers and other nominee Shareholders to forward
materials relating to the Offers to beneficial owners of the Shares and
Debentures. The Depositary and the Information Agent each will receive
reasonable and customary compensation for its services, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith. Employees of the
Purchaser or its affiliates may make solicitations in connection with the
Offers, but they will not receive any additional compensation therefor. Brokers,
dealers, commercial banks and trust companies will be reimbursed by the
Purchaser for customary mailing expenses incurred by them in forwarding material
to their customers.
Expenses estimated to be incurred by the Purchaser in connection with the
Offers are as follows:
Depositary and information fees....................... $ 25,000
Legal fees............................................ 100,000
Printing, mailing and distribution expenses........... 50,000
SEC filing fee........................................ 14,766
Miscellaneous fees and expenses....................... 22,071
---------
Total.............................................. $ 211,837
=========
The Company is required under the Redemption Agreement to pay or reimburse
Purchaser for all reasonable documented fees, costs and expenses incurred in
connection with the Offers.
CERTAIN INFORMATION CONCERNING THE COMPANY
General
The Company is a Georgia corporation with its principal executive offices
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia.
The Company develops, owns and manages FECs called Mountasia Family
FunnCenters(TM) or "Malibu Grand Prix" centers. FECs consist of several
entertainment attractions, including elaborate miniature golf courses featuring
cascading waterfalls, underground caves and heavily landscaped grounds and video
and skill game rooms, as well as fast food and souvenir concessions. Each FEC is
intended to create a fun-filled environment which appeals to the entire family
and can be enjoyed at a reasonable price. The Company's business strategy is to
bring professional management techniques to a traditionally fragmented industry
by developing a worldwide network of family entertainment centers located
principally in major, non-resort metropolitan areas. On November 15, 1994, the
Company acquired Malibu, the owner and operator of 21 Malibu Grand Prix Centers
located in nine states. Malibu Grand Prix centers generally feature a
combination
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of scaled grand prix racetracks utilizing Virage(C) race cars, miniature golf
courses, video arcades, go-kart tracks, batting cages, bumper boats, trains,
carousels and food service/merchandise facilities. With the Malibu acquisition,
the Company became one of the largest owners and operators of FECs in the United
States.
For a discussion of the Company's current business strategy, see
"Background of the Offers -- The Purchaser's Reasons for the Recapitalization
and the Offers."
Financial Information
The following summary consolidated financial information relating to the
Company has been taken or derived from the audited consolidated financial
statements contained in the Company's Annual Report on Form 10-K\A for the year
ended September 30, 1995 (the "1995 Form 10-K") and the unaudited interim
consolidated financial statements in the Company's Quarterly Reports on Form
10-Q for the quarter ended December 31, 1995 (the "1996 First Quarter 10-Q") and
the quarter ended September 30, 1996 (the "1996 Third Quarter 10-Q"), which
financial statements are hereby incorporated in their entirety herein by this
reference. The 1995 Form 10-K, 1996 First Quarter 10-Q and the 1996 Third
Quarter 10-Q may be examined and copies may be obtained from the offices of the
Commission as described in "Additional Information." See "Miscellaneous."
27
<PAGE>
<TABLE>
MOUNTASIA ENTERTAINMENT INTERNATIONAL, INC.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(Dollars in thousands, except per Share amounts and ratios)
<CAPTION>
Nine Months Ended at Twelve Months Ended and at
September 30, Three Months September 30,
----------------------- Ended -------------------------
Income Statement Data: 1996 1995 12/31/95 1995 1994
---- ---- -------- ---- ----
<S> <C> <C> <C> <C> <C>
Total operating revenues: $ 30,554 $ 39,827 6,419 $ 46,207 $ 28,177
Net income (loss) applicable to (7,998) (1,500) (3,798) (2,634) 1,232
common stock before extraordinary
items and effect of changes in
accounting principle
Net income (loss) applicable to (8,536) (1,500) (3,798) (3,072) 1,232
common stock
Ratio of earnings to fixed charges (a) (a) (a) (a) (a)
Balance Sheet Data:
Working capital (deficit) 5,268 (8,253) (5,746) (1,317)
Total assets 116,384 100,195 100,195 62,926
Total indebtedness 31,396 40,102 40,102 21,579
Total shareholders' equity 74,853 46,989 46,989 31,827
Net book value per share of $ 2.68 $ 4.51 $ 4.51 $ 4.81
common stock (b)
Net income (loss) per share of common stock:
Net income (loss) before extraordinary (0.58) (0.19) (0.45) (0.19) (0.34)
item and cumulative effect of a
change in accounting principle
Extraordinary item (0.04) 0.00 0.00 0.00 0.06
Cumulative effect of a change in 0.00 0.00 0.00 (0.06) 0.00
accounting principle
Net (loss) per share (0.62) (0.19) (0.45) (0.19) (0.40)
Weighted average number of Common Shares 13,687,288 7,901,366 8,374,750 7,719,727 6,268,751
Outstanding
Number of Common Shares outstanding at end 27,960,927 7,850,868 7,850,868 7,850,868 6,619,842
of period
</TABLE>
- ----------
(a) Earnings have been inadequate to cover fixed charges and preferred
dividends for all periods presented.
(b) Computed based upon the common shareholders' equity divided by the
total number of shares of common stock outstanding at the end of the
period.
(c) The Company changed its fiscal year to a December 31st year end during
1995. The three months ended December 31, 1995 is being presented to
provide a more complete presentation. The results of operations for
the comparable prior year period, the three months ended December 31,
1994, reported a net loss of $1,496,171 or $0.21 per share on total
revenues of $4,160,259.
ADDITIONAL INFORMATION
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file with the
Commission periodic reports and other information relating to its business,
financial condition, and other matters. The Company is required to disclose in
such reports certain information, as of particular dates, concerning the
Company's operating results and financial condition, its officers and directors,
the principal holders of the Company's securities, any material interests of
such persons in transactions with the Company and other matters. These reports
and other informational filings required by the Exchange Act should be available
for inspection at the public reference facilities maintained by the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and also should be available for inspection and copying at the regional offices
of the Commission located at Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60611 and 7 World Trade Center, 13th Floor, New York, New York 10048.
The Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. Such reports, proxy and information statements and other
information may
28
<PAGE>
be found on the Commission's Web site address, http: // www.sec.gov. Copies of
such material may be obtained by mail, upon payment of the Commission's
customary fees, from the Commission's principal office at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. Information regarding the Company
may also be obtained at the offices of the AMEX, 86 Trinity Place, New York, New
York 10006.
Certain of the information contained in this Offers to Purchase concerning
the Company is based upon publicly available documents or records on file with
the Commission. Although the Purchaser is not aware that any such document or
record filed since the Closing is materially false or misleading, the Purchaser
does not accept any responsibility for the accuracy or completeness of such
information or for any failure by the Company to disclose events which have
occurred or may affect the significance or accuracy of any such information. See
"Miscellaneous."
CERTAIN INFORMATION CONCERNING THE PURCHASER
The Purchaser is a Delaware limited partnership with its principal
executive offices at 4220 Texas Commerce Tower West, 2200 Ross Avenue, Dallas,
Texas 75201.
The principal business of the Purchaser is to invest in the Company. Since
its formation, Purchaser has not engaged in any activities unrelated to the
Recapitalization Agreements, the Redemption Agreement or the Offers. As of
November 14, 1996, the Purchaser (i) owned 11,727,970 Shares, or 41.8% of the
outstanding Shares, (ii) is entitled, upon the occurrence of certain future
events outside the Purchaser's control, to purchase from the Company or to
receive from the Company without payment of additional consideration, additional
Shares or other securities (see "The Recapitalization Agreements -- The
Warrant;" and "-- Post-Closing Adjustment Provisions"), (iii) has agreed to
purchase certain additional securities which, if Shareholder Approval for such
conversions is obtained (see "Background of the Offers -- Certain Events
Following the Recapitalization"), would be convertible into 2,032,565 additional
Shares, and (iv) has certain other rights in respect of its investments in the
Company and the purchase of securities from the Company. See "Background of the
Offers -- The Recapitalization" and "The Recapitalization Agreements." Annex A
hereto sets forth the following information with respect to certain persons
related to Purchaser: (a) name; (b) business address; (c) present principal
occupation or employment and the name, principal business address of any
corporation or other organization in which such employment or occupation is
conducted; (d) material occupations, positions, offices or employments during
the last five years, giving the starting and ending dates of each and the name,
principal business and address of any business corporation or other organization
in which such occupation, position, office or employment was carried on; and (e)
citizenship.
29
<PAGE>
MISCELLANEOUS
No person has been authorized to give any information or make any
representation other than as contained in this Offer To Purchase or the related
Letter of Transmittal and, if given or made, such information or representation
must not be relied upon as having been authorized.
The Offers are being made to all Holders. The Purchaser is not aware of any
jurisdiction in which the making of the Offers is prohibited by administrative
or judicial action pursuant to a state statute. If the Purchaser becomes aware
of any jurisdiction where the making of the Offers is so prohibited, the
Purchaser will make a good faith effort to comply with any such statute or seek
to have such statute declared inapplicable to the Offers. If, after such good
faith effort, the Purchaser cannot comply with any applicable statute, the
Offers will not be made to (nor will tenders be accepted from or on behalf of)
the Holders in such jurisdiction. In those jurisdictions where securities, blue
sky or other laws require the Offers to be made by a licensed broker or dealer,
the Offers shall be deemed to be made on behalf of the Purchaser by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
Certain of the information concerning the Company contained in this Offer
To Purchase has been taken from or based upon publicly available documents and
records on file with the Commission and other public sources. Although the
Purchaser is not aware that any such document or record filed since the Closing
is materially false or misleading, the Purchaser accepts no responsibility for
the accuracy or completeness of the information contained in such documents and
records, or for any failure by the Company to disclose events which may have
occurred or may affect the significance or accuracy of any such information.
The Purchaser has filed with the Commission a Transaction Statement on
Schedule 13E-3 and a Tender Offer Statement on Schedule 14D-1, together with
exhibits in each case, pursuant to Rules 13e-3 and 14d-3, respectively, under
the Exchange Act, furnishing certain additional information with respect to the
Offers. Such Statements and any amendments thereto, including exhibits, may be
examined and copies may be obtained at the same places and in the manner set
forth under "Additional Information" in this Offer To Purchase (except that they
will not be available in the regional offices of the Commission).
MEI HOLDINGS, L.P.
November 14, 1996
30
<PAGE>
ANNEX A
CERTAIN INFORMATION WITH
RESPECT TO THE PURCHASER
Certain information with respect to each of the general partners of the
Purchaser is set forth below. The Purchaser is a Delaware limited partnership
that was organized by MEI GenPar, L.P., a Delaware limited partnership ("MEI
GP"), HH GenPar Partners, a Texas general partnership ("HH GP"), Hampstead
Associates, Inc., a Texas corporation ("Associates"), RAW GenPar, Inc., a Texas
corporation ("RAW GP"), InMed, Inc. (d/b/a InCap, Inc.), a Texas corporation
("InMed"), Donald J. McNamara, Robert A. Whitman and Daniel A. Decker
(collectively, the "Purchaser Persons").
The principal business of the Purchaser is to invest in the Company. MEI GP
is, and its principal business is to act as, the sole general partner of the
Purchaser. HH GP is, and its principal business is to act as, the managing
general partner of MEI GP (and various other partnerships). Associates is, and
its principal business is to act as, the managing general partner of HH GP. RAW
GP and InMed are the only other general partners of HH GP. The principal
business of each of RAW GP and InMed is to invest in HH GP. The address of the
principal executive office of the Purchaser, MEI GP, HH GP, Associates, RAW GP
and InMed is 4200 Texas Commerce Tower West, 2200 Ross Avenue, Dallas, Texas
75201.
Mr. McNamara is the Chairman, President and a director of Associates. Mr.
Whitman is the President, Treasurer and a director of RAW GP. Mr. Decker is the
Chairman, President and a director of InMed and the Executive Vice President and
Assistant Secretary of Associates. Each of Messrs. McNamara, Whitman and Decker
is a United States citizen.
Each of Donald J. McNamara, Robert A. Whitman and Daniel A. Decker is
employed by Hampstead. Mr. McNamara is the Chairman and Co-Chief Executive
Officer of Hampstead, Mr. Whitman is the President and Co-Chief Executive
Officer of Hampstead and Mr. Decker is an Executive Vice President of Hampstead.
Mr. Whitman is also the Chairman of the Board and interim Chief Executive
Officer of the Company, and each of Messrs. McNamara, Whitman and Decker, as
well as three other Hampstead employees, is a member of the Company Board. The
principal business of Hampstead is to provide management services in respect of
investments in site-based businesses. The business address of Hampstead and of
each such individual is 4200 Texas Commerce Tower West, 2200 Ross Avenue,
Dallas, Texas 75201.
None of the Purchaser Persons and, to their knowledge, none of the other
persons identified herein as officers of the Purchaser, MEI GP, HH GP, RAW GP,
Associates, InMed and Hampstead has, during the last five years, been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors)
or been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction.
A-1
<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 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
