EXHIBIT 99.3(a)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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: C.A. No. 15921NC
HERBERT BEHRENS, :
:
Plaintiff, :
: CLASS ACTION
-against- : COMPLAINT
:
ROBERT L. JOHNSON, JOHN C. MALONE, :
PETER R. BARTON, DELANO E. LEWIS, :
SHEILA CRUMP JOHNSON, HERBERT P. :
WILKINS, DENZEL WASHINGTON, TELE- :
COMMUNICATIONS, INC., LIBERTY MEDIA :
CORPORATION and BET HOLDINGS, INC., :
:
Defendants. :
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Plaintiff, by his attorneys, alleges upon information
and belief, except as to paragraph 1 which plaintiff alleges upon
knowledge, as follows:
1. Plaintiff Herbert Behrens is a stockholder of
defendant BET Holdings, Inc. ("BET Holdings" or the "Company").
2. Defendant BET Holdings is a corporation duly
organized and existing under the laws of the state of Delaware,
with its principal offices located at One BET Plaza, 1900 W Place
Northeast, Washington, D.C. 20018. As of November 1996, there
were approximately 16.75 million shares of BET Holdings common
stock outstanding. BET Holdings is a holding company with
subsidiaries which operate predominantly in the cable television
programming industry. The Company's cable television programming
operations are conducted through Black Entertainment Television
("BET"), BET on Jazz: The Cable Jazz Channel and Action Pay-Per-
View. The Company derives a large portion of its revenues
through the BET cable network.
3. Defendant Tele-Communications, Inc. ("TCI") is a
corporation duly organized and existing under the laws of the
State of Delaware with its principal offices located at Terrace
Tower II, 5619 DTC Parkway, Englewood, Colorado 80111. TCI is
the largest owner/operator of cable television systems in the
United States. TCI also produces, acquires and distributes
programming through its wholly-owned subsidiary defendant Liberty
Media Corporation ("Liberty"). TCI, either directly or through
it subsidiaries, owns 18.1% of the outstanding Class A common
stock of BET Holdings, 100% of the outstanding Class B common
stock and controls 26.3% of the vote of all classes of common
stock.
4. Defendant Robert L. Johnson ("Johnson") is the
founder of BET, the Company's primary operating facility.
Defendant Johnson has served as President, Chief Executive
Officer and a director of BET since it was created in 1979.
Since 1991, Johnson has served as Chairman of the Board of
Directors. Since 1991, Johnson also served as Chief Executive
Officer of BET Holdings and as its President from 1991 until
March 1996. Defendant Johnson is also the Chairman of District
Cablevision, Inc. ("DCI"), a Washington D.C. cable system
operating company which he founded in 1980. Johnson has also
served as a director of Liberty, a wholly owned subsidiary of
defendant TCI, since December 1991. According to BET Holding's
most recent Proxy Statement, Johnson owned approximately 21.8% of
the outstanding Class A common stock of BET Holdings, 100% of the
Class C common stock and controlled 65.7% of the vote of all
classes of common stock. On August 1, 1997, it was reported that
Johnson had cut his stake in BET Holdings to 46% by selling
71,007 class A common shares at prices ranging from $33.25 to
$33.88 per share.
5. Defendant John C. Malone ("Malone") has been a
director of BET since 1979 and was its Chairman from 1979 to
1991. Malone has been the President and Chief Executive Officer
of defendant TCI since 1973 and a director and Chairman of the
Board of Liberty since 1991.
6. Defendant Peter R. Barton has been a director of
BET Holdings and of BET since January of 1992. Barton has been
the President and a director of Liberty since 1990. Barton is
Liberty's nominee on the Company's Board. From 1986 through
1990, Barton served as a consultant to TCI and a director of QVC
Network, Inc. From 1988 until March 1991, Barton served as
Senior Vice President of TCI. Barton also sits on the boards of
Turner Broadcasting System, Inc. and Home Shopping Network.
7. Defendant Sheila Crump Johnson ("S. Johnson") is
the wife of defendant Johnson. S. Johnson has served on the
Board of Directors of BET since 1979 and since 1990, has been
Vice President, Corporate Affairs of BET. Since September of
1992, she has served as Executive Vice President, Corporate
Affairs of BET Holdings.
8. Defendant Herbert P. Wilkins, Sr., Delano E. Lewis
and Denzel Washington are the remaining members of the board of
BET Holdings. They, together with Johnson, Malone, Barton and S.
Johnson are sometimes referred to herein as the "Individual
Defendants".
9. The Individual Defendants as officers and/or
directors of BET Holdings have a fiduciary relationship and
responsibility to plaintiff and the other common public
stockholders of BET Holdings and owe to plaintiff and the other
class members the highest obligations of good faith, loyalty,
fair dealing, due care and candor.
CLASS ACTION ALLEGATIONS
10. Plaintiff brings this action on his own behalf and
as a class action, pursuant to Rule 23 of the Rules of the Court
of Chancery, on behalf of all common stockholders of BET
Holdings, or their successors in interest, who are being and will
be harmed by defendants' actions described below (the "Class").
Excluded from the Class are defendants herein and any person,
firm, trust, corporation, or other entity related to or
affiliated with any of defendants.
11. This action is properly maintainable as a class
action because:
(a) The Class is so numerous that joinder of all
members is impracticable. There are hundreds of BET Holdings
stockholders of record who are located throughout the United
States;
(b) There are questions of law and fact which are
common to the Class and which predominate over questions
affecting any individual Class members, including: whether
defendants have engaged or are continuing to act in a manner
calculated to benefit themselves at the expense of the BET
Holdings public stockholders; and whether plaintiff and the other
Class members would be irreparably damaged if the defendants are
not enjoined in the manner described below;
(c) Plaintiff is committed to prosecuting this
action and has retained competent counsel experienced in
litigation of this nature. The claims of plaintiff are typical
of the claims of the other members of the Class and plaintiff has
the same interests as the other members of the Class.
Accordingly, plaintiff is an adequate representative of the Class
and will fairly and adequately protect the interests of the
Class; and
(d) Plaintiff anticipates that there will be no
difficulty in the management of this litigation.
12. For the reasons stated herein, a class action is
superior to other available methods for the fair and efficient
adjudication of this controversy and the requirements of Rule 23
of the Chancery Court Rules are satisfied.
CLAIM FOR RELIEF
13. BET was founded in 1979 by defendant Johnson.
BET's formation was funded in part by defendant Malone through
TCI. TCI paid Johnson $180,000 for 20% of BET's equity and
loaned Johnson $320,000. During November of 1991, BET Holdings
issued 2,102,500 shares of Class A common stock through an
initial public stock offering. BET, through which BET Holdings
realizes a substantial portion of its revenues, has been a
wholly-owned subsidiary of BET Holdings since 1991.
14. TCI currently owns 18.1% of the outstanding Class
A common stock of BET Holdings and controls 26.3% of the vote.
Johnson, until recently, owned 21.8% of the outstanding Class A
common stock of BET Holdings and controlled 65.7% of the vote.
As of August 1, that stake was cut to 46%.
15. On or about September 11, 1997, it was announced
that TCI, Liberty and Johnson ("the Buyout Group") offered to
acquire the shares of BET Holdings they do not already own for
$48 per share in cash in exchange for each outstanding share of
BET Holdings.
16. As set forth above, BET Holdings has seven board
members, at least four of whom have loyalties that are, at best,
divided in the instant transaction. Furthermore, five of the
directors of BET Holdings are elected exclusively by holders of
Class B and Class C common stock of BET Holdings -- all of which
is owned by either TCI or Johnson. The Individual Defendants are
beholden to Johnson, TCI and Malone and can not be expected to
act in the best interest of BET Holdings' minority stockholders.
17. The purpose of the proposed acquisition
transaction is to enable the Buyout Group to acquire the shares
of BET Holdings they do not already own and BET Holdings'
valuable assets for the benefit of the Buyout Group at the
expense of the BET Holdings' public stockholders.
18. The proposed acquisition comes at a time when BET
Holdings has performed well and is expected to continue to
perform well. The core operations of BET Holdings have reported
consistently improving growth in revenues and earnings and
defendants have made clear through public statements and filings
BET Holdings' efforts to capitalize upon the strength of the BET
brand name by diversifying into other areas, including leisure
activities, financial services and the cosmetics and apparel
industry. The Buyout Group has timed this transaction to capture
BET Holdings' positive performance and future potential and use
it to their own ends, without paying an adequate or fair price
for BET Holdings' remaining shares.
19. On June 11, 1997, BET Holdings reported quarterly
financial results for its third fiscal quarter. The Company
reported net income of $1.09 for the nine months ended April 30,
as compared with $.89 in the prior year, and $.36 for the
quarter, as compared with $.30 in the prior year. Revenues for
the quarter were $40,909,000. BET Holdings attributed its slowed
earnings growth to start up costs associated with pursuing its
growth strategy but added that "it expects its investments to
position it for future earnings growth and increased shareholder
value."
20. In March of 1997, BET Holdings reported that
earnings for its second fiscal quarter ended January 31 rose 14%
to $16.6 million ($.38 per share) from $5.8 million ($.32 per
share) in the same period of 1996. Revenues for the quarter were
$36.6 million, up 11% from $32.9 million in 1996's second
quarter. In a Company press release, Johnson commented, "We are
pleased that BET Holdings, Inc., led by our core business, BET,
continued to report revenue, earnings and cash flow growth as it
made strategic investments to position the company for future
growth. During the quarter we made significant progress toward
expanding our cable programming presence and pursuing brand
extension opportunities...."
21. Likewise, for the first fiscal quarter of its
fiscal year ended July 31, 1997, BET Holdings reported earnings
per share of $.35, up 32% from the prior year's first quarter.
Commenting on those results, defendant Johnson again stressed
increases in future profitability: "We are pleased that our core
business, BET, reported an exceptional 25 percent increase in
operating income during the quarter. BET's outstanding financial
performance permits us to continue implementing our strategy of
pursuing investments in other cable programming and brand
extension opportunities...."
22. TCI and Johnson are in a position of control and
power over BET Holdings and have access to internal financial
information about BET Holdings, its true value, expected increase
in true value and the benefits to the Buyout Group of 100%
ownership of BET Holdings to which plaintiffs and the Class
members are not privy. TCI and Johnson are using their positions
of control and access to non-public information to benefit
themselves in this transaction, to the detriment of the BET
Holdings' common stockholders.
23. In proposing the merger, the Buyout Group has
committed or threatened to commit the following acts to the
detriment and disadvantage of BET Holdings' public stockholders:
(a) They have undervalued the BET Holdings common
stock by ignoring the full value of its assets and future
prospects. The prospered acquisition consideration does not
reflect the value of BET Holdings' valuable assets; and
(b) They timed the announcement of the proposed
buyout to place an artificial lid on the market price of BET
Holdings' common stock which is unfair to BET Holdings' public
stockholders.
24. As a result of the foregoing, plaintiff and the
other members of the Class will be irreparably harmed in that
they will not receive their fair portion of the value of BET
Holdings' assets and business and will be prevented from
obtaining the real value of their equity ownership of the
Company. Unless the proposed acquisition is enjoined by the
Court, defendants will continue to breach their fiduciary duties
owed to plaintiff and the members of the Class and will
consummate the proposed acquisition, to the irreparable harm of
the members of the Class.
25. Plaintiff and the other members of the Class have
no adequate remedy at law.
WHEREFORE, plaintiff prays for judgment and relief as
follows:
A. Ordering that this action may be maintained as a
class action and certifying plaintiff as the Class
representative;
B. Preliminarily and permanently enjoining the
defendants and their counsel, agents, employees and all persons
acting under, in concert with, or for them, from proceeding with,
consummating or closing the proposed transaction.
C. In the event the proposed transaction is
consummated, rescinding it and setting it aside;
D. Awarding compensatory damages against defendants
individually and severally in an amount to be determined at
trial, together with prejudgment interest at the maximum rate
allowable by law;
E. Awarding costs and disbursements, including
plaintiff's counsel's fees and experts' fees; and
F. Granting such other and further relief as to the
Court may seem just and proper.
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
BY:__________________________________________
Joseph Rosenthal
Kevin Gross
919 North Market Street
Suite 1401, Mellon Bank Center
Wilmington, Delaware 19801
(302) 656-4433
OF COUNSEL:
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York, New York 10016
(212) 889-3700