- - - ----------------------------------------------------------------------------
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrants (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
(X) Preliminary Proxy Statement ( ) Confidential, for Use of
the Commission Only (as
permitted by Rule
14a-6(e)(2))
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
BET HOLDINGS, INC.
(Name of Registrant as specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
( ) No fee required.
(X) Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Class A Common Stock, par value $.02 per share (the "Class A Stock")
(2) Aggregate number of securities to which transaction applies:
6,309,618 (representing all the outstanding shares of Class A Stock not
owned by Mr. Robert L. Johnson, Liberty Media Corporation or their
respective affiliates).
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$63 per share cash price plus a maximum aggregate payment of $74,045,678
to holders of outstanding options to acquire Class A Stock in
consideration for cancellation of those options.
(4) Proposed maximum aggregate value of transaction: $471,551,612.
(5) Total fee paid: $94,310. Fee paid by wire transfer on May 1, 1998.
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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PRELIMINARY COPIES
BET HOLDINGS, INC.
ONE BET PLAZA, 1900 W PLACE, N.E.
WASHINGTON, D.C. 20018-1211
(202) 608-2000
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders
of BET Holdings, Inc. to be held at [
] on [ ,
1998], at [ ] a.m., local time.
At this meeting, you will be asked to vote on the merger of BTV
Acquisition Corporation with and into BET Holdings with BET Holdings as the
surviving corporation. BTV Acquisition was formed in connection with the
proposed merger by Robert L. Johnson, BET Holdings' Chairman of the Board,
Chief Executive Officer and largest stockholder, and by Liberty Media
Corporation, BET Holdings' next largest stockholder and a wholly owned
subsidiary of Tele-Communications, Inc. ("TCI"). Together, Mr. Johnson and
Liberty Media currently own approximately 63% of BET Holdings' outstanding
capital stock, representing approximately 92% of the voting power of the
stockholders. Mr. Johnson and Liberty Media have proposed the merger in
order to buy out the remaining stockholders. After the merger, BET
Holdings will be wholly owned by Mr. Johnson and Liberty Media.
If the merger is approved and consummated, you will be entitled to
receive $63 in cash for each share of Class A common stock you own. The
$63 per share price represents a 58% premium over the $40 average closing
per share price during the 30-day period preceding September 10, 1997,
which was the last full trading day before Mr. Johnson and Liberty Media
first announced that they wanted to purchase all of the shares of BET
Holdings they do not already own. A Special Independent Committee formed
by the Board of Directors of BET Holdings negotiated this price with Mr.
Johnson and Liberty Media.
Since a majority of the members of the Board of Directors are
affiliated with Mr. Johnson, Liberty Media or TCI and have a conflict of
interest regarding the merger, the Board formed the Special Independent
Committee to avoid any conflicts of interests in evaluating the fairness of
the merger to the stockholders of BET Holdings not associated with Mr.
Johnson, Liberty Media or TCI. The Special Independent Committee is
composed of Mr. Delano Lewis, a director of BET Holdings. Mr. Lewis is not
an employee of BET Holdings, Liberty Media or TCI, is not a director of
Liberty Media or TCI, and does not have any commercial relationship with
Mr. Johnson, Liberty Media or TCI.
The Special Independent Committee received a written opinion from
Goldman, Sachs & Co., its financial advisor, that as of March 15, 1998, the
$63 per share merger price was fair from a financial point of view to BET
Holdings' stockholders, other than Mr. Johnson, Liberty Media and Liberty
Media's affiliates. The Goldman, Sachs & Co. fairness opinion is subject
to various considerations and assumptions described in such opinion, a copy
of which accompanies this Proxy Statement.
The Board of Directors of BET Holdings, acting on the recommendation
of the Special Independent Committee, has approved a merger agreement with
BTV Acquisition, Mr. Johnson and Liberty Media. The Special Independent
Committee and the full Board of Directors believe that the terms and
provisions of the merger agreement and the merger are fair to and in the
best interest of BET Holdings and its stockholders other than BTV
Acquisition, Mr. Johnson, Liberty Media and any of their respective
subsidiaries. Therefore, the Board of Directors recommends that you vote
in favor of the merger agreement and approve the merger.
This document explains the proposed merger and provides specific
information concerning the Special Meeting. Please read these materials
carefully. In addition, you may obtain information about BET Holdings from
documents that BET Holdings has filed with the Securities and Exchange
Commission.
If you do not vote in favor of the merger agreement, you will have the
right to dissent and to seek appraisal of the fair market value of your
shares if the merger is consummated and you comply with the Delaware law
procedures explained on pages 57 to 61 of this document.
Whether or not you plan to attend the Special Meeting, I urge you to
complete, sign and promptly return the enclosed proxy card to ensure that
your shares will be voted at the meeting. If you sign, date and return
your proxy card without indicating how you want to vote, your proxy will be
counted as a vote in favor of the merger agreement. Your proxy may be
revoked at any time before it is voted by submitting to the Secretary of
BET Holdings a written revocation or a proxy bearing a later date, or by
attending and voting in person at the meeting. Even if you plan to attend
the meeting, please complete and return your proxy.
The merger is an important decision for BET Holdings and its
stockholders. Among other things, the merger cannot occur unless the
merger agreement is approved by an affirmative vote of the holders of a
majority of the voting power of the shares other than shares held by Mr.
Johnson, Liberty Media or any of their respective affiliates.
On behalf of the Board of Directors, I thank you for your support and
urge you to vote FOR adoption of the merger agreement.
Sincerely,
Debra L. Lee
President and Chief Operating Officer
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES REGULATORS. NOR HAVE THE
COMMISSION OR ANY STATE SECURITIES REGULATORS 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.
Proxy Statement dated [ ], 1998 and first mailed to
stockholders on [ ], 1998.
BET HOLDINGS, INC.
ONE BET PLAZA, 1900 W PLACE, N.E.
WASHINGTON, D.C. 20018-1211
(202) 608-2000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Dear Stockholder:
Notice is hereby given that a Special Meeting of Stockholders of BET
Holdings, Inc., a Delaware corporation, will be held at [
] on [JULY , 1998] at [
] a.m., local time, for the following purposes:
1. To consider and vote upon the approval and adoption of an
Agreement and Plan of Merger, dated as of March 15, 1998. The
Agreement and Plan of Merger provides for, among other things,
the merger of BTV Acquisition Corporation with and into BET
Holdings, with BET Holdings as the surviving corporation. BTV
Acquisition was formed by the two largest stockholders of BET
Holdings, Mr. Robert L. Johnson, the Chairman and Chief Executive
Officer of BET Holdings, and Liberty Media Corporation, for the
purpose of buying out the other stockholders of BET Holdings
through the merger. The Agreement and Plan of Merger is more
fully described in this document and is attached to this document
as an exhibit.
2. To transact any other business which may properly come before the
special meeting or any adjournment or postponement thereof.
Stockholders of BET Holdings who do not vote in favor of the Agreement
and Plan of Merger will have the right to dissent and to seek appraisal of
the fair market value of their shares if the merger is consummated and they
comply with the Delaware law procedures explained in the accompanying proxy
statement.
Only holders of record at the close of business on [ ],
[ ], 1998 are entitled to notice of and to vote at the
Special Meeting or any adjournment or postponement thereof. Any
stockholder will be able to examine a list of the holders of record, for
any purpose related to the Special Meeting, during ordinary business hours
during the 10-day period before the meeting. The list will be available at
[ ].
Stockholders may vote in person or by proxy. This document explains
the merger in detail and is accompanied by a proxy card. In order to
assure that your vote will be counted, please complete, date, sign and
return the enclosed proxy promptly in the enclosed prepaid envelope whether
or not you plan to attend the Special Meeting. Your proxy may be revoked
at any time before it is voted, by submitting to the Secretary of BET
Holdings a written revocation or a proxy bearing a later date, or by
attending and voting in person at the Special Meeting.
THE BOARD OF DIRECTORS OF BET HOLDINGS HAS APPROVED THE AGREEMENT AND
PLAN OF MERGER AND THE MERGER AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE AGREEMENT AND PLAN OF MERGER.
By Order of the Board of Directors
Debra L. Lee
President and Chief Operating Officer
Washington, D.C.
[ , 1998]
YOUR VOTE IS IMPORTANT. PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY
PROMPTLY, WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING.
PLEASE DO NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGER . . . . . . . . . . . . . . . . . 1
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INFORMATION CONCERNING THE SPECIAL MEETING . . . . . . . . . . . . . . 10
Time, Place, Date . . . . . . . . . . . . . . . . . . . . . . . . 10
Purpose of the Special Meeting . . . . . . . . . . . . . . . . . . 10
Record Date; Voting at the Meeting; Quorum . . . . . . . . . . . . 11
Required Vote . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Action to be Taken Under the Proxy . . . . . . . . . . . . . . . . 12
Proxy Solicitation . . . . . . . . . . . . . . . . . . . . . . . . 13
THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
BTV Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . 14
Robert L. Johnson . . . . . . . . . . . . . . . . . . . . . . . . 14
Liberty Media Corporation . . . . . . . . . . . . . . . . . . . . 15
Tele-Communications, Inc. . . . . . . . . . . . . . . . . . . . . 15
SPECIAL FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Purpose and Background of the Merger . . . . . . . . . . . . . . . 16
Recommendation of the Special Independent Committee and Board of
Directors; Fairness of the Merger . . . . . . . . . . . . . . 25
The Buying Group's Purpose and Reason for the Merger . . . . . . . 30
Opinion of Financial Advisor to the Special Independent Committee. 31
Certain Effects of the Merger . . . . . . . . . . . . . . . . . . 38
Plans for the Company After the Merger . . . . . . . . . . . . . . 39
Conduct of the Business of the Company if the Merger is not
Consummated . . . . . . . . . . . . . . . . . . . . . . . . . 39
Buying Group Letter Agreements . . . . . . . . . . . . . . . . . . 39
Interests of Certain Persons in the Merger; Certain Relationships 41
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . 43
Financing of the Merger . . . . . . . . . . . . . . . . . . . . . 44
Regulatory Requirements . . . . . . . . . . . . . . . . . . . . . 44
Federal Income Tax Consequences of the Merger . . . . . . . . . . 45
Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 46
THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 48
The Merger; Merger Consideration . . . . . . . . . . . . . . . . . 48
The Exchange Fund; Payment for Shares of Class A Stock . . . . . . 49
Transfers of Class A Stock . . . . . . . . . . . . . . . . . . . . 50
Treatment of Stock Options . . . . . . . . . . . . . . . . . . . . 50
Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Representations and Warranties . . . . . . . . . . . . . . . . . . 51
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Indemnification and Insurance . . . . . . . . . . . . . . . . . . 52
No Solicitation; Fiduciary Obligations of Directors . . . . . . . 52
Directors and Officers of the Company Following the Merger;
Certificate of Incorporation; Bylaws . . . . . . . . . . . . 53
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Amendment/Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 54
LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
DISSENTERS RIGHTS OF APPRAISAL . . . . . . . . . . . . . . . . . . . . 57
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY . . . . . . . . . . 62
CERTAIN RELATIONSHIPS AND TRANSACTIONS . . . . . . . . . . . . . . . . 64
Agreements with Cable Affiliates . . . . . . . . . . . . . . . . . 64
Agreements with Related Parties . . . . . . . . . . . . . . . . . 64
Transactions with Management . . . . . . . . . . . . . . . . . . . 65
MARKET FOR THE CLASS A STOCK . . . . . . . . . . . . . . . . . . . . . 66
Class A Stock Market Price Information; Dividend Information . . . 66
Class A Stock Purchase Information . . . . . . . . . . . . . . . . 67
SECURITIES OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . 68
Beneficial Ownership of More Than 5% of Class A Stock . . . . . . 68
Beneficial Ownership of Class A Stock by Certain Parties Related
to the Company or the Buying Group . . . . . . . . . . . . . 70
Ownership of BTV Acquisition Common Stock by Directors and
Executive Officers of the Company . . . . . . . . . . . . . . 74
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Directors and Executive Officers of the Company . . . . . . . . . 75
Directors and Executive Officers of BTV Acquisition . . . . . . . 79
Directors and Executive Officers of TCI . . . . . . . . . . . . . 79
Directors and Executive Officers of Liberty . . . . . . . . . . . 83
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . 85
STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . 85
DOCUMENTS INCORPORATED BY REFERENCE . . . . . . . . . . . . . . . . . . 85
OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 87
EXHIBIT A AGREEMENT AND PLAN OF MERGER . . . . . . . . . . . . . . . A - 1
EXHIBIT B OPINION OF GOLDMAN, SACHS & CO. . . . . . . . . . . . . . . B - 1
EXHIBIT C SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW . . . . C - 1
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WITH WHOM IS THE COMPANY MERGING?
A: BTV Acquisition Corporation, an entity formed by the two largest
stockholders of BET Holdings, Inc., Mr. Robert L. Johnson (the
Chairman of the Board and Chief Executive Officer of BET Holdings) and
Liberty Media Corporation. BTV Acquisition would merge with and into
BET Holdings, with BET Holdings as the surviving corporation.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: Stockholders of BET Holdings (other than BTV Acquisition, Mr. Johnson,
Liberty Media or any of their respective subsidiaries) will be
entitled to receive $63 in cash in exchange for each share of Class A
common stock acquired in the merger. The Special Independent
Committee formed by the Board of Directors of BET Holdings negotiated
this price with BTV Acquisition, Mr. Johnson and Liberty Media.
Q: WHY IS THE BOARD OF DIRECTORS RECOMMENDING THAT I VOTE FOR THE MERGER
AGREEMENT?
A: In the opinion of your Board, based upon the recommendation of the
Special Independent Committee, the terms and provisions of the merger
agreement and the merger are fair to and in the best interest of BET
Holdings and its stockholders who are not affiliated with BTV
Acquisition, Mr. Johnson or Liberty Media. For the merger to occur,
the holders of a majority of the voting power of BET Holdings' shares
not held by Mr. Johnson, Liberty Media and their respective affiliates
must approve the merger. To review the background and reasons for the
merger in greater detail, see pages 16 to 24.
Q: WHAT DO I NEED TO DO NOW?
A: Please mail your signed proxy card in the enclosed return envelope as
soon as possible, so that your shares may be represented at the
Special Meeting.
Q: WHAT RIGHTS DO I HAVE IF I OPPOSE THE MERGER?
A: Stockholders who wish to dissent from the merger may seek appraisal of
the fair market value of their shares, but only if they comply with
all of the Delaware law procedures explained on pages 57 to 61.
Q: WHO CAN VOTE ON THE MERGER?
A: All stockholders of record as of the close of business on [ ,
1998] will be entitled to notice of and to vote at the Special
Meeting to approve the proposed merger and the merger agreement.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send you written
instructions for exchanging your share certificates.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on
how to vote. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. Just send in a written revocation or a later dated, signed
proxy card before the Special Meeting or attend the Special Meeting
and vote.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the merger as quickly as possible.
If the merger agreement is approved and the other conditions to the
merger are satisfied, we expect to complete the merger promptly following
the Special Meeting.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: The merger generally will be taxable to you for U.S. federal income
tax purposes. To review the federal income tax consequences to
stockholders in greater detail, see pages 45 to 46.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
A: We do not expect to ask you to vote on any other matters at the
Special Meeting.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have more questions about the merger or would like additional
copies of this Proxy Statement, you should contact Morrow & Co., Inc.,
a professional soliciting organization retained by BET Holdings, at
800-566-9061 or Byron F. Marchant, General Counsel, BET Holdings,
Inc., One BET Plaza, 1900 W Place, N.E., Washington, D.C. 20018-1211;
telephone number (202) 608-2000.
SUMMARY
This summary highlights selected information from this document. This
summary may not contain all of the information that is important to you.
To understand the merger fully and for a more complete description of the
legal terms of the merger, you should read carefully this entire document
and the other documents to which we have referred you. See the sections
of this document entitled "DOCUMENTS INCORPORATED BY REFERENCE" and
"AVAILABLE INFORMATION."
Throughout this document, the term "Merger Agreement" refers to the
Agreement and Plan of Merger dated as of March 15, 1998 (a copy of which is
included at the back of this document as Exhibit A) and the term "Merger"
refers to the merger of BTV Acquisition Corporation with and into BET
Holdings, Inc. with BET Holdings as the surviving corporation. BTV
Acquisition Corporation is owned by the two largest stockholders of BET
Holdings, Robert L. Johnson and Liberty Media Corporation, a wholly owned
subsidiary of Tele-Communications, Inc. For ease of reference, we
sometimes refer in this document to BTV Acquisition Corporation as "BTV
Acquisition," to BET Holdings, Inc. as the "Company," to Robert L. Johnson
as "Mr. Johnson," to Liberty Media Corporation as "Liberty," to Tele-
Communications, Inc. as "TCI" and to Mr. Johnson and Liberty collectively
as the "Buying Group." We are also using the phrase "holders of
Nonaffiliated Stock" to mean all holders of Class A common stock of the
Company other than BTV Acquisition, Mr. Johnson, Liberty and their
respective subsidiaries.
THE SPECIAL MEETING
VOTING
At the Special Meeting of stockholders of the Company, the holders of
the Company's outstanding capital stock (including the holders of the Class
A common stock) will vote on a proposal to adopt the Merger Agreement.
Each share of the Company's Class A common stock is entitled to one vote
per share and each share of Class B and Class C common stock is entitled to
ten votes per share. Delaware law requires that the holders of a majority
of all outstanding shares of capital stock vote to approve the Merger.
Mr. Johnson and Liberty hold enough shares to assure that majority.
However, in order to ensure that the stockholders not affiliated with Mr.
Johnson or Liberty, as a group, are in favor of the Merger, Mr. Johnson,
Liberty and the Company have agreed that the holders of a majority of the
voting power of the shares not affiliated with the Buying Group must
approve the Merger Agreement for the Merger to occur.
Acting under authority granted to it by the Board of Directors, the
Special Independent Committee of the Board of Directors of the Company has
set the close of business on [ ], 1998 as the record date for
determining who is entitled to vote at the Special Meeting. On the record
date, there were [ ] shares of Class A common stock
outstanding and entitled to vote held by approximately [ ],
stockholders of record.
SPECIAL FACTORS
PURPOSE, BACKGROUND AND EFFECTS OF THE MERGER
The Buying Group's purpose for the Merger is to acquire all of the
remaining Class A common stock in the Company that they do not already own.
Mr. Johnson and Liberty sought to structure the transaction as a merger
because it would enable them to obtain financing on the best terms possible
and reduce transaction costs. If the Merger is completed, the Company's
stock would cease to be publicly traded and holders of Nonaffiliated Stock
(other than stockholders who dissent from the Merger and seek appraisal of
their shares in accordance with the Delaware law requirements explained in
this document) would receive $63 per share in cash. Following the Merger,
all of the outstanding capital stock of the Company, as the surviving
corporation in the Merger, would be owned by Mr. Johnson and Liberty.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
In September 1997, the Buying Group initially offered to acquire all
the remaining Class A common stock of the Company at a purchase price of
$48 per share. Because four of the seven members of the Board of Directors
are affiliated with the Buying Group (Mr. Johnson, his wife, Mrs. Sheila
Crump Johnson, Dr. John C. Malone, the Chairman and Chief Executive Officer
of TCI, and Mr. Robert R. Bennett, the President of Liberty), the Board
sought to avoid the potential conflicts of interest involved by forming a
special committee of independent directors (the "Special Independent
Committee") to review the Buying Group's proposal, make a recommendation to
the Board of Directors regarding any proposed transaction with the Buying
Group, and negotiate the terms of any such transaction with the Buying
Group. The Special Independent Committee is comprised of Mr. Delano E.
Lewis, a director of the Company who is not associated with the Buying
Group.
The Company's Board of Directors, acting on the recommendation of its
Special Independent Committee, has approved the Merger and the Merger
Agreement and recommends that you vote to adopt the Merger Agreement. The
Company's Board of Directors believes that the Merger and the terms and
provisions of the Merger Agreement (including the $63 per share purchase
price) are fair to and in the best interest of the Company and the holders
of Nonaffiliated Stock.
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS AND THE SPECIAL INDEPENDENT
COMMITTEE
In reaching their decision to recommend adoption of the Merger
Agreement, the Special Independent Committee and the Board considered a
number of factors. These include the following:
o a comparison of the historical market prices of the Class A
common stock of the Company with the per share price offered by
Mr. Johnson and Liberty. The $63 per share price represents a
58% premium over the $40 average closing price per share for the
30-day period preceding September 10, 1997, the last full trading
day before Mr. Johnson and Liberty first announced their
intention to purchase the shares of Class A common stock of the
Company they do not already own.
o the opinion of Goldman, Sachs & Co. addressed to the Special
Independent Committee that, as of March 15, 1998, the $63 per
share to be received by the holders of Common Stock (other than
Mr. Johnson, Liberty and Liberty's affiliates) in connection with
the Merger is fair to such stockholders from a financial point of
view.
o the Merger Agreement's requirement that the Merger be approved by
the holders of a majority of the shares of Class A common stock
other than Mr. Johnson, Liberty and their respective affiliates
and the Merger Agreement provision permitting the Board of
Directors to withdraw its recommendation that stockholders vote
in favor of the Merger if the exercise of the Board's fiduciary
duties requires the Board to do so because there is a reasonably
likely alternative proposal more favorable to the holders of
Class A common stock.
GOLDMAN SACHS' FAIRNESS OPINION
Goldman Sachs delivered to the Special Independent Committee a written
opinion, dated March 15, 1998, that as of such date, based upon and subject
to the various considerations and assumptions stated therein, the $63 per
share to be received by the holders of Common Stock (other than Mr.
Johnson, Liberty and Liberty's affiliates) is fair from a financial point
of view to such stockholders. The Goldman Sachs opinion is included as
Exhibit B at the end of this Proxy Statement. Please read this opinion
carefully.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
BTV Acquisition was formed by Mr. Johnson and Liberty for the purpose
of acquiring the Company in the Merger. Mr. Johnson and Liberty own
approximately 65% and 35%, respectively, of BTV Acquisition. Following the
effectiveness of the Merger, on a fully diluted basis, Mr. Johnson will own
[ %] of the common stock of the Company (as the surviving corporation in
the Merger), and Liberty will own [ %]. Such ownership will arise from
the conversion, upon the consummation of the Merger, of all of the
outstanding common stock of BTV Acquisition into all of the outstanding
common stock of the Company, and the conversion of Mr. Johnson's options to
acquire shares of Class A common stock of the Company into options to
acquire an equivalent amount of common stock of the surviving corporation.
In addition, almost all of the Company's officers and directors own
the Company's Class A common stock or hold options to purchase Class A
common stock and, to that extent, their interest in the Merger is the same
as yours. However, some of the officers and directors of the Company have
relationships, or interests in the Merger, that are different from your
interests as a stockholder or that may present a conflict of interest. For
a description of these interests see pages 41 to 43. The Special
Independent Committee and the Board were aware of these interests and
considered them in recommending and approving the Merger.
ACCOUNTING TREATMENT
The cost of repurchasing the Company's outstanding Class A common
stock will be accounted for as a treasury stock transaction, since the
Merger will not constitute a change of control within the context of
generally accepted accounting principles. This means that the historical
cost basis of the Company's assets and liabilities will be carried forward
to the surviving corporation in the Merger, with the aggregate cost of such
repurchase being accounted for as a charge to stockholders' equity. The
cost of repurchasing and cancelling outstanding common stock options will
be accounted for as compensation expense.
FINANCING OF THE MERGER
At the closing of the Merger, BTV Acquisition expects to pay an
aggregate purchase price of $471.5 million to the holders of Nonaffiliated
Stock and the holders of options to acquire the Company's Class A common
stock (other than options held by Mr. Johnson), assuming no stockholders
exercise the dissenter appraisal rights explained in this document. In
addition, the parties anticipate that BTV Acquisition will require
approximately $42 million to pay all other expenses and costs relating to
the Merger, to refinance or finance certain indebtedness of the Company,
BTV Acquisition, certain principals of BTV Acquisition, and Black
Entertainment Television, Inc., the Company's primary operating subsidiary,
and to finance other general corporate purposes. It is a condition to BTV
Acquisition's obligation to consummate the Merger that it has obtained, on
terms reasonably acceptable to it, sufficient funds for the foregoing
purposes. BTV Acquisition expects to finance such payments by entering
into a senior secured loan facility of approximately $600 million with a
syndicate of financial institutions to be arranged by The Bank of New York
Company, Inc. and BNY Capital Markets, Inc.
REGULATORY REQUIREMENTS
The Hart-Scott-Rodino Act prohibits the completion of the Merger until
Liberty and the Company have furnished certain information to the Antitrust
Division of the Department of Justice and the Federal Trade Commission and
a required waiting period has expired. The required notification and
report forms have been filed with the Antitrust Division and the Federal
Trade Commission, and the required waiting period is scheduled to expire at
11:59 p.m. on May 27, 1998 (unless terminated earlier or a request for
additional information is received).
FEDERAL INCOME TAX CONSEQUENCES
You will be taxed on your receipt of the $63 per share to the extent
that the amount you receive exceeds your tax basis in your Class A common
stock. Because determining the tax consequences of the Merger can be
complicated, especially in light of recent changes in the federal tax laws
governing capital gains, you should consult your tax advisor in order to
understand fully how the Merger will affect you.
THE MERGER AGREEMENT
THE MERGER CONSIDERATION
If the Merger is completed, you will be entitled to receive $63 per
share in cash for your Class A common stock.
CONDITIONS TO THE MERGER
There are a number of conditions that must be satisfied before either
the Company or the Buying Group is obligated to complete the Merger,
including:
o the Merger must be approved by a majority of the voting power
held by the stockholders of the Company other than Mr. Johnson,
Liberty and their respective affiliates;
o there can be no legal restraints or prohibitions that prevent
completion of the Merger; and
o all governmental authorizations necessary for the Merger's
completion must have been obtained and any waiting period under
the Hart-Scott-Rodino Act must have expired or been terminated.
There are additional conditions that must be satisfied or waived
before BTV Acquisition is obligated to complete the Merger, including:
o BTV Acquisition must obtain sufficient financing to complete the
Merger and to finance or refinance certain indebtedness;
o holders of not more than 10% of the outstanding shares of Class A
common stock not owned by Mr. Johnson, Liberty and their
respective affiliates have exercised dissenters appraisal rights;
o there is no litigation challenging the Merger pending or
threatened;
o the Company must comply with the Merger Agreement; and
o the representations and warranties made by the Company in the
Merger Agreement that are qualified as to materiality must be
true and correct and, if not so qualified, must be true and
correct in all material respects.
There are additional conditions that must be satisfied before the
Company is obligated to complete the Merger, including:
o BTV Acquisition, Mr. Johnson and Liberty must comply with the
Merger Agreement; and
o the representations and warranties made by BTV Acquisition, Mr.
Johnson and Liberty in the Merger Agreement that are qualified as
to materiality must be true and correct and, if not so qualified,
must be true and correct in all material respects.
TERMINATION OF THE MERGER AGREEMENT
The Company and BTV Acquisition may agree at any time (including any
time after the Special Meeting) to terminate the Merger Agreement. In
addition, either the Company or BTV Acquisition may terminate the Merger
Agreement if:
o the Merger has not been completed by September 30, 1998;
o a final court order or other governmental action prohibits
the Merger; or
o the other party materially fails to comply with the Merger
Agreement and such failure cannot be remedied by September
30, 1998.
The Company may terminate the Merger Agreement if:
o the Buying Group has not obtained commitments for the
financing necessary to complete the Merger by May 15, 1998.
BTV Acquisition may terminate the Merger Agreement if:
o the Board decides to withdraw or change its recommendation
of the Merger; or
o holders of shares representing a majority of the voting
power owned by stockholders of the Company (other than Mr.
Johnson, Liberty or any of their respective affiliates) do
not approve the Merger Agreement by September 15, 1998.
LITIGATION
Shortly after the public announcement of the Buying Group's initial
offer of $48 per share for the remaining outstanding shares of Class A
common stock of the Company, several lawsuits were filed by stockholders of
the Company alleging that the offer price was inadequate. Five class
action complaints were filed and consolidated in a Delaware state court and
one class action complaint was filed in a District of Columbia court. On
March 15, 1998, the parties to the Delaware lawsuits entered into a
Memorandum of Understanding (the "MOU") which outlines an agreement-in-
principle regarding the terms of a settlement, subject to court approval,
third-party consents and other conditions. The parties to the MOU agreed,
among other things, to cooperate in seeking the dismissal of the complaint
pending in the District of Columbia court. The litigation and the MOU are
discussed in the section of this document entitled "LITIGATION." The
consummation of the Merger is conditioned upon there being no pending or
threatened litigation concerning the Merger.
DISSENTER APPRAISAL RIGHTS
Any stockholder who does not wish to accept $63 per share in the
Merger has the right under Delaware law to have the "fair value" of his or
her shares determined by the Delaware Chancery Court. This "right of
appraisal" is subject to a number of restrictions and technical
requirements. Generally, in order to exercise appraisal rights:
o you must NOT vote in favor of the Merger; and
o you must make a written demand for appraisal in compliance with
Delaware law BEFORE the vote on the Merger.
Merely voting against the Merger will not protect your right of appraisal.
Exhibit C to this Proxy Statement contains the Delaware statute relating to
your right of appraisal. Failure to follow all of the steps required by
this statute will result in the loss of your right of appraisal. The
Delaware law requirements for exercising appraisal rights are explained in
the section of this document entitled "DISSENTERS RIGHTS OF APPRAISAL."
INFORMATION CONCERNING
THE SPECIAL MEETING
TIME, PLACE, DATE
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of the Company of proxies from the holders of
shares of the Company's Class A Common Stock, par value $.02 per share (the
"Class A Stock") for use at a Special Meeting of stockholders of the
Company to be held at [ ] local time, on [ ], [JULY ],
1998, at the [ ],
or at any adjournment(s) or postponement(s) thereof (the "Special
Meeting"), pursuant to the enclosed Notice of Special Meeting of
Stockholders.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, the stockholders of the Company will be asked
to consider and vote upon the approval and adoption of the Merger
Agreement, a copy of which is attached to this Proxy Statement as Exhibit
A. The Merger Agreement provides for the merger of BTV Acquisition with
and into the Company, with the Company as the surviving corporation (the
"Surviving Corporation"). Pursuant to the Merger Agreement, each
outstanding share of Class A Stock (other than Class A Stock (i) held in
the treasury of the Company or by any of its wholly owned subsidiaries,
(ii) held by BTV Acquisition, Mr. Johnson or Liberty, or any of their
respective subsidiaries, or (iii) held by stockholders who perfect their
rights under Delaware law to dissent from the Merger and seek an appraisal
of the fair market value of their shares (the "Dissenting Stockholders")),
will be converted into the right to receive $63 per share in cash, without
interest (the "Merger Consideration"). All Class A Stock of the Company
not owned by BTV Acquisition, Mr. Johnson, Liberty or any of their
respective subsidiaries is referred to in this document as the
"Nonaffiliated Stock."
The Special Independent Committee consisting of one director, Mr.
Delano Lewis, was appointed by the Board of Directors to review and
evaluate the terms of the Merger and to report to the Board of Directors of
the Company regarding the fairness of the Merger to the holders of
Nonaffiliated Stock. Mr. Lewis is not an employee of the Company, Liberty
or TCI, is not a director of Liberty or TCI and does not have any
commercial relationship with any of the members of the Buying Group. The
Special Independent Committee concluded that the terms and provisions of
the Merger Agreement and the Merger are fair to and in the best interest of
the Company and the holders of Nonaffiliated Stock, and recommended that
the Board approve the Merger Agreement and the transactions contemplated
thereby. At a meeting held on March 15, 1998, acting on the recommendation
of the Special Independent Committee, and after the unanimous approval of
Messrs. Lewis, Washington and Wilkins, the directors who are not (i) officers
or employees of the Company, (ii) officers, directors or employees of TCI or
Liberty or (iii) affiliates of Mr. Johnson, Liberty or TCI (although Mr.
Wilkins is a director and stockholder of two TCI-affiliated companies), the
Board concluded that the terms and provisions of the Merger Agreement and the
Merger are fair to and in the best interest of the Company and the holders of
Nonaffiliated Stock, approved the Merger Agreement, and recommended that the
stockholders approve and adopt the Merger Agreement. The Special Independent
Committee
and the Board, in reaching their respective decisions, considered a
number of factors, including the opinion of Goldman, Sachs & Co. ("Goldman
Sachs"), an investment banking firm engaged by the Special Independent
Committee as its exclusive financial advisor, that, as of the date of such
opinion and based upon and subject to various considerations and
assumptions stated therein, the Merger Consideration is fair from a
financial point of view to the holders of Common Stock other than Mr.
Johnson, Liberty and Liberty's affiliates. A copy of Goldman Sachs'
opinion is attached hereto as Exhibit B. See "SPECIAL FACTORS --
Recommendation of the Special Independent Committee and Board of Directors;
Fairness of the Merger" and "-- Opinion of Financial Advisor to the Special
Independent Committee."
BASED ON THE RECOMMENDATION OF ITS SPECIAL INDEPENDENT COMMITTEE, THE
BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
RECORD DATE; VOTING AT THE MEETING; QUORUM
Acting under authority granted to it by the Board of Directors, the
Special Independent Committee has fixed the close of business on [ ,
1998] as the record date for the Special Meeting (the "Record
Date"). Only stockholders of record as of the close of business on [ ,
1998] will be entitled to notice of and to vote at the Special
Meeting.
As of the close of business on April 28, 1998, the Company had
outstanding 10,070,321 shares of Class A Stock, held of record by 624
registered holders, 1,831,600 shares of Class B Common Stock, par value
$.02 per share (the "Class B Stock"), and 4,820,000 shares of Class C
Common Stock, par value $.02 per share (the "Class C Stock" together with
the Class A Stock and Class B Stock the "Common Stock"). Mr. Johnson
beneficially owns 2,186,103 shares of the Company's Class A Stock
(representing approximately 21.2% of the outstanding shares of Class A
Stock) and 4,820,000 shares of the Class C Stock, representing 100% of the
outstanding shares of Class C Stock. Liberty beneficially owns 1,831,600
shares of the Company's Class A Stock (representing approximately 18.2% of
the outstanding shares of Class A Stock) and 1,831,600 shares of the
Company's Class B Stock representing 100% of the outstanding shares of the
Class B Stock. As of April 28, 1998, Mr. Johnson and Liberty collectively
held 39.4% of the outstanding Class A Stock. However, Mr. Johnson owns
100% of the outstanding Class C Stock and Liberty owns 100% of the
outstanding Class B Stock. Mr. Johnson's shares of Class C Stock and
Liberty's shares of Class B Stock are convertible into Class A Stock on a
one-for-one basis. If such Class B Stock and Class C Stock were converted
into Class A Stock, Mr. Johnson and Liberty would beneficially own
approximately 62.8% of the Company's outstanding shares of Class A Stock.
Except as to the election of members of the Board of Directors and as
otherwise required by Delaware law, shares of Class A Stock, Class B Stock
and Class C Stock vote together as a single class, with holders of the
Class A Stock entitled to one vote per share and holders of the Class B
Stock and Class C Stock entitled to ten votes per share. By virtue of Mr.
Johnson's current ownership of Class A Stock and Class C Stock and
Liberty's current ownership of Class A Stock and Class B Stock, Mr. Johnson
and Liberty are entitled to approximately 65.6% and 26.3%, respectively, of
the vote of all classes of the Company's Common Stock and combined, Mr.
Johnson and Liberty hold approximately 92% of the voting power of all
classes of the Company's Common Stock. The presence in person or by proxy
of the holders of at least a majority of the combined voting power of the
outstanding Class A Stock, Class B Stock and Class C Stock entitled to vote
at the Special Meeting constitutes a quorum. Broker non-votes and shares
as to which a stockholder abstains will be included in determining whether
there is a quorum at the Special Meeting. Because Mr. Johnson and Liberty
together own at least a majority of the combined voting power of the
outstanding Class A Stock, Class B Stock and Class C Stock, their presence
at the Special Meeting will be sufficient to create a quorum.
REQUIRED VOTE
Under Delaware law, the Merger Agreement must be approved and adopted
by the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock of the Company. Because Mr. Johnson and Liberty
together own a majority of the outstanding shares of Common Stock, their
agreement to vote in favor of the Merger Agreement means that the Delaware
law vote requirement will be satisfied. However, the Buying Group and the
Company have agreed in the Merger Agreement that it is also a condition to
consummation of the Merger that the Merger Agreement be approved and
adopted by the holders of a majority of the voting power of the shares of
Common Stock not owned by Mr. Johnson, Liberty or any of their respective
affiliates (the "Independent Vote Requirement"). The affirmative vote of
approximately 3,154,810 shares of Common Stock not owned by Mr. Johnson,
Liberty or any of their respective affiliates will be necessary to satisfy
the Independent Vote Requirement. The Merger is also subject to other
conditions. See "THE MERGER AGREEMENT -- Conditions."
Failure to return an executed proxy card or to vote in person at the
Special Meeting or voting to abstain will constitute, in effect, a vote
against approval and adoption of the Merger Agreement for purposes of
Delaware law and the Independent Vote Requirement.
ACTION TO BE TAKEN UNDER THE PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in
person should any stockholder giving the proxy so desire. Stockholders
have an unconditional right to revoke their proxy at any time prior to the
exercise thereof, either by filing with the Company's Secretary at the
Company's principal executive offices a written revocation or a duly
executed proxy bearing a later date or by voting in person at the Special
Meeting. Attendance at the Special Meeting without casting a ballot will
not, by itself, constitute revocation of a proxy. Any written notice
revoking a proxy should be sent to BET Holdings, Inc., One BET Plaza, 1900
W Street, N.E., Washington, D.C. 20018-1211, Attention: Byron F.
Marchant, Secretary.
All shares of Class A Stock represented at the Special Meeting by
properly executed proxies received prior to or at the Special Meeting,
unless previously revoked, will be voted at the Special Meeting in
accordance with the instructions on the proxies. Unless contrary
instructions are indicated, proxies will be voted FOR the approval and
adoption of the Merger Agreement. As explained below in the section
entitled "DISSENTERS RIGHTS OF APPRAISAL," a vote in favor of the Merger
Agreement means that the stockholder owning those shares will not have the
right to dissent and seek appraisal of the fair market value of the shares.
The Company does not know of any matters, other than as described in the
Notice of Special Meeting of Stockholders, which are to come before the
Special Meeting. If any other matters are properly presented at the
Special Meeting for action, the persons named in the enclosed form of proxy
and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment.
PROXY SOLICITATION
The cost of preparing, assembling and mailing this Proxy Statement,
the Notice of Special Meeting of Stockholders and the enclosed proxy will
be borne by the Company. The Company is requesting that banks, brokers and
other custodians, nominees and fiduciaries forward copies of the proxy
material to their principals and request authority for the execution of
proxies. The Company may reimburse such persons for their expenses in so
doing. In addition to the solicitation of proxies by mail, the directors,
officers and employees of the Company and its subsidiaries may, without
receiving any additional compensation, solicit proxies by telephone,
telefax, telegram or in person.
Morrow & Co., Inc. (the "Proxy Solicitor"), a professional soliciting
organization, will assist in the solicitation of proxies by the Company.
The Proxy Solicitor's fee for solicitation of the proxies is $6,500 plus
disbursements incurred by the Proxy Solicitor on the Company's behalf (for
which the Company has paid an advance of $6,000). The Proxy Solicitor's
charge to solicit holders of record and non-objecting beneficial owners is
$5 per holder.
No person is authorized to give any information or make any
representation not contained in this Proxy Statement, and if given or made,
such information or representation should not be relied upon as having been
authorized.
COMPANY STOCKHOLDERS SHOULD NOT SEND ANY CERTIFICATES REPRESENTING
SHARES OF COMMON STOCK WITH THEIR PROXY CARD. IF THE MERGER IS
CONSUMMATED, THE PROCEDURE FOR THE EXCHANGE OF CERTIFICATES REPRESENTING
SHARES OF CLASS A STOCK WILL BE AS SET FORTH IN THIS PROXY STATEMENT. SEE
"THE MERGER AGREEMENT -- THE EXCHANGE FUND; PAYMENT FOR SHARES OF CLASS A
STOCK" AND " -- TRANSFERS OF CLASS A STOCK."
THE PARTIES
THE COMPANY
The Company was incorporated in Delaware in July 1991 in connection
with the initial public offering of its Class A Stock. As a result of a
series of related transactions completed in September 1991, Black
Entertainment Television, Inc. ("BET"), a District of Columbia corporation
formed in 1979, became a wholly owned subsidiary of the Company. In
November 1991, the Company completed its initial public stock offering and
became the first black majority-controlled company listed on the New York
Stock Exchange (the "NYSE"). Substantially all of the Company's operations
are conducted by BET through its operation of the Black Entertainment
Television Cable Network ("BET Cable Network"), an advertiser-supported
basic cable network. The Company has its principal executive offices at
One BET Plaza, 1900 W Place, N.E., Washington, D.C. 20018-1211. The
telephone number of the Company is (202) 608-2000.
BET Cable Network commenced operations in 1980 by providing two hours
of programming per week targeted to the interests and concerns of African-
American viewers to affiliated cable system operators serving approximately
3.8 million cable subscribers. In 1984, BET Cable Network began offering
cable television programming 24 hours per day. As of July 31, 1997, BET
Cable Network reached over 50.5 million households, as estimated by Nielsen
Media Research, providing a broad mix of music videos, off-network
situation comedies and original programming.
For additional information concerning the Company, see "DOCUMENTS
INCORPORATED BY REFERENCE" and "AVAILABLE INFORMATION."
BTV ACQUISITION
BTV Acquisition was incorporated in Delaware in 1998 by Mr. Johnson
and Liberty in connection with the proposed Merger. BTV Acquisition has
not been engaged in any business activities other than those in connection
with the Merger. The principal office and business address of BTV
Acquisition is c/o Liberty Media Corporation, 8101 East Prentice Avenue,
Englewood, CO 80111. The telephone number of BTV Acquisition is (303)
721-5400.
ROBERT L. JOHNSON
Mr. Johnson founded BET, the Company's primary operating subsidiary,
in 1979. Mr. Johnson has served as President, Chief Executive Officer and a
director of BET since its creation. Since 1991, Mr. Johnson has served as
the Chairman of the Company's Board of Directors. Since 1991, Mr. Johnson
has also served as Chief Executive Officer of the Company and served as its
President from 1991 until March 1996. Mr. Johnson is also the Chairman of
District Cablevision, Inc. ("DCI"), a Washington, D.C. cable operating
company which he founded in 1980, and served as a director of a predecessor
of Liberty from December 1991 until August 1994. Since January 1994, Mr.
Johnson has served as a director of Hilton Hotels Corporation and has
served as a director of US Airways Group, Inc. since January 1998. Mr.
Johnson's business address is One BET Plaza, 1900 W Place, N.E.,
Washington, D.C. 20018-1211 and the telephone number is (202) 608-2000.
LIBERTY MEDIA CORPORATION
Liberty is a Delaware corporation and a wholly owned subsidiary of
TCI. Liberty produces, acquires and distributes entertainment for an
international audience, educational and informational programming, as well
as home shopping via television and other interactive media and marketing
services. The principal office and business address of Liberty is 8101
East Prentice Avenue, Englewood, CO 80111. The telephone number of Liberty
is (303) 721-5400.
TELE-COMMUNICATIONS, INC.
TCI is a Delaware corporation primarily engaged in the operation of
cable television systems and the provision of cable television,
telecommunications and programming services. The principal office and
business address of TCI is 5619 DTC Parkway, Englewood, CO 80111. The
telephone number of TCI is (303) 267-5500.
SPECIAL FACTORS
PURPOSE AND BACKGROUND OF THE MERGER
At a meeting of the Board of Directors of the Company held on May 20,
1997, the Board discussed general options for increasing stockholder value.
At that meeting, the Board authorized the retention of a financial advisor
to consider possible value enhancement transactions. In late May 1997, Mr.
Johnson, in his individual capacity, discussed with the Company's senior
management the general concept of enhancement of stockholder value for the
Company, including the possibility of Mr. Johnson making a proposal to
acquire the Company. In late May and early June 1997, Mr. Johnson and
representatives of Liberty had general discussions concerning the
feasibility of taking the Company private in a leveraged buy-out or other
business combination transaction. No proposal regarding the acquisition of
the Company was made by Mr. Johnson or Liberty at that time.
On July 10, 1997, the Board of Directors approved the retention by the
Company of Salomon Brothers Inc ("Salomon") to render certain financial
advisory and investment banking services to the Company, including
identifying and/or evaluating various strategic or financial alternatives
that may be available to the Company to enhance stockholder value,
including a public or private sale or placement of additional equity or
debt securities of the Company. Salomon entered into an engagement letter
with the Company dated August 20, 1997.
On or about September 8, 1997 Mr. Johnson contacted representatives of
Liberty and proposed that the parties consider a potential acquisition of
the Company, in the event that the Salomon analysis, which was to be
presented to the Board at the Board's September 10 meeting, did not suggest
an alternative transaction acceptable to Mr. Johnson and Liberty. On
September 10, 1997, Salomon made a presentation to the Board regarding
several possible alternative transactions, but the Board took no action to
pursue any of such alternatives at that time. Following this Board
meeting, Mr. Johnson, Dr. Malone and Mr. Bennett met to consider a
potential acquisition of the Company by Mr. Johnson and Liberty. At this
meeting, Liberty and Mr. Johnson determined to proceed with a potential
acquisition and they proceeded to deliver a letter to the Company proposing
that a corporation to be formed by the Buying Group acquire, by merger or
other business combination, all of the outstanding Class A Stock of the
Company not owned by the Buying Group, at a purchase price of $48 per share
in cash (the "$48 Offer"). The letter stated that consummation of the
proposed transaction would be subject to, among other things, the
negotiation and execution of a definitive merger and other related
agreements and the receipt of financing on terms and conditions acceptable
to the Buying Group. In addition, the letter stated that the Buying Group
and its advisors were prepared to meet with the Board of Directors of the
Company or any special independent committee formed by it to consider the
$48 Offer. On September 10, 1997, Salomon informed the Company that it was
resigning as financial advisor under the August 20, 1997 engagement letter
and would thereafter be acting as financial advisor to the Buying Group.
On September 11, 1997, the Company issued a press release regarding the $48
Offer. Mr. Johnson and Liberty entered into a letter agreement dated as of
September 11, 1997 setting forth the general terms and conditions under
which Mr. Johnson and Liberty would act together in respect of the
proposed transaction. See "-Buying Group Letter Agreements."
On September 11, 1997, three class action complaints were filed in the
Court of Chancery in the state of Delaware (the "Court") challenging the
$48 Offer: (1) Behrens v. Johnson, C.A. No. 15921-NC (the "Behrens
Complaint"), (2) Harbor Finance Partners v. Barton, C.A. No. 15923-NC and
(3) Friedman v. Johnson, C.A. No. 15924-NC. On September 12, 1997 a fourth
class action complaint, Tiger Options, L.L.C. v. Johnson, C.A. No. 5936,
and on September 13, 1997 a fifth class action complaint, Ramos v. Johnson,
C.A. No. 15941, were filed with the Court. The Behrens Complaint was
served on the Company and its directors on September 15, 1997. The Behrens
Complaint alleged, among other things, that $48 per share was an unfair
price for the shares of the Nonaffiliated Stock. On October 14, 1997, the
Court executed an order consolidating these five complaints into one cause
of action under the caption In re BET Holdings, Inc. Shareholders
Litigation, C.A. No 15921 (the "Consolidated Action"). Between October
1997 and March 1998, the Court granted the defendants monthly extensions of
time to respond to the Behrens Complaint.
On September 15, 1997, the Board of Directors of the Company appointed
the Special Independent Committee to review and evaluate the $48 Offer.
Mr. Delano E. Lewis was viewed as highly qualified to act as a special
committee member because of his extensive experience as a business
executive and his understanding of business and financial matters. In
addition, Mr. Lewis was the only member of the Board who had neither
financial relationships with the Buying Group which might lead to questions
concerning his being "disinterested" or "independent" nor professional
obligations which would preclude his devoting sufficient time and attention
to the work of the Special Independent Committee. In considering Mr.
Lewis's appointment to the Special Independent Committee, the Board was
aware that Mr. Lewis had been nominated originally to serve on the Board by
Mr. Johnson pursuant to the Company Stockholders Agreement (as defined
below), but the Board did not view that fact as creating a potential
conflict of interest, particularly given Mr. Lewis's qualifications and the
absence of a financial relationship between Mr. Lewis and Mr. Johnson.
Accordingly, Mr. Lewis was appointed to serve as the Chairman and sole
member of the Special Independent Committee. As used in this document, the
term "Company Stockholders Agreement" refers to the Agreement Among
Stockholders dated November 6, 1991 among the Company, Mr. Johnson, an
affiliate of TCI, and TW/BET Holding Co. (which is no longer a shareholder
of the Company), which, among other provisions, permits Mr. Johnson to
nominate one director as long as he holds a specified number of shares of
Class C Stock.
Promptly following his appointment, Mr. Lewis retained the Washington,
D.C. law firm of Freedman, Levy, Kroll & Simonds to serve as counsel to the
Special Independent Committee. The Special Independent Committee retained
that law firm because of its expertise relating to corporation and
securities law matters and because the firm had not previously represented
either the Company or the Buying Group.
On September 19, 1997, the Buying Group transmitted a letter to the
Special Independent Committee clarifying certain issues regarding the $48
Offer and requesting that the Company provide it with certain financial and
business information, subject to the Buying Group agreeing to appropriate
confidentiality protections. In this letter, the members of the Buying
Group stated that they were not considering selling any of their shares in
the Company to a third party.
On September 29, 1997, the Special Independent Committee conducted its
organizational meeting at the offices of the Company. At that meeting, the
Special Independent Committee and its counsel met with Company officials
and the Company's counsel. The Company provided to the Special Independent
Committee copies of various submissions the Company had received from
investment banking firms expressing an interest in serving as the Special
Independent Committee's financial advisor. The Company also confirmed that
it would provide the Special Independent Committee with information and
access to Company personnel upon request by the Special Independent
Committee and its advisors. However, the Company and the Special
Independent Committee also noted that the Company's officers and counsel
could not and would not be privy to the details of the Special Independent
Committee's work, so as to maintain the integrity of the Special
Independent Committee's process. Counsel for the Special Independent
Committee also suggested that Mr. Lewis be compensated by the Company on a
reasonable and fair basis for serving as Chairman and sole member of the
Special Independent Committee, to which the Company agreed.
The Company and the Buying Group entered into a Nondisclosure
Agreement dated as of October 2, 1997 which provided that the Company would
make available to the Buying Group and its representatives certain non-
public financial and other business information concerning the Company and
that the Buying Group would treat non-public information about the Company
received by it confidentially.
On October 2, 1997, the Special Independent Committee met with its
counsel to establish a process for the selection of a financial advisor to
the Special Independent Committee. Mr. Lewis, in consultation with counsel
for the Special Independent Committee, selected three investment banking
firms, including Goldman Sachs, as the candidates to serve as the Special
Independent Committee's financial advisor. The basis for this selection
was the quality of written materials submitted, the prominence and
reputation of the firms, the firms' experience in advising special
committees, the firms' background and experience in the media, cable and
telecommunications industries and the potential for conflicts of interest.
Mr. Lewis then contacted representatives of those firms and, with the
assistance of counsel, conducted interviews with the three firms on October
7 and 8, 1997.
On October 7, 1997 a class action complaint and motion for a
preliminary injunction was filed under the caption Baskerville v. Johnson,
Civil No. 97ca007778 (the "Baskerville Complaint"), in the Superior Court
for the District of Columbia (the "D.C. Court"). Like the Behrens
Complaint, the Baskerville Complaint challenged a proposed buyout of
holders of the Nonaffiliated Stock. Between November 1997 and February
1998, the D.C. Court granted defendants monthly extensions of time to
respond to the complaint and motion for preliminary injunction. On
February 6, 1998, the D.C. Court held an initial conference and orally
granted (i) an extension of time to respond to the Baskerville Complaint
until April 30, 1998 and (ii) plaintiff's motion to withdraw her motion for
a preliminary injunction.
On October 10, 1997, the Special Independent Committee and its counsel
met to review the presentations made by the three investment banking firms
that were interviewed. Mr. Lewis selected Goldman Sachs as the Special
Independent Committee's financial advisor, subject to reaching agreement on
Goldman Sachs' proposed fee structure. In addition to the factors
discussed above, the Special Independent Committee's selection of Goldman
Sachs was based on the Special Independent Committee's high comfort with
the representatives of Goldman Sachs who would be assigned to the matter,
the sensitivity of such persons to the need to obtain for holders of the
Nonaffiliated Stock both a fair price and arm's length procedural
safeguards and Goldman Sachs' proposed compensation structure. On October
14, 1997, following further discussions with Goldman Sachs, the Special
Independent Committee retained Goldman Sachs as its financial advisor. On
October 15, 1997, the Company issued a press release announcing that the
Special Independent Committee had retained Goldman Sachs.
On October 22, 1997, the Special Independent Committee and its legal
and financial advisors met at the offices of the Company to formally
introduce the Goldman Sachs representatives to the senior management of the
Company and to develop a process for Goldman Sachs to review the Company's
business.
On October 29, 1997, the Special Independent Committee and its legal
and financial advisors met to review a contact Goldman Sachs had received
from Salomon requesting a meeting between Goldman Sachs and Salomon. The
Special Independent Committee authorized Goldman Sachs to participate in
such a meeting with Salomon, which meeting occurred on October 30, 1997.
On November 5, 1997, the Special Independent Committee and its legal
and financial advisors met to review Goldman Sachs' progress in their
review of the Company's business and prospects, as well as to discuss
Goldman Sachs' meeting on October 30, 1997 with Salomon. Goldman Sachs
reported to the Special Independent Committee that it had been advised that
if a fair price could be negotiated, the Buying Group preferred to proceed
with a long-form merger (i.e., a merger requiring submission to a vote by
the Company's stockholders) rather than a tender offer or other type of
acquisition transaction. Goldman Sachs also outlined, on a preliminary
basis, the methodologies to be employed in its fairness analysis. Goldman
Sachs also reviewed with the Special Independent Committee the Company's
efforts to expand its business into areas other than the core cable
network, and the Special Independent Committee considered the potential
risks and rewards associated with these new ventures. After discussion,
the Special Independent Committee authorized Goldman Sachs to continue its
discussions with Salomon, as well as to conduct further due diligence and
analysis of the Company's business and prospects. Additionally, the
Special Independent Committee decided to invite the large public
stockholders who had expressed a desire to communicate directly with the
Special Independent Committee to meet with the Special Independent
Committee and its advisors.
On November 24, 1997, the Special Independent Committee and its legal
and financial advisors met by telephone with representatives of the three
institutional investors holding the largest amounts of the Company's common
stock other than members of the Buying Group. Mr. Lewis explained to such
representatives that the Special Independent Committee wanted to hear what
they had to say, but could not respond or provide any information
concerning the work of the Special Independent Committee that was not
publicly available. Such representatives expressed their views that the
$48 Offer was not adequate, and expressed their views that a substantially
higher price would be appropriate.
Also on November 24, 1997, Goldman Sachs reported to the Special
Independent Committee on the progress of discussions with the Buying Group
and its advisors. Goldman Sachs informed the Special Independent Committee
that, at their meeting on November 20, 1997, Salomon had informed Goldman
Sachs that the Buying Group and its financial advisors believed that, as
between the Company's internal financial forecasts prepared in October 1997
(the "October 1997 Projections") and an earlier set of internal
projections, prepared by management in May 1997 (the "May 1997
Projections"), the May 1997 Projections were more appropriate for analyzing
the Company's business and prospects. The May 1997 Projections forecast
for the Company's core cable network in 2001 revenues of $241.2 million,
operating expenses of $81.5 million and earnings before income taxes,
depreciation and amortization ("EBITDA") of $167.1 million, reflecting a
projected EBITDA compounded annual growth rate ("CAGR") for the years 1998
through 2001 of 25%. The October 1997 Projections forecast 2001 core cable
network revenues, operating expenses and EBITDA of $283.2 million, $81.5
million and $209.0 million, respectively, reflecting a projected EBITDA
CAGR for the years 1998 through 2001 of 29%.
On December 12, 1997, the Special Independent Committee and its legal
and financial advisors met to review developments following the Committee's
meeting on November 24. Mr. Lewis reported that he had spoken with Mr.
Johnson on November 24 and Mr. Johnson had indicated, in substance, that
the Special Independent Committee had not been provided with projections
that, in Mr. Johnson's view, reflected a realistic forecast of the
Company's potential performance. Mr. Johnson stated to Mr. Lewis that he
would request senior management of the Company to review the October 1997
Projections and provide the Special Independent Committee with projections
which management believed were attainable. In addition, Mr. Johnson
indicated to Mr. Lewis that he did not participate in the preparation of
either the October 1997 Projections or the December 1997 Projections (as
defined below). Goldman Sachs met with representatives of the Company on
December 8, 1997 and discussed the variables and assumptions underlying the
Company's internal financial projections. A discussion was held concerning
the general optimism of the Company's projections and the variables upon
which such optimism was based.
Following the Special Independent Committee's December 12, 1997
meeting, Goldman Sachs received from the Company a revised set of internal
financial projections (the "December 1997 Projections"). Members of the
Company's management represented that they were utilizing the December 1997
Projections to run the Company and to make budgeting decisions. The
December 1997 Projections forecast 2001 core cable network revenues,
operating expenses and EBITDA of $254.2 million, $81.5 million and $180.0
million, respectively, reflecting a projected EBITDA CAGR for the years
1998 through 2001 of 23%. The Special Independent Committee concluded that
the December 1997 Projections, like the May 1997 Projections and the
October 1997 Projections, were more aggressive than the Company's
historical results. The Company's historical 1997 core cable network
revenues, operating expenses and EBITDA were $136.2 million, $72.4 million
and $68.9 million, respectively, reflecting an EBITDA CAGR for the years
1995 through 1997 of 21%. The December 1997 Projections forecast for the
1998 fiscal year ending July 31, 1998 core cable network revenues of
approximately $160.6 million and EBITDA of $96.4 million. Based on an
annualization of the Company's historical results of operations for the six
months ended January 31, 1998, the Company's core cable network revenues
and EBITDA for the year ending July 31, 1998 would be approximately $151.4
million and $84.0 million, respectively.
On January 12, 1998, the Special Independent Committee and its legal
and financial advisors met to review a presentation by Goldman Sachs
concerning the $48 Offer. At the January 12, 1998 presentation to the
Special Independent Committee, Goldman Sachs expressed its view to the
Special Independent Committee that the $48 Offer was not adequate. The
Special Independent Committee concluded that the $48 Offer was not adequate
and decided to so advise the Company and the Buying Group, and to issue a
press release announcing its views. The press release was issued on
January 23, 1998.
The Special Independent Committee authorized Goldman Sachs to continue
its discussions with Salomon. On February 9, 1998, representatives of
Salomon and Goldman Sachs met and discussed their respective analyses of
the Company. During the February 9, 1998 meeting, Goldman Sachs was
furnished with the December 1997 Projections as adjusted in certain
respects by the Buying Group and its financial advisor (the "Modified
December 1997 Projections"). The Modified December 1997 Projections
forecast for the Company's core cable network in 2001 revenues of $217.1
million, operating expenses of $76.9 million and EBITDA of $140.3 million,
reflecting a projected EBITDA CAGR for the years 1998 through 2001 of 16%.
Representatives of Salomon and Goldman Sachs met again by telephone on
February 27, 1998 to continue their discussions concerning their respective
analyses of the Company. At this meeting, representatives of Salomon, on
behalf of the Buying Group, indicated to Goldman Sachs that the Buying
Group was concerned that the further continuation of their effort to
acquire the Company was disrupting the day to day operation of the Company
and that it was desirable either to complete or to abandon the transaction.
Salomon stated, on behalf of the Buying Group, that the Buying Group was
considering increasing the offer price and that if it did so it would
expect the Special Independent Committee to consider whether or not such
increased offer price was acceptable, and if acceptable, to proceed to
negotiate a definitive merger agreement as promptly as possible. Based
upon its conversation with Salomon, Goldman Sachs reported to the Special
Independent Committee its view that the Buying Group would be willing to
increase its offer to $63.
On March 2, 1998, Mr. Johnson telephoned Mr. Lewis and confirmed that
the Buying Group was considering increasing its offer price. Mr. Johnson
told Mr. Lewis, however, that any such increase in the proposed offer price
would only be made in conjunction with the resolution of all issues
concerning a proposed merger. Mr. Johnson reaffirmed to the Special
Independent Committee that Mr. Johnson and Liberty were not considering
selling their shares to a third party.
Following Mr. Johnson's conversation with Mr. Lewis, the Special
Independent Committee requested Goldman Sachs to analyze a $63 price. On
March 5, 1998, the Special Independent Committee met and Goldman Sachs
presented to the Special Independent Committee an analysis of a $63 offer
price. Among other things, Goldman Sachs explained that an offer at $63
would fall within a range of reasonableness, based upon comparable
transactions. However, Goldman Sachs also advised the Special Independent
Committee that to conclude that such a price was "fair," one had to believe
that there was substantial risk that the Company's operating performance
would not be as successful as management had projected in the December 1997
Projections furnished to the Special Independent Committee and reviewed by
Goldman Sachs. After discussing the principal assumptions on which the
December 1997 Projections were based, and noting that the Company's
performance during the first five months of the current fiscal year was
below management's projections, the Special Independent Committee concluded
that there were indeed substantial risks and uncertainties associated with
the Company's internal financial projections of future earnings and growth.
The Special Independent Committee also noted that no other potential
bidders for the Company or the publicly held shares of the Company's Class
A Stock had contacted the Special Independent Committee since the Special
Independent Committee had been established, and that a price of $63 per
share would represent a premium of approximately 58% over the market price of
the shares prior to the initial public announcement of the $48 Offer and a
premium of approximately 31% over the $48 Offer. The Special Independent
Committee concluded that an offer from the Buying Group at $63 was in all
likelihood the best alternative for the holders of the Nonaffiliated Stock
that was likely to be reasonably available for the foreseeable future. In
addition, the Special Independent Committee determined that its support of
a $63 offer price would be conditioned upon the Buying Group agreeing to
certain structural protections for the holders of the Nonaffiliated Stock,
in particular that the consummation of the merger would be made contingent
on the approval of the holders of a majority of the Nonaffiliated Stock.
Such an approval requirement, which would effectively neutralize the voting
power of the Buying Group, would enable the holders of the Nonaffiliated
Stock to make an independent determination as to the fairness of an offer
price.
At the conclusion of its March 5, 1998 meeting, the Special
Independent Committee decided to ascertain whether a price above $63 per
share could be obtained from the Buying Group. During a meeting with Mr.
Johnson on March 6, 1998, Mr. Lewis requested that the Buying Group
increase its offer to $69 per share. Mr. Johnson responded that the Buying
Group would not agree to raise the price above $63 per share. Mr. Johnson
said that if the Special Independent Committee would not recommend an offer
of $63 per share, then the Company would remain a publicly held
corporation.
After further discussions between Mr. Johnson and Mr. Lewis, Mr.
Johnson confirmed that, subject to an indication by the Special Independent
Committee that the Special Independent Committee would recommend the
transaction and the resolution of various other issues relating to the
proposed merger, the Buying Group was prepared to increase its offer to $63
per share, that the Buying Group would not offer more than $63 per share,
and that a merger agreement would have to be completed promptly. Mr. Lewis
indicated to Mr. Johnson that the Special Independent Committee would, on a
preliminary basis, be willing to consider an offer of $63 per share,
subject to Goldman Sachs' ability to opine that such price was fair to the
holders of the Nonaffiliated Stock from a financial point of view, and to
the successful negotiation of the terms of a merger agreement, including
the requirement that the holders of the Nonaffiliated Stock separately
approve the merger.
On March 12, 1998, the Special Independent Committee and its legal and
financial advisors met to consider the terms of a draft of a proposed
merger agreement that had been prepared by counsel to the Buying Group and
negotiated with counsel to the Special Independent Committee and to
determine the Special Independent Committee's response to an offer price of
$63 per share. The Special Independent Committee tentatively determined
that a $63 price would be acceptable, subject to the Special Independent
Committee's receipt of an opinion of Goldman Sachs as to the fairness of
such price to the holders of the Nonaffiliated Stock and subject to the
Buying Group agreeing in the merger agreement to certain protections for
the benefit of the holders of the Nonaffiliated Stock. The protections
insisted on by the Special Independent Committee in the merger agreement
included a condition to the merger that the holders of a majority of the
Nonaffiliated Stock have approved the merger, a right for the Company to
terminate the merger agreement in the event that the Buying Group did not
deliver to the Company a firm commitment for the financing of the merger by
May 15, 1998, and certain other provisions relating to the ability of the
Board of Directors, acting on the recommendation of the Special Independent
Committee, to withdraw its recommendation of the merger. In addition, the
Special Independent Committee determined to require the Buying Group to
obtain a "highly confident" letter from a financial institution indicating
such institution's confidence in the financeability of the merger prior to
taking any action with respect to the proposed merger.
On the evening of March 13, 1998, Mr. Johnson, informed the Special
Independent Committee that he had requested management of the Company to
arrange for a meeting of the Board to take place on the evening of March
15, 1998. The Special Independent Committee and the Buying Group and their
respective financial and legal advisors continued to negotiate the terms of
a proposed merger agreement through the evening of March 15, 1998.
On March 15, 1998, the Special Independent Committee reviewed with its
counsel and Goldman Sachs the terms of a proposed merger agreement that had
been negotiated by counsel representing the Special Independent Committee,
the Company and the Buying Group. The Special Independent Committee
approved the $63 price and other terms and provisions of the proposed
agreement and found such price and terms and provisions to be fair to and
in the best interest of the Company and the holders of Nonaffiliated Stock,
and determined to recommend that the Board of Directors approve the
proposed merger agreement. At the Special Independent Committee meeting,
Goldman Sachs delivered its oral opinion that, as of such date, the $63 per
share to be received by the holders of Common Stock (other than Mr.
Johnson, Liberty and Liberty's affiliates) pursuant to the proposed merger
agreement is fair to such holders from a financial point of view.
A special meeting of the Board of Directors was held on March 15, 1998
to consider the proposed merger agreement. All directors were present (in
person or by telephone) at the meeting, other than Dr. Malone, who was
unavailable. The Special Independent Committee presented its report to the
Board regarding the negotiations with the Buying Group. Goldman Sachs then
presented its written and oral analysis of the proposed merger to the Board
of Directors and answered various questions from Board members. After its
presentation, Goldman Sachs rendered its oral opinion, subsequently
confirmed in writing, that as of such date the $63 per share to be received
by the holders of the Common Stock (other than Mr. Johnson, Liberty and
Liberty's affiliates) pursuant to the proposed merger agreement is fair to
such holders from a financial point of view. This opinion is attached
hereto as Exhibit B. See "SPECIAL FACTORS Opinion of Financial Advisor
to the Special Independent Committee."
After representatives of Goldman Sachs presented their analysis, they
excused themselves and the Board meeting continued. Legal counsel for the
Company reviewed the terms of the proposed merger agreement and reported to
the Special Independent Committee and the Board regarding the status and
proposed resolution of the Consolidated Action and the Baskerville
Complaint. Legal counsel for the Company also reiterated to the members of
the Board the details of their fiduciary duties to the Company and to the
holders of the Nonaffiliated Stock.
Mrs. Johnson and Messrs. Johnson and Bennett excused themselves from
the meeting and the Goldman Sachs representatives returned to the meeting.
After reviewing with representatives of Goldman Sachs the basis for its
opinion, and reviewing and approving the terms and conditions of the
proposed merger agreement, Messrs. Lewis, Washington and Wilkins, the
directors who are not (i) officers or employees of the Company, (ii)
officers, directors or employees of TCI or Liberty or (iii) affiliates of
Mr. Johnson, Liberty or TCI (although Mr. Wilkins is a director and
stockholder of two TCI-affiliated companies), unanimously concluded that the
terms and provisions of the Merger Agreement and the Merger are fair to and
in the best interest of the Company and the holders of the Nonaffiliated
Stock, approved the Merger Agreement, and recommended that the stockholders
approve and adopt the Merger Agreement. The other directors then returned
to the meeting and the full Board (except for Dr. Malone who was absent)
unanimously concluded that the terms and provisions of the Merger Agreement
and the Merger are fair to and in the best interest of the Company and the
holders of the Nonaffiliated Stock, approved the Merger Agreement, and
recommended that the stockholders approve and adopt the Merger Agreement.
On March 15, 1998 counsel for plaintiffs and defendants in the
Consolidated Action executed a Memorandum of Understanding (the "MOU")
which outlined an agreement-in-principle regarding the terms of a
settlement of the Consolidated Action. See "LITIGATION." On that same
day, Mr. Johnson and Liberty entered into a letter agreement relating to
the prospective management and ownership of the business of the Company
following consummation of the Merger. See "Buying Group Letter
Agreements."
On March 16, 1998, the Company and the Buying Group issued separate
press releases disclosing that they had signed a definitive merger
agreement pursuant to which the Buying Group would acquire all of the
Nonaffiliated Stock at a per share price of $63 in cash.
RECOMMENDATION OF THE SPECIAL INDEPENDENT COMMITTEE AND BOARD OF DIRECTORS;
FAIRNESS OF THE MERGER
On March 15, 1998, the Special Independent Committee determined that
the Merger and the terms and provisions of the Merger Agreement are fair to
and in the best interest of the Company and the holders of the
Nonaffiliated Stock, and recommended to the Board of Directors of the
Company that it approve the Merger Agreement.
At a special meeting held immediately following the Special
Independent Committee's determination, at which all directors of the
Company were present, except for Dr. Malone, the Board of Directors of the
Company considered the recommendation of the Special Independent Committee.
After Mrs. Johnson and Messrs. Johnson and Bennett excused themselves from
the meeting, Messrs. Lewis, Washington and Wilkins unanimously concluded
that the terms and provisions of the Merger Agreement and the Merger are
fair to and in the best interest of the Company and the holders of the
Nonaffiliated Stock, approved the Merger Agreement, and recommended that
the stockholders approve and adopt the Merger Agreement. Mrs. Johnson and
Messrs. Johnson and Bennett then returned to the meeting and all the
directors present unanimously concluded that the terms and provisions of
the Merger Agreement and the Merger are fair to and in the best interest of
the Company and the holders of the Nonaffiliated Stock, approved the Merger
Agreement, and recommended that the stockholders approve and adopt the
Merger Agreement.
Special Independent Committee. In reaching its determination to
approve and recommend that the Board of Directors approve the Merger
Agreement, the Special Independent Committee considered the following
factors, each of which, in the opinion of the Special Independent
Committee, supported such determination:
(1) Market Prices and Merger Price Premium. The Special
Independent Committee considered the historical market prices of
the Company's Class A Stock and the premium to be received by the
holders of the Nonaffiliated Stock pursuant to the Merger
Agreement. The average closing price of the Class A Stock on the
NYSE during the 30-day period preceding September 10, 1997, on
which date the $48 Offer was publicly announced, was
approximately $40 per share. The $63 price represents a premium
of approximately 58% over such $40 average closing price per
share. Furthermore, the $63 price represents a premium of
approximately 50% over the $41.88 per share closing price on
September 9, 1997, which was the 52-week high closing price for
the shares prior to the September 11, 1997 announcement of the
$48 Offer, and a premium of approximately 155% over the $24.75
per share closing price on December 18, 1996, which was the 52-
week low closing price prior to the September 11, 1997
announcement.
(2) Increase in Merger Price Over $48 Offer. The Special
Independent Committee also considered the fact that following the
negotiations between the Special Independent Committee and its
financial advisor and the Buying Group and its financial advisor,
the Buying Group increased the price it was willing to pay to the
holders of the Nonaffiliated Stock in connection with the
proposed Merger from $48 to $63, an increase of approximately
31%. The Special Independent Committee also considered its
belief that the Buying Group would not further increase the price
it was willing to pay for the publicly held shares and that the
$63 per share price was, in the belief of the Special Independent
Committee, the highest price which the Buying Group was willing
to pay.
(3) Goldman Sachs Opinion. The Special Independent
Committee also considered the opinion of Goldman Sachs that, as
of the date of such opinion, based upon and subject to various
considerations and assumptions stated therein, the $63 per share
to be received by the holders of Common Stock (other than Mr.
Johnson, Liberty and Liberty's affiliates) in connection with the
Merger is fair, from a financial point of view, to such
stockholders. A copy of such opinion is included as Exhibit B to
this Proxy Statement, and should be read in its entirety. The
Special Independent Committee also considered the report and
analysis presented by Goldman Sachs to the Special Independent
Committee in connection with the $48 Offer and the $63 offer
price. (See "SPECIAL FACTORS -- Opinion of Financial Advisor to
the Special Independent Committee.")
(4) Terms of the Merger Agreement. The Special Independent
Committee also considered the terms of the Merger Agreement,
including (a) the "neutralized voting" provision requiring that
the Merger Agreement be approved by the holders of a majority of
the voting power of shares not owned by Mr. Johnson, Liberty or
their respective affiliates (Section 7.01(a)); (b) the provision
making the Company's obligation to call the Special Meeting,
recommend adoption of the Merger Agreement and use best efforts
to obtain the approval of stockholders subject to the Board's
fiduciary duties (Section 6.03); (c) the provisions providing
that the terms of the Merger Agreement may not be amended or
waived without the approval of the Special Independent Committee
(Sections 8.03 and 8.04); (d) the absence of any termination fee
other than the payment of the Buying Group's reasonable costs and
expenses in the event the Merger Agreement is terminated because
of an uncured material breach by the Company, a withdrawal or
change in the Board's recommendation to stockholders favoring the
Merger, the Board's recommendation of an alternative transaction,
or the stockholders' failure to approve the Merger Agreement
(Section 8.05); (e) the provision permitting the Board of
Directors of the Company to engage in negotiations or provide
information to a third party in response to an unsolicited
written inquiry subject to receipt of certain advice from the
Board's financial advisor or legal advisor (Section 6.04); and
(f) the provision requiring that the Buying Group deliver to the
Company upon execution of the Merger Agreement a letter from the
proposed source of the Buying Group's financing that such source
is highly confident that such financing will be provided and,
furthermore, that the Buying Group would obtain by May 15, 1998 a
firm commitment from an appropriate financial source relating to
the Buying Group's financing (Section 4.12).
(5) Historical and Projected Financial Performance and
Related Risks and Uncertainties. The Special Independent
Committee considered the financial projections prepared by
management of the Company in the light of the Company's
historical results of operations. It was the Special Independent
Committee's judgment that the projections appeared aggressive in
view of historical performance of the Company. For example,
while the Company's consolidated EBITDA as a percent of revenues
(the "EBITDA Margin") approximated 40% during each of the fiscal
years ended July 31, 1995, 1996 and 1997, the Company's projected
Consolidated EBITDA Margin based on the December 1997 Projections
of the Company's management is substantially higher, reaching
levels in excess of 70% in the fiscal years ended July 31, 2001
and 2002. The CAGR of the Company's consolidated EBITDA during
the three-year period ended July 31, 1997 amounted to 19%, while
the projected CAGR of the Company's consolidated EBITDA during
the five-year period ended July 31, 2002, based on the December
1997 Projections, is 28%. In spite of such aggressive revenue
and growth projections, the projected CAGR of the Company's
expenses forecast by the December 1997 Projections during the
five-year period ended July 31, 2002 amounts to only 6%, compared
to the historical CAGR of the Company's expenses of 18% during
the three-year period ended July 31, 1997. The Special
Independent Committee was not able to identify support for the
significant disparity between the projected and historical
performance and, indeed, noted that annualization of the
Company's historical consolidated revenues and EBITDA for the six
months ended January 31, 1998, results in estimated 1998 revenue
of $171.8 million and EBITDA of $72.8 million, respectively,
which are substantially lower than the $180.9 million revenue and
$92.1 million EBITDA forecast for 1998 by the December 1997
Projections. Furthermore, the Company's internal financial
projections generally assumed continued growth of advertising
revenues for the core cable network, even though the network's
ratings were relatively flat during the period from 1991 through
1997. The Special Independent Committee therefore concluded that
there are substantial risks and uncertainties associated with the
Company's internal financial projections of future revenues,
earnings and growth. The Special Independent Committee also
determined that such risks and uncertainties relate not only to
the Company's core cable network operations, but also to the
Company's non-core operations, including BET on Jazz,
publications and SoundStage Restaurant businesses, which have
incurred operating losses to date, as well as the Company's
equity in consolidated affiliates in non-core, startup
enterprises.
(6) Review of Other Cable and Media Industry Transactions.
The Special Independent Committee also considered the financial
terms of certain recent business combinations in the cable
programming industry as well as selected minority buyout
transactions generally. While no public cable programming
company transaction was sufficiently similar to the proposed
Merger to be characterized by the Special Independent Committee
as "comparable," the proposed payment of $63 per share for the
publicly held shares of the Company generally is within the range
of terms of other cable programming transactions and, in some
respects, compares favorably when viewed in the light of certain
criteria. With respect to recent selected minority buyout
transactions generally, for example, the premium of almost 60%
represented by the excess of the $63 price over the market value
of the shares prior to the public announcement of the $48 Offer,
and the 31% premium represented by the excess of the $63 price
over the $48 price, are in the Special Independent Committee's
view significantly in excess of premiums in most reported offer
price changes. With respect to recent selected cable programming
transactions, the $63 price to be paid to holders of the
Nonaffiliated Stock in the Merger represents a multiple of 7.7
times the Company's revenues per share for the year ended July
31, 1997 and a multiple of 6.6 times projected fiscal 1998
revenues per share based on the December 1997 Projections, while
the average revenue multiples in other recent selected cable
programming transactions were less than 4 to 1.
(7) Small Public Float. The Special Independent Committee
also considered the fact that the public float for the Company's
outstanding Class A Stock, assuming the conversion by the Buying
Group of its shares of Class B Stock and Class C Stock of the
Company into Class A Stock, consists of only approximately 37% of
the outstanding shares of Class A Stock.
(8) Buying Group Control of the Company; Absence of
Alternative Transactions. The Special Independent Committee also
considered the fact that assuming the conversion by the Buying
Group of its shares of Class B Stock and Class C Stock into
shares of Class A Stock, the Buying Group beneficially owns
approximately 63% of the Company's Class A Stock. Furthermore,
because each share of Class B Stock and Class C Stock generally
is entitled to 10 votes per share while the Class A Stock is
entitled to one vote per share, the Buying Group holds equity
securities of the Company representing approximately 92% of the
voting power of the Company. The Special Independent Committee
therefore considered the fact that the Buying Group has
sufficient stock ownership and voting power to control a
disposition of the Company. The Special Independent Committee
and Goldman Sachs were not authorized to, and did not, solicit
third party indications of interest for the acquisition of the
Company. The Special Independent Committee also considered its
belief that during the period that transpired between the initial
public announcement of the $48 Offer and the Board of Directors'
approval of the Merger Agreement, which exceeded six months, no
third party indications of interest for the acquisition of the
Company were communicated to the Company, the Special Independent
Committee or Goldman Sachs.
(9) Possible Decline in Market Price of Shares. The
Special Independent Committee also considered the possibility
that if a merger transaction with the Buying Group were not
negotiated and the Company remained as a publicly owned
corporation, it is possible that because of potentially lower
than expected projected Company earnings or a decline in the
market price of the shares of the Company's Class A Stock or the
stock market in general, the price that might be received by the
holders of the Company's publicly held shares upon the sale
thereof in a future transaction might be less than the $63 per
share price to be received by them in connection with the
proposed Merger.
(10) Availability of Dissenters Rights. The Special
Independent Committee also considered the fact that dissenters
rights of appraisal will be available to the holders of the
Nonaffiliated Stock under Delaware law. (See "DISSENTERS RIGHTS
OF APPRAISAL.")
Board of Directors of the Company. In reaching its determinations
referred to above, the Board of Directors of the Company considered the
following factors, each of which, in the view of the Board of Directors,
supported such determinations: (i) the conclusions and recommendations of
the Special Independent Committee; (ii) the considerations referred to
above as having been taken into account by the Special Independent
Committee, including the receipt by the Special Independent Committee of
the opinion of Goldman Sachs addressed to the Special Independent Committee
that, as of the date of such opinion, based upon and subject to various
considerations and assumptions stated therein, the $63 per share to be
received by the holders of Common Stock (other than Mr. Johnson, Liberty
and Liberty's affiliates) in the Merger is fair to such holders from a
financial point of view, and the related analysis presented to the Board of
Directors of the Company; and (iii) the fact that the price per share to be
paid in the Merger and the terms and conditions of the Merger Agreement
were the result of arms-length negotiations between the Special Independent
Committee and the Buying Group and their respective advisors.
The members of the Board of Directors of the Company, including the
member of the Special Independent Committee, evaluated the Merger in the
light of their knowledge of the business, financial condition and prospects
of the Company, and based upon the advice of financial and legal advisors.
In the light of the number and variety of factors that the Special
Independent Committee and the Board of Directors of the Company considered
in connection with their evaluation of the Merger, neither the Special
Independent Committee nor the Board of Directors found it practicable to
assign relative weights to the foregoing factors, and, accordingly, neither
the Special Independent Committee nor the Board of Directors did so.
The Board of Directors of the Company believes that the Merger is
procedurally fair because, among other things: (i) the Special Independent
Committee consisted of an independent director appointed to represent the
interests of the stockholders other than the Buying Group; (ii) the Special
Independent Committee retained and was advised by independent legal
counsel; (iii) the Special Independent Committee retained Goldman Sachs as
its independent financial advisor to assist in evaluating the proposed
transaction and received advice from Goldman Sachs; (iv) the fact that the
$63 per share price and the other terms and conditions of the Merger
Agreement resulted from active arms-length bargaining between
representatives of the Special Independent Committee and representatives of
the Buying Group and their respective advisors; and (v) the inclusion in
the Merger Agreement of a neutralized voting provision requiring approval
of the Merger Agreement by the holders of a majority of the shares held by
other than the Buying Group.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE MERGER IS FAIR TO
AND IN THE BEST INTEREST OF THE COMPANY AND THE HOLDERS OF NONAFFILIATED
STOCK AND, UPON THE RECOMMENDATION OF THE SPECIAL INDEPENDENT COMMITTEE,
UNANIMOUSLY RECOMMENDS APPROVAL OF THE MERGER AGREEMENT TO ITS
STOCKHOLDERS.
THE BUYING GROUP'S PURPOSE AND REASON FOR THE MERGER
The Buying Group's purpose for engaging in the transactions
contemplated by the Merger Agreement is to acquire 100% ownership of the
Company in a transaction in which the holders of the Nonaffiliated Stock
would have their equity interest in the Company extinguished in exchange
for cash in the amount of $63 per share. Each of Mr. Johnson and Liberty
believes that such an acquisition is an attractive investment opportunity
at this time based upon, among other things, the past performance of the
Company and its future business prospects. The determination to proceed
with the acquisition at this time would also, in the view of the Buying
Group, afford the Company's stockholders an opportunity to dispose of their
shares at a premium over recent market prices. In addition, the Buying
Group noted that causing the Company to be closely held, and therefore no
longer required to file periodic reports with the Securities and Exchange
Commission (the "SEC"), would enable management to focus on the creation of
long term value, rather than being subject to the pressures associated with
the reporting of quarterly earnings, provide the Buying Group with
flexibility in dealing with the assets of the Company, and reduce costs
associated with the Company's obligations and reporting requirements under
the securities laws. The transactions contemplated by the Merger
Agreement, however, will involve a substantial risk to the Buying Group
because of the large amount of indebtedness to be incurred in connection
with the consummation of the Merger. See "SPECIAL FACTORS -- Financing of
the Merger."
The Buying Group did not pursue a liquidation of the Company or a sale
of the Company to a third party because Mr. Johnson wished to continue to
operate the business of the Company on an ongoing basis and Mr. Johnson and
Liberty wanted to acquire the entire equity interest in the Company and
neither of them desired to sell the shares that they owned to a third
party.
The acquisition of the entire equity interest in the Company was
structured as a cash merger in order to accomplish the acquisition in a
single step, without the necessity of financing separate purchases of
shares in a tender offer or in open market purchases while at the same time
not materially disrupting the Company's operations.
The Buying Group has concluded that the Merger, including the Merger
Consideration of $63 per share, and the terms and conditions of the Merger
Agreement are fair to the Company and the holders of the Nonaffiliated
Stock based upon the following factors: (i) the conclusions and
recommendations of the Special Independent Committee and the Company's
Board of Directors; (ii) the fact that a group of the Company's directors
composed of persons not affiliated with the members of the Buying Group had
unanimously approved the Merger and recommended that stockholders approve
the Merger Agreement; (iii) the fact that the Merger Consideration and the
other terms and conditions of the Merger Agreement were the result of
arm's-length good faith negotiations between the Special Independent
Committee and its advisors and the representatives of the Buying Group and
its advisors; (iv) the fact that Goldman Sachs issued a fairness opinion to
the Special Independent Committee to the effect that, as of the date of
such opinion, based upon and subject to various considerations and
assumptions stated therein, the $63 per share to be received in the Merger
is fair from a financial point of view to the holders of Common Stock other
than Mr. Johnson, Liberty and Liberty's affiliates; (v) the fact that prior
to the execution of the Merger Agreement there had been, and during the
substantial period of time which would elapse between the announcement of
the execution of the Merger Agreement and the consummation of the Merger
following the Special Meeting of Stockholders to be held to vote upon the
Merger there would be, more than sufficient time and opportunity for other
persons to propose alternative transactions to the Merger and that the
terms of the Merger Agreement authorize the Company to furnish information
to, participate in negotiations, and negotiate with third parties in
response to unsolicited requests by such parties concerning any merger,
sale of assets, sale of shares of capital stock or similar transaction
involving the Company or any subsidiary or division thereof if the Special
Independent Committee determines such action is required in light of the
Board's fiduciary obligations to the Company's stockholders; and (vi) the
other factors referred to above as having been taken into account by the
Special Independent Committee and the Company's Board of Directors, which
the members of the Buying Group adopt as their own (see "SPECIAL FACTORS --
Purpose and Background of the Merger" and "SPECIAL FACTORS -- Opinion of
Financial Advisor to the Special Independent Committee").
OPINION OF FINANCIAL ADVISOR TO THE SPECIAL INDEPENDENT COMMITTEE
Pursuant to a letter agreement dated as of October 14, 1997, as
amended by a supplementary letter agreement dated as of October 20, 1997
(the "Engagement Letter"), the Special Independent Committee, on behalf of
the Board of Directors of the Company, retained Goldman Sachs to act as the
Special Committee's financial advisor in connection with any proposals made
by Mr. Johnson and/or Liberty to acquire shares of the Company's Class A
Stock held by stockholders (excluding Mr. Johnson, Liberty and Liberty's
affiliates) and other matters arising in connection therewith. Goldman
Sachs is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate,
corporate and other purposes.
At the meeting of the Special Independent Committee on March 15, 1998,
Goldman Sachs rendered its oral opinion to the Special Independent
Committee that, as of such date, and based upon and subject to various
considerations and assumptions set forth therein, the consideration to be
paid to stockholders of the Company (excluding Mr. Johnson, Liberty and
Liberty's affiliates) pursuant to the Merger Agreement is fair, from a
financial point of view, to such stockholders. Such opinion was
subsequently confirmed in writing and is dated as of March 15, 1998. No
limitations were imposed by the Special Independent Committee upon Goldman
Sachs with respect to the investigations made or procedures followed by it
in rendering its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS DATED AS OF
MARCH 15, 1998, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS EXHIBIT B TO THIS PROXY
STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS OF THE
COMPANY ARE URGED TO READ THE OPINION IN ITS ENTIRETY. GOLDMAN SACHS'
WRITTEN OPINION IS ADDRESSED TO THE SPECIAL INDEPENDENT COMMITTEE OF THE
BOARD OF DIRECTORS OF THE COMPANY, IS DIRECTED ONLY TO THE CONSIDERATION TO
BE PAID PURSUANT TO THE MERGER AGREEMENT AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER OF THE COMPANY AS TO HOW SUCH STOCKHOLDER
SHOULD VOTE AT THE SPECIAL MEETING. THE SUMMARY OF THE OPINION OF GOLDMAN
SACHS SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Goldman Sachs reviewed, among other
things, the Merger Agreement; Annual Reports to Stockholders and Annual
Reports on Form 10-K of the Company for the three fiscal years ended July
31, 1997; certain interim reports to stockholders and Quarterly Reports on
Form 10-Q of the Company; certain other communications from the Company to
its stockholders; and certain internal financial analyses and forecasts for
the Company prepared by its management and by the Buying Group. Goldman
Sachs also held discussions with members of the senior management of the
Company regarding its past and current business operations, financial
condition and future prospects. In addition, Goldman Sachs reviewed the
reported price and trading activity for the Class A Stock, compared certain
financial and stock market information for the Company with similar
information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the cable programming industry specifically and other
industries generally and performed such other studies and analyses as it
considered appropriate.
Goldman Sachs relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was
publicly available or that was furnished to it by the Company or otherwise
reviewed by Goldman Sachs, and Goldman Sachs has not assumed any
responsibility or liability therefor. Goldman Sachs also was furnished
with the Modified December 1997 Projections prepared by the Buying Group
and its financial advisors based upon the December 1997 Projections, as
adjusted by the Buying Group and its advisors to modify certain of the
assumptions used by management in the December 1997 Projections. Neither
the Buying Group nor any of its advisors made any representation to Goldman
Sachs concerning such projections.
Goldman Sachs has not conducted any valuation or appraisal of any
assets or liabilities, nor have any valuations or appraisals been provided
to Goldman Sachs. Goldman Sachs was not requested to solicit, and did not
solicit, interest from other parties with respect to an acquisition of or
other business combination with the Company. Goldman Sachs has also assumed
that the Merger will have the tax consequences described in this Proxy
Statement, and in discussions with, and materials furnished to Goldman
Sachs by, representatives of the Company, and that the other transactions
contemplated by the Merger Agreement will be consummated as described in
the Merger Agreement and this Proxy Statement. Goldman Sachs relied, as to
certain legal matters relevant to rendering its opinion, upon the advice of
counsel to the Company.
Several projections were furnished to Goldman Sachs as described
below. Goldman Sachs considered, with the approval of the Special
Independent Committee, the Special Independent Committee's assessment of
the risks and uncertainties in achieving such projections. The Company
does not publicly disclose internal management projections of the type
provided to Goldman Sachs in connection with Goldman Sachs' analysis of the
Merger, such projections were not prepared with a view toward public
disclosure, and investors are cautioned not to rely on such projections.
These projections were based on numerous variables and assumptions that are
inherently uncertain and may be beyond the control of management. In
particular, the projections may be affected by pricing pressures and other
competitive factors, results of the Company's strategies to obtain
additional subscribership to the Company's cable programming services,
heightened competition (including the entry of new competitors and the
development of new products and services by competitors), the inability to
obtain and produce quality cable programming on a cost-effective basis or
to renew on favorable terms the BET cable affiliate agreements due to
expire on December 31, 2003, the risks inherent in the startup of multiple
new businesses beyond the Company's core cable network, unanticipated
changes in industry trends, the inability to carry out marketing and sales
plans, changes in interest rates, loss of key executives, adverse state and
federal legislation and regulation, and general economic and business
conditions that are less favorable than expected. Accordingly, actual
results could vary significantly from those set forth in such projections.
In addition, these projections were not prepared with a view to compliance
with the published guidelines of the SEC or the guidelines established by
the American Institute of Certified Public Accountants regarding
projections and forecasts or generally accepted accounting principles and
are included in this Proxy Statement only because such projections were
included in the information submitted to and received by the Special
Independent Committee and Goldman Sachs. None of the Company, the Buying
Group, Goldman Sachs or any other party to whom these projections were
provided makes any representation that the results indicated by such
projections will occur. The prospective financial information included in
this Proxy Statement has been prepared by, and is the responsibility of,
the Company's management. Price Waterhouse LLP does not express an opinion
or any other form of assurance with respect thereto. The Price Waterhouse
LLP report incorporated by reference in this Proxy Statement relates to the
Company's historical financial information. It does not extend to the
prospective financial information and should not be read to do so.
Goldman Sachs' opinion is based on economic, market and other
conditions as in effect on, and the information made available to Goldman
Sachs as of, the date of its opinion. Subsequent developments may affect
the written opinion of Goldman Sachs, and Goldman Sachs does not have any
obligation to update, revise, or reaffirm such opinion.
Certain Projections Prepared by Management and the Buying Group
Goldman Sachs was furnished with projections for the Company's core
cable network as follows: (i) the May 1997 Projections, (ii) the October
1997 Projections, (iii) the December 1997 Projections and (iv) the Modified
December 1997 Projections. A review of the May 1997 Projections, October
1997 Projections and Modified December 1997 Projections showed revenues for
2001 ranged approximately from a low of $217.1 million to a high of $283.2
million, as compared to December 1997 Projections of $254.2 million; 2001
EBITDA ranged approximately from a low of $140.3 million to a high of
$209.0 million, as compared to December 1997 Projections of $180.0 million;
revenue compound annual growth rates from 1998 to 2001 ranged approximately
from a low of 12% to a high of 21%, as compared to December 1997
Projections of 17%; and EBITDA compound annual growth rates ranged
approximately from a low of 16% to a high of 29%, as compared to December
1997 Projections of 23%.
Summary of Analyses
In accordance with customary investment banking practice, Goldman
Sachs employed generally accepted valuation methods in reaching its
opinion. The following is a brief summary of the material financial
analyses utilized by Goldman Sachs in connection with providing its
opinion.
Stock Price Performance. Goldman Sachs reviewed the historical stock
prices and trading volume history for the Company's Class A Stock. This
review showed that prices ranged from $15.88 to $54.69 during the three-
year period from March 10, 1995 to March 6, 1998 and from $30.25 to $53.75
during the one-year period from March 13, 1997 to March 12, 1998. This
review also showed that the Company's Class A Stock was up approximately
78% for the one year ended March 13, 1998, as compared to 35% for the S&P
400 index and 51% for the three years ended March 13, 1998, as compared to
28% for the S&P index. Goldman Sachs also compared the relative indexed
stock price performance of the Company's Class A Stock with an index of
certain large capitalization companies (which includes The Walt Disney
Company, EMI Group Plc (UK), The News Corporation Limited, Polygram N.V.,
The Seagram Company, Ltd., Time Warner Inc. and Viacom Inc. (the "Large
Selected Companies")) and an index of certain medium capitalization
companies (which includes Gaylord Entertainment Company, International
Family Entertainment, Inc., King World Productions, Inc., and Spelling
Entertainment Group, Inc. (the "Medium Selected Companies")) for the three-
year period from March 10, 1995 to March 6, 1998 and the one-year period
from March 13, 1997 to March 12, 1998.
Purchase Price Analysis. Based upon a per share price of $63, fully
diluted shares of Class A Stock and net debt of $50.8 million, Goldman
Sachs analyzed the levered consideration for the Company as a multiple of
(i) sales, (ii) EBITDA both on a consolidated basis and on a core cable
network basis, and (iii) earnings before interest and taxes ("EBIT") both
on a consolidated basis and on a core cable network basis, for fiscal 1997
and the latest twelve months ended October 31, 1997 ("LTM"). Goldman
Sachs' analyses showed multiples of levered consideration to fiscal 1997
sales of 7.7x, LTM sales of 7.4x, fiscal 1997 consolidated EBITDA of 19.0x,
LTM consolidated EBITDA of 17.9x, fiscal 1997 core cable network EBITDA of
17.2x, LTM core cable network EBITDA of 16.2x, fiscal 1997 consolidated
EBIT of 22.1x, LTM consolidated EBIT of 20.8x, fiscal 1997 core cable
network EBIT of 18.6x and LTM core cable network EBIT of 17.5x. In
addition, Goldman Sachs analyzed the discount rates of the Company's core
cable network implied by (i) a per share price of $63, (ii) fully diluted
shares of Class A Stock, (iii) a valuation of non-core business units of
$70 million, (iv) a terminal value in 2002 based on multiples ranging from
nine times EBITDA to 11 times EBITDA and (v) (a) the December 1997
Projections, (b) December 1997 Projections assuming a constant EBITDA
margin of 58% (the "Adjusted December 1997 Projections") and (c) the
Modified December 1997 Projections. This analysis showed that implied
discount rates ranged from a low of 21.4% to a high of 26.8% for the
December 1997 Projections, from a low of 14.6% to a high of 19.7% for the
Adjusted December 1997 Projections and from a low of 12.8% to a high of
17.9% for the Modified December 1997 Projections. Goldman Sachs also
analyzed the discount rates implied by (i) a per share price of $63, (ii)
fully diluted shares of Class A Stock, (iii) a valuation of non-core
business units of $70 million, (iv) a terminal value in 2002 based on
multiples ranging from nine times EBITDA to 11 times EBITDA and (v) EBITDA
growth rates from 12% to 24%, which ranged from a low of 5.6% to a high of
25.9%. For example, under the above analyses, an exit multiple of ten
times EBITDA and an implied discount rate of 13.1% corresponds to an EBITDA
growth rate of 16%.
Review of Selected Publicly Traded Companies. Using publicly
available information, Goldman Sachs compared selected financial data of
the Company's businesses with similar data for selected publicly traded
entertainment companies. The companies selected by Goldman Sachs with a
large capitalization were the Large Selected Companies. The companies
selected by Goldman Sachs with a medium capitalization were the Medium
Selected Companies. For each company, publicly available financial
performance through LTM was measured. The multiples of the Company were
calculated using a price of $53.75 per share, the closing price of such
shares on March 12, 1998, and the multiples of the Large Selected Companies
and the Medium Selected Companies were calculated using the closing prices
for such companies on March 12, 1998. Goldman Sachs considered adjusted
market capitalization (i.e. levered market capitalization less estimated
non-EBITDA assets) as a multiple of LTM sales and as a multiple of LTM
EBITDA. Goldman Sachs' analyses of the Large Selected Companies indicated
multiples of adjusted market capitalization to LTM sales with a range from
a low of 1.2x to a high of 3.9x (and a mean of 2.2x and a median of 2.0x)
and to LTM EBITDA with a range from a low of 9.6x to a high of 17.2x (and a
mean of 13.6x and a median of 13.9x), as compared to the Company's
multiples of adjusted market capitalization to LTM sales of 6.3x and LTM
EBITDA of 15.4x. Goldman Sachs' analyses of the Medium Selected Companies
indicated multiples of adjusted market capitalization to LTM sales with a
range from a low of 0.7x to a high of 6.3x (and a mean of 2.6x and a median
of 1.7x) and to LTM EBITDA with a range from a low of 2.5x to a high of
15.4x (and a mean of 8.5x and a median of 7.7x). Goldman Sachs also
considered the price to earnings ("P/E") ratios for LTM and 1998 and 1999
(based on IBES calendarized estimates, except for EMI Group, available as
of March 12, 1998) for the Large Selected Companies and the Medium Selected
Companies. The P/E ratios for the Large Selected Companies ranged from a
low of 18.8x to a high of 49.4x for LTM P/E ratios (with a mean of 29.3x
and a median of 22.6x), a low of 18.2x to a high of 42.5x for calendar 1998
P/E ratios (with a mean of 26.8x and a median of 21.0x) and a low of 15.5x
to a high of 34.9x for calendar 1999 P/E ratios (with a mean of 22.6x and a
median of 18.4x), as compared to a LTM P/E ratio of 33.2x, a calendar 1998
P/E ratio of 25.8x and a calendar 1999 P/E ratio of 21.9x for the Company.
The P/E ratios for the Medium Selected Companies ranged from a low of 7.3x
to a high of 33.3x for LTM P/E ratios (with a mean of 24.6x and a median of
33.2x), a low of 7.2x to a high of 25.8x for calendar 1998 P/E ratios (with
a mean of 19.6x and a median of 25.8x) and a low of 6.4x to a high of 23.8x
for calendar 1999 P/E ratios (with a mean of 17.4x and a median of 21.9x).
Five-year EPS growth rates (based on the above referenced IBES estimates)
for the Large Selected Companies ranged from a low of 10.0% to a high of
18.0% (with a mean of 14.2% and a median of 14.4%), as compared to 20.0%
for the Company. Five-year EPS growth rates for the Medium Selected
Companies ranged from a low of 8.0% to a high of 20.0% (with a mean of
14.0% and a median of 14.0%).
Analysis of Selected Merger Transactions. Using publicly available
information, Goldman Sachs examined selected transactions involving mature
networks (the "Mature Networks"), development networks (the "Development
Networks") and Home Shopping networks (the "Home Shopping Networks") in the
basic cable programming industry since January 1990. Such analysis
indicated that for the selected transactions for which transaction pricing
and performance data was available, implied value for the Mature Networks
as a multiple of (i) LTM EBITDA ranged from a low of 14.2x to a high of
24.9x (with a mean of 19.2x and a median of 19.3x), as compared to 17.9x
for the Company based upon a per share price of $63 and including net debt
of the Company, (ii) forward year-end ("FYE") EBITDA (multiple of projected
year-ahead cash flow) ranged from a low of 10.3x to a high of 22.9x (with a
mean of 14.7x and a median of 15.1x), and (iii) revenue (multiple of
projected revenues) ranged from a low of 1.5x to a high of 5.9x (with a
mean of 3.4x and a median of 3.3x) and value per subscriber ranged from a
low of $4.07 to a high of $38.64 (with a mean of $17.50 and a median of
$14.60), as compared to a Company value per subscriber of $23.14 based upon
a per share price of $63 and including net debt of the Company. Implied
value for the Development Networks as a multiple of (i) LTM EBITDA was
12.2x, (ii) FYE EBITDA ranged from a low of 5.7x to a high of 24.0x (with a
mean of 12.2x and a median of 6.9x) and (iii) revenue ranged from a low of
1.5x to a high of 7.9x (with a mean of 4.1x and a median of 4.1x) and value
per subscriber ranged from a low of $0.96 to a high of $40.00 (with a mean
of $9.64 and a median of $5.30). Implied value for the Home Shopping
Networks as a multiple of (i) LTM EBITDA was 11.3x, (ii) FYE EBITDA ranged
from a low of 7.6x to a high of 9.6x (with a mean of 8.6x and a median of
8.6x) and (iii) revenue ranged from a low of 1.0x to a high of 1.7x (with a
mean of 1.4x and a median of 1.4x) and value per subscriber ranged from a
low of $24.69 to a high of $35.86 (with a mean of $30.27 and a median of
$30.27).
Discounted Cash F1ow Analysis. Goldman Sachs performed a discounted
cash flow analysis of the Company's core cable network valued as of July
31, 1998 utilizing the December 1997 Projections for the years ended July
31, 1998 to July 31, 2002. Goldman Sachs calculated a net present value of
free cash flows for the years ended July 31, 1998 to July 31, 2002 using
discount rates ranging from 11% to 14%. Goldman Sachs calculated the
Company's terminal value in the year 2002 based on multiples ranging from
nine times EBITDA to 11 times EBITDA. Utilizing this analysis, the implied
value per share of the Company's core cable network ranged approximately
from a low of $72.00 to a high of $95.00. In addition, Goldman Sachs
utilized the above analysis using discount rates of 11% to 14% for current
margin and 20% to 24% for premium margin assumed in the December 1997
Projections, which resulted in an implied value per share of the Company's
core cable network which ranged approximately from a low of $65.00 to a
high of $87.00. Goldman Sachs also analyzed the sensitivity of the implied
value per share of the Company's core cable network to (i) the Adjusted
December 1997 Projections and (ii) projections with a range of EBITDA
margins (held constant) and with a constant discount rate of 12.5% (the
"Adjusted EBITDA Margin Projections"). This analysis resulted in an
implied value per share of the Company's core cable network which ranged
approximately from a low of $58.00 to a high of $76.00 for the Adjusted
December 1997 Projections and from a low of $47.00 to a high of $77.00 for
the Adjusted EBITDA Margin Projections. The above analysis does not give
effect to the Company's other businesses.
Recapitalization Analysis. Based upon a per share price of $63 to
holders of the Class A Stock (excluding the Buying Group), and (i) the
December 1997 Projections (the "Management Case"), (ii) the Adjusted
December 1997 Projections (the "Adjusted Management Case") and (iii) the
projections provided by the Buying Group for the core cable network, BET on
Jazz and restaurants and the December 1997 Projections for the remaining
units of the Company (the "Adjusted Buying Group Case"), Goldman Sachs
analyzed equity returns through 2001 to the Buying Group using a terminal
value in the year 2001 based on multiples ranging from nine times EBITDA to
11 times EBITDA. This analysis assumes the recapitalization is financed
with debt. This analysis showed equity returns to the Buying Group which
ranged from a low of 24.7% to a high of 31.7% for the Management Case and a
low of 17.7% to a high of 24.8% for the Adjusted Management Case and a low
of 10.1% to a high of 17.3% for the Adjusted Buying Group Case.
Minority Buyout Analysis. Goldman Sachs reviewed the percentage
increase from the initial offer to the final offer with respect to certain
minority interest buyout transactions, including BIC Corporation, which
increased 11%, Rhone-Poulenc Rorer Inc., which increased 5%, La Petite
Academy, Inc., which increased 5% and Ocean Drilling & Exploration, which
increased 10% (with a mean of 8%), as compared to a 31% increase for the
Company.
The summary set forth above does not purport to be a complete
description of the analyses or data presented by Goldman Sachs. The
preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description.
Goldman Sachs believes that the summary set forth above and its analyses
must be considered as a whole and that selecting portions thereof, without
considering all of its analyses, could create an incomplete view of the
processes underlying its analyses and opinion. Goldman Sachs based its
analyses on assumptions that it deemed reasonable, including assumptions
concerning general business and economic conditions and industry-specific
factors. The other principal assumptions upon which Goldman Sachs based
its analyses are set forth above under the description of each such
analysis. Goldman Sachs' analyses are not necessarily indicative of actual
values or actual future results that might be achieved, which values may be
higher or lower than those indicated. No company or transaction used in
the above analyses as a comparison is identical to the Company or the
Merger. Moreover, Goldman Sachs' analyses are not and do not purport to be
appraisals or otherwise reflective of the prices at which the shares of
Class A Stock could actually be bought or sold.
CERTAIN EFFECTS OF THE MERGER
If the Merger is consummated, the holders of the Company's Class A
Stock will no longer have any interest in, and will not be stockholders of,
the Company and, therefore, will not benefit from any future earnings or
growth of the Company or benefit from any increases in the value of the
Company and will no longer bear the risk of any decreases in value of the
Company. Instead, each such stockholder will have the right to receive
upon consummation of the Merger $63 in cash for each share of Class A Stock
held (other than Class A Stock (i) held in the treasury of the Company or
by any of its wholly owned subsidiaries or (ii) held by BTV Acquisition,
Mr. Johnson or Liberty, or any of their respective subsidiaries, and (iii)
held by Dissenting Stockholders).
The Class A Stock is currently registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). As a result of the
Merger, the Class A Stock will be delisted from the NYSE, the registration
of the Class A Stock under the Exchange Act will be terminated, the Company
will be relieved of the obligation to comply with the proxy rules of
Regulation 14A under Section 14 of the Exchange Act, and its officers,
directors and beneficial owners of more than 10% of the Class A Stock will
be relieved of the reporting requirements and restrictions on insider
trading under Section 16 of the Exchange Act. Further, the Company will no
longer be subject to the periodic reporting requirements of the Exchange
Act and will cease filing information with the SEC. Accordingly, less
information will be required to be made publicly available than presently
is the case.
The directors of BTV Acquisition immediately prior to the Effective
Time (as defined below) of the Merger will be the directors of the
Surviving Corporation immediately after the Merger. The Buying Group is
presently considering inviting Messrs. Lewis, Malone, Washington and
Wilkins and Mrs. Johnson to join the Board of Directors of the Surviving
Corporation following the Merger; however, no determination has been made
in such regard. The officers of the Company immediately prior to the
Effective Time of the Merger will be the officers of the Surviving
Corporation immediately after the Merger. The certificate of incorporation
and bylaws of BTV Acquisition immediately prior to the Effective Time will
be the certificate of incorporation and Bylaws of the Company immediately
after the Merger.
PLANS FOR THE COMPANY AFTER THE MERGER
Mr. Johnson and Liberty expect that the business and operations of the
Surviving Corporation will be continued by them substantially as they are
currently being conducted by the Company and its subsidiaries. Mr.
Johnson and Liberty do not currently intend to dispose of any assets of the
Surviving Corporation, other than in the ordinary course of business. It
is anticipated, however, that Mr. Johnson and Liberty will from time to
time evaluate and review their businesses, operations and properties and
make such changes as are deemed appropriate.
Except as described in this Proxy Statement, none of Mr. Johnson,
Liberty or the Company has any present plans or proposals involving the
Company or its subsidiaries which relate to or would result in an
extraordinary corporate transaction such as a merger, reorganization, or
liquidation, or a sale or transfer of a material amount of assets, or any
material change in the present dividend policy, indebtedness or
capitalization, or any other material change in the Company's corporate
structure or business. However, Mr. Johnson and Liberty will review
proposals or may propose the acquisition or disposition of assets or other
changes in the Surviving Corporation's business, corporate structure,
capitalization, management or dividend policy which they consider to be in
the best interest of the Surviving Corporation and its stockholders.
CONDUCT OF THE BUSINESS OF THE COMPANY IF THE MERGER IS NOT CONSUMMATED
If the Merger is not consummated, the Board of Directors expects that
the Company's current management will continue to operate the Company's
business substantially as presently operated. No other alternatives are
presently being considered.
BUYING GROUP LETTER AGREEMENTS
Mr. Johnson and Liberty have entered into a letter agreement dated
September 11, 1997 (the "September Buying Group Letter") setting forth the
general terms and conditions under which Mr. Johnson and Liberty agreed to
act together in respect of the potential acquisition of the Company.
Subject to certain terms and conditions set forth therein, the September
Buying Group Letter provides that, among other things, (a) all material
decisions with respect to the proposed acquisition of the Company would be
made jointly by them; (b) they would contribute all of the equity
securities of the Company owned by them to a newly formed acquisition
entity contemporaneously with and contingent upon the consummation of the
proposed merger; (c) each party would enter into margin or other loan
agreements on reasonably acceptable terms to obtain any funds required to
be advanced to such newly formed acquisition entity prior to consummation
of the acquisition of the Company; (d) the parties' equity interests in the
newly formed acquisition entity would be based on their respective
contributions to it; (e) the parties would negotiate as soon as practicable
the terms of a stockholders agreement relating to the governance of the
acquisition entity and the Company following consummation of the
acquisition; (f) their obligations under the September Buying Group Letter
would be conditioned upon the obtaining of appropriate financing on terms
and conditions reasonably acceptable to them; (g) they would vote all their
shares of Common Stock in favor of the proposed acquisition and would vote
against and not solicit any alternative transaction as specified therein;
(h) they would not otherwise sell or dispose of any capital stock of the
Company owned by them, and would not enter into any agreement, arrangement
or understanding with any other person with respect to the purchase, sale
or voting of shares of Common Stock of the Company; (i) all costs and
expenses incurred by them would be paid or reimbursed by the newly formed
acquisition entity following consummation of the proposed acquisition; (j)
Mr. Johnson and Liberty would allocate between them based on relative fault
any obligations incurred by the acquisition entity as a result of any
breach of the provisions of any definitive acquisition agreement regarding
the proposed acquisition; (k) any amounts payable by Mr. Johnson and
Liberty to Salomon prior to consummation of the proposed acquisition would
be paid by them in proportion to their respective equity interests in the
acquisition entity, any amounts payable to Salomon upon consummation of the
proposed acquisition would be paid or reimbursed by the Surviving
Corporation, and any indemnification obligations owed to Salomon and
certain other parties by Mr. Johnson and Liberty would be allocated between
them based on their relative fault; and (l) in the event the September
Buying Group Letter is terminated and either Mr. Johnson or Liberty
independently seeks or proposes to acquire all or a significant portion of
the Company's equity securities or assets, it will indemnify the other
party for certain liabilities such party may incur because of that
independent action. The September Buying Group Letter provides that it may
be terminated by the mutual agreement of the parties or by either party if
the proposed acquisition has not occurred on or before June 30, 1998.
On March 15, 1998, Mr. Johnson and Liberty entered into a letter
agreement (the "March Buying Group Letter") setting forth the terms to be
provided in a stockholders agreement to be entered into by Mr. Johnson (or
a business entity controlled by him) and Liberty relating to the
prospective management and ownership of the business of the Company
following consummation of the Merger. The covenants and agreements set
forth in the March Buying Group Letter are intended to be superseded by
definitive stockholder agreements, but if such definitive agreements are
not executed prior to consummation of the Merger, the March Buying Group
Letter will be deemed to constitute the definitive stockholder agreement.
Among other provisions, the March Buying Group Letter specifies terms
in the stockholders agreement for the election of directors, fundamental
actions that the Surviving Corporation may not take without Liberty's
consent in the event that Mr. Johnson ceases to act as Chairman of the
Board and Chief Executive Officer of the Surviving Corporation on a full-
time basis, restrictions on transfers of the Surviving Corporation's equity
securities, and rights of first refusal and certain other exit rights for
the Surviving Corporation's stockholders. The March Buying Group Letter
also specifies the mutual goal of the parties, so long as Mr. Johnson
serves as the Chairman of the Board and Chief Executive Officer of the
Surviving Corporation on a full time basis, to provide for aggregate annual
compensation to Mr. Johnson of $6 million per year and to Liberty of $2
million per year, adjusted upward annually at the greater of five percent
or the increase in the consumer price or similar index, and subject to
annual review and reasonable bonus consideration and award, in respect of
services to be provided by such persons to the Surviving Corporation.
The parties have also agreed in the March Buying Group Letter that Mr.
Johnson will receive a loan from BTV Acquisition or the Company, or both as
appropriate, up to $35 million to be used for matters previously discussed
between the parties. The loan will be fully binding on the Surviving
Corporation after the consummation of the Merger and will be for a term of
between five and ten years and will bear interest at a rate equal to the
applicable rate at which BTV Acquisition has borrowed the funds to finance
the Merger. Mr. Johnson will also have the option to pay interest
currently or to allow interest to accrue and be paid at maturity, and he
may, from time to time, sell shares of equity securities of the Surviving
Corporation to an employee stock option plan of the Surviving Corporation,
if applicable, and use the proceeds to pay interest. The March Buying
Group Letter also permits Mr. Johnson to take certain actions to transfer
to the Surviving Corporation certain PCS licenses owned by R&S PCS, Inc.,
an entity controlled by Mr. Johnson. See "CERTAIN RELATIONSHIPS AND
TRANSACTIONS -- Agreements with Related Parties."
INTERESTS OF CERTAIN PERSONS IN THE MERGER; CERTAIN RELATIONSHIPS
In considering the recommendation of the Special Independent Committee
and the Board of Directors with respect to the Merger, stockholders should
be aware that certain members of the Board and of the Company's management
have interests that may present them with actual, potential or the
appearance of potential conflicts of interest in connection with the
Merger. The Special Independent Committee and the Board of Directors were
aware of these potential or actual conflicts of interest and considered
them along with other matters described under "SPECIAL
FACTORS Recommendation of the Special Independent Committee and the Board
of Directors; Fairness of the Merger."
At the Effective Time of the Merger, each share of common stock of BTV
Acquisition outstanding immediately prior to the Effective Time of the
Merger will be converted into and become one share of common stock of the
Surviving Corporation and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation. BTV Acquisition was formed by
Mr. Johnson, the Company's Chairman of the Board, Chief Executive Officer
and largest stockholder and by Liberty, the Company's next largest
stockholder. Mr. Johnson and Liberty own approximately 65% and 35%,
respectively, of the equity of BTV Acquisition and, as a result of the
Merger, Mr. Johnson will own [ ] shares, or [ %] of the
common stock of the Surviving Corporation, and Liberty will own [ ]
shares, or [ %], of the common stock of the Surviving Corporation
on a fully diluted basis. Sheila Crump Johnson, a director of the Company,
is the spouse of Robert Johnson. Robert R. Bennett is a director of the
Company and is also the President and Chief Executive Officer of Liberty
and an Executive Vice President of TCI. In addition, pursuant to the
Company Stockholders Agreement, Mr. Bennett serves as TCI's representative
to the Board of Directors of the Company. Dr. Malone is a director of the
Company and serves as Chairman of the Board and Chief Executive Officer of
TCI, as well as a director of Liberty. In addition, FW Strategic Partners,
L.P., an investment partnership in which Mr. Johnson is a limited partner,
beneficially owns 842,105 shares of the Company's Class A Stock.
Among other provisions, the March Buying Group Letter established for
the Surviving Corporation annual compensation goals of $6 million for Mr.
Johnson and $2 million for Liberty, subject to adjustment, for so long as
Mr. Johnson is serving as the Chairman of the Board and the Chief Executive
Officer of the Surviving Corporation on a full-time basis, and provided for
a loan of up to $35 million to Mr. Johnson from BTV Acquisition or the
Company, or both as appropriate. See " -- Buying Group Letter Agreements."
The Merger Agreement provides that the current directors of BTV
Acquisition shall be the directors of the Surviving Corporation. Mr.
Johnson and Mr. Bennett currently serve as the only two directors of BTV.
Other than Mr. Johnson and Mr. Bennett, none of the current directors of
the Company will be the initial directors of the Surviving Corporation.
The Buying Group is presently considering inviting Messrs. Lewis, Malone,
Washington and Wilkins and Mrs. Johnson to join the Board of Directors of
the Surviving Corporation following the Merger; however, no determination
has been made in such regard. The Merger Agreement also provides that the
current officers of the Company shall be the officers of the Surviving
Corporation.
The Company's executive officers and directors (other than Mr.
Johnson) currently own an aggregate of 13,410 shares of Class A Stock,
representing less than 1% of the total outstanding shares of Class A Stock.
In addition, the Company's executive officers and directors (other than Mr.
Johnson) own options to purchase an aggregate of 1,457,995 shares of Class
A Stock at strike prices ranging from $12.80 to $17.75, each of which is
subject to cancellation in the Merger in exchange for an amount of cash
equal to the difference between $63 and the applicable share strike price.
The Buying Group has offered certain executive officers of the Company the
option to continue to have an equity interest in the Surviving Corporation
following the Effective Time by allowing all or a portion of his or her
Options to be converted into an equity interest in the Surviving
Corporation. Any such arrangement shall be pursuant to a separate
agreement between BTV Acquisition and such executive, which agreement may
provide for such executive to receive options to purchase common stock of
the Surviving Corporation or other equity interests or equity-based
interests, such as stock appreciation rights. To the extent that an
executive agrees to such an arrangement rather than cashing out his or her
Options, the amount required to be borrowed to consummate the Merger would
be decreased. Discussions concerning such arrangements are preliminary and
it is not yet known whether any executives will accept such offer and, if
accepted, how many outstanding Options will not be required to be cashed
out at the Effective Time.
If all the outstanding Options are cashed out at the Effective Time,
it is anticipated that the following directors or executive officers will
receive the following cash payments for their options: Debra L. Lee,
President and Chief Operating Officer, $11,142,750; James A. Ebron,
Executive Vice President, Corporate Media Sales, $9,184,300; William T.
Gordon III, Executive Vice President, Chief Financial Officer and
Treasurer, $10,381,298; Sheila Crump Johnson, a director and Executive Vice
President, Corporate Affairs, $6,778,687; Jefferi K. Lee, Executive Vice
President, Network Operations and Programming, $10,145,250; Curtis N.
Symonds, Executive Vice President, Affiliate Sales and Marketing,
$8,682,242; Janis P. Thomas, Executive Vice President, Brand Marketing and
Licensing, $11,142,750; Louis Carr, Senior Vice President, National Media
Sales, $814,500; and Maurita Coley, Senior Vice President, Network
Operations and Programming, $1,357,500. See "SECURITIES OWNERSHIP
Beneficial Ownership of Class A Stock by Certain Parties Related to the
Company or the Buying Group."
The Merger Agreement provides that the Surviving Corporation will,
from and after the Effective Time, indemnify the present and former
officers and directors of the Company to the same extent and upon the terms
and conditions provided in the Company's certificate of incorporation and
bylaws, and to the full extent permitted under the Delaware General
Corporation Law (the "DGCL") against certain losses and expenses in
connection with claims based on the fact that such person was an officer or
director of the Company. The Merger Agreement also provides that the
Surviving Corporation will maintain its existing policies of officers' and
directors' liability insurance for a period of six years after the
Effective Time, subject to certain limitations. See "THE MERGER AGREEMENT
- - - -- Indemnification and Insurance."
ACCOUNTING TREATMENT
The cost of repurchasing the Company's outstanding Class A Stock will
be accounted for as a treasury stock transaction, since the Merger will not
constitute a change of control within the context of generally accepted
accounting principles. This means that the historical cost basis of the
Company's assets and liabilities will be carried forward to the Surviving
Corporation rather than using a new basis of accounting to account for the
assets and liabilities of the Surviving Corporation. Consequently, the
aggregate cost of repurchasing the Company's outstanding Class A Common
will be accounted for as a charge to stockholders' equity.
The cost of repurchasing and cancelling outstanding Options will be
accounted for as compensation expense. This means that the excess of the
aggregate Merger Consideration over the aggregate exercise price of
outstanding Options will be accounted for as a charge to operations.
FINANCING OF THE MERGER
The total amount of funds required by BTV Acquisition to pay the
aggregate Merger Consideration due to stockholders and option holders of
the Company at the closing of the Merger, assuming the Options of all
executive officers of the Company are cashed out in the Merger and there
are no Dissenting Stockholders, is expected to be approximately $471.5
million. In addition, BTV Acquisition will require approximately $42
million to pay all other expenses and costs relating to the transactions,
to refinance or finance certain indebtedness of the Company, BET, BTV
Acquisition and certain principals of BTV Acquisition, and for other
general corporate purposes.
BTV Acquisition delivered to the Company a letter dated March 13, 1997
from The Bank of New York Company, Inc. and BNY Capital Markets, Inc.
(collectively, the "Lenders") to the effect that the Lenders are highly
confident that they, directly or through any of their affiliates, can
successfully arrange and fully syndicate a $600 million senior secured
credit facility (the "Facility") for the purpose of financing the Merger,
paying all fees, expenses and costs in connection with the Merger,
refinancing the existing revolving credit facility of BET and for general
corporate purposes. The Lenders' expression of confidence is subject to
certain customary qualifications and conditions set forth in the letter,
including, among others, that (i) the Facility be on terms and conditions
satisfactory to them, including, without limitation, pricing and fees and
covenants, including maximum leverage and coverage ratios, that in the
Lenders' view, are appropriate for a credit facility of this size, type and
purpose, and (ii) the Lenders be satisfied with the results of their due
diligence with respect to the Merger, the Facility, BTV Acquisition, the
Company and BET and with the documentation for the Facility and the Merger.
It is anticipated that any borrowings under the Facility would be repaid
from internally generated cash flow from operations of the Surviving
Corporation.
The highly confident letter does not constitute a commitment to make
available the Facility, nor does such a commitment now exist. BTV
Acquisition and the Lenders are currently in discussions over the potential
terms and conditions of such a commitment letter, but there can be no
assurance that a final agreement will be reached between them, that the
Facility will be made available, or that BTV Acquisition will be able to
obtain a suitable alternative financing source if the Facility is not made
available. The Company may, at its option, terminate the Merger Agreement
at any time prior to the Effective Time if BTV Acquisition is unable to
obtain a commitment for the financing of the transactions contemplated by
the Merger Agreement by May 15, 1998.
REGULATORY REQUIREMENTS
The Company does not believe that any material federal or state
regulatory approvals, filings or notices are required by the Company in
connection with the Merger other than (i) such approvals, filings or
notices required pursuant to federal and state securities laws, (ii) such
filings required pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act") and (iii) the filing of the
certificate of merger with the Secretary of State of the State of Delaware.
Under the HSR Act and the rules that have been promulgated thereunder
by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain 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. The consummation of the Merger was conditioned upon
the expiration or termination of all applicable HSR waiting periods.
Pursuant to the HSR Act, on April 17, 1998 and April 27, 1998,
respectively, TCI and Mr. Johnson, as the "ultimate parent entity" of the
Company under the HSR Act, filed Premerger Notification and Report Forms
with the Antitrust Division and the FTC in connection with the acquisition
by BTV Acquisition of the Company's Class A Stock pursuant to the Merger
and the Merger Agreement. Under the applicable provisions of the HSR Act,
the Merger may not be consummated until the expiration of a 30-calender day
waiting period following such filings. Such waiting period is scheduled to
expire at 11:59 p.m. New York city time on May 27, 1998 (unless terminated
earlier or a request for additional information is received).
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of certain material United States federal
income tax considerations relevant to beneficial owners whose shares of
Class A Stock are converted to cash in the Merger. This summary is based
upon laws, regulations, rulings and decisions currently in effect, all of
which are subject to change possibly with retroactive effect, and is not
applicable to Mr. Johnson or Liberty (and certain parties related to Mr.
Johnson or Liberty, if any). The summary applies only to beneficial owners
who hold shares of Class A Stock as capital assets within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"),
and may not apply to shares of Class A Stock received pursuant to the
exercise of employee stock options or otherwise as compensation, or to
certain types of beneficial owners of Class A Stock (such as insurance
companies, tax-exempt organizations and broker-dealers) who may be subject
to special rules. This summary does not address the U.S. federal income
tax consequences to a beneficial owner of Class A Stock who, for United
States federal income tax purposes, is a non-resident alien individual, a
foreign corporation, a foreign partnership, or a foreign estate or trust,
nor does it consider the effect of any foreign, state or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL OWNER OF
SHARES OF CLASS A STOCK SHOULD CONSULT SUCH BENEFICIAL OWNER'S OWN TAX
ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH
BENEFICIAL OWNER AND THE PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL OWNER OF
THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER
TAX LAWS.
The receipt of cash for shares of Class A Stock pursuant to the Merger
will be a taxable transaction for U.S. federal income tax purposes. In
general, for U.S. federal income tax purposes, a beneficial owner of shares
of Class A Stock will recognize capital gain or loss equal to the
difference between the beneficial owner's adjusted tax basis in the shares
of Class A Stock converted to cash in the merger and the amount of cash
received. A beneficial owner's adjusted basis in the shares of Class A
Stock generally will equal the beneficial owner's purchase price for such
shares of Class A Stock. Gain or loss must be determined separately for
each block of Class A Stock (i.e., shares of Class A Stock acquired at the
same cost in a single transaction) converted to cash in the Merger.
Under the Taxpayer Relief Act of 1997, net capital gain (i.e.,
generally, capital gain in excess of capital loss) recognized by
individuals, estates and trusts from the sale of property held more than 18
months will generally be taxed at a rate not to exceed 20% for U.S. federal
income tax purposes. Net capital gain from property held for more than 12
months but not more than 18 months is taxed at a rate not to exceed 28%,
and net capital gain from property held for 12 months or less will continue
to be subject to tax at ordinary income tax rates. In addition, capital
gains recognized by a corporate taxpayer will be subject to tax at the
ordinary income tax rates applicable to corporations. In general, capital
losses are deductible only against capital gains and are not available to
offset ordinary income. However, individual taxpayers are allowed to
offset a limited amount of capital losses against ordinary income.
Payments in connection with the Merger may be subject to "backup
withholding" at a rate of 31%, unless a beneficial owner of Class A Stock
(i) is a corporation or comes within certain exempt categories, or (ii)
provides a certified taxpayer identification number on Form W-9 and
otherwise complies with the backup withholding rules. Backup withholding
is not an additional tax; any amounts so withheld may be credited against
the U.S. federal income tax liability of the beneficial holder subject to
the withholding.
FEES AND EXPENSES
Whether or not the Merger is consummated and except as otherwise
provided herein, all fees and expenses incurred in connection with the
Merger will be paid by the party incurring such fees and expenses, except
that the Company will pay for all costs and expenses relating to the
printing and mailing of this Proxy Statement. The Company will pay BTV
Acquisition its reasonable expenses incurred in connection with the Merger
if the Merger Agreement is terminated by BTV Acquisition because (i) the
Board or any committee thereof withdraws, modifies or changes its
recommendation so that it is not in favor of the Merger Agreement or the
Merger; (ii) the Board decides to recommend an alternative transaction;
(iii) the required stockholder approval has not been obtained by September
15, 1998; or (iv) there is a material breach by the Company.
Estimated fees and expenses to be incurred by the Company or BTV
Acquisition in connection with the Merger are as follows:
Financing Fees(1) $[ ]
Financial Advisors Fees 6,000,000
SEC Filing Fees 94,310
Legal Fees and Expenses [ ]
Accounting Fees 50,000
Printing and Mailing Expenses [ ]
Exchange Agent Fees [ ]
Special Independent Committee Fee [ ]
Solicitation Fees 12,500
-------------------
Total $[ ]
===================
(1) See "SPECIAL FACTORS -- Financing of the Merger."
For services rendered in connection with its engagement the Company
has agreed to pay Goldman Sachs (i) a fee of $150,000 which was paid on
October 14, 1997, (ii) a fee of $750,000 which was paid upon completion of
Goldman Sachs' initial report and presentation to the Special Independent
Committee and (iii) a fee contingent upon the acquisition by Mr. Johnson
and/or Liberty or a third party of the Company's Common Stock held by
stockholders (excluding Mr. Johnson and/or Liberty) equal to the product of
(a) 2% of the amount by which the price paid for the Company's Common Stock
held by such stockholders, as determined pursuant to the Engagement Letter
(the "Transaction Price") is in excess of $48 per share but less than or
equal to $52.00 per share, plus 3% of the amount by which the Transaction
Price is in excess of $52.00 per share but less than or equal to $60.00 per
share, plus 2% of the amount by which the Transaction Price is in excess of
$60.00 per share; and (b) the number of shares of Common Stock acquired by
Mr. Johnson and/or Liberty or such third party, including, without
limitation, shares issuable pursuant to options, warrants and convertible
securities held by persons other than Mr. Johnson and/or Liberty as of
October 14, 1997 (not including up to a maximum of 850,000 shares issued by
the Company as a result of the exercise of employee stock options to the
extent such options were outstanding as of October 20, 1997), subject to
adjustment. In addition, the Company has agreed to reimburse Goldman Sachs
for its expenses incurred in connection with its services, including the
fees and disbursements of counsel, and will indemnify Goldman Sachs against
certain liabilities, including liabilities arising under the Federal
securities laws.
Goldman Sachs and its affiliates may maintain banking and other
business relationships with Mr. Johnson and/or Liberty and the Company, for
which it will receive customary compensation. Goldman Sachs acted as co-
managing underwriter on a public offering of 7-1/8% Notes due 2028 of TCI,
on February 19, 1998, for which it received compensation of $369,225.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger
Agreement, a copy of which is attached as Exhibit A to this Proxy
Statement. Such summary is qualified in its entirety by reference to the
full text of the Merger Agreement.
THE MERGER; MERGER CONSIDERATION
The Merger Agreement provides that the Merger will become effective at
such time as a certificate of merger is duly filed with the Secretary of
State of the State of Delaware or at such later time as is agreed to by the
parties and as is specified in the certificate of merger (the "Effective
Time"). If the Merger is approved by the holders of a majority of the
Nonaffiliated Stock at the Special Meeting and the other conditions to the
Merger are satisfied, it is currently anticipated that the Merger will
become effective as soon as practicable after the Special Meeting (subject
to compliance with or waiver of the other conditions of the Merger
Agreement); however, there can be no assurance as to the timing of the
consummation of the Merger or that the Merger will be consummated.
At the Effective Time, BTV Acquisition will be merged with and into
the Company, the separate corporate existence of BTV Acquisition will
cease, and the Company will continue as the Surviving Corporation. In the
Merger, each share of Nonaffiliated Stock (other than Class A Stock (i)
held in the treasury of the Company or by any of its wholly owned
subsidiaries or (ii) held by Dissenting Stockholders) will, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted solely into the right to receive $63 per share in cash, without
interest (the "Merger Consideration"). Each certificate representing
shares of Nonaffiliated Stock that has been converted under the terms of
the Merger Agreement will, after the Effective Time, evidence only the
right to receive, upon the surrender of such certificate, an amount of cash
per share equal to the Merger Consideration.
Each share of Common Stock (i) held in the treasury of the Company or
by any wholly owned subsidiary of the Company or (ii) owned by BTV
Acquisition, Mr. Johnson, Liberty or any of their respective subsidiaries
will automatically be cancelled, retired and cease to exist and no payment
will be made with respect thereto.
Each share of common stock of BTV Acquisition issued and outstanding
immediately prior to the Effective Time will be converted into and become
one share of common stock of the Surviving Corporation and shall constitute
the only outstanding shares of capital stock of the Surviving Corporation.
Dissenting Stockholders who do not vote to approve and adopt the
Merger Agreement and who otherwise strictly comply with the provisions of
the DGCL regarding statutory appraisal rights have the right to seek a
determination of the fair value of their shares of Class A Stock and such
payment in cash therefor in lieu of the Merger Consideration. See
"DISSENTERS RIGHTS OF APPRAISAL."
THE EXCHANGE FUND; PAYMENT FOR SHARES OF CLASS A STOCK
On or before the closing date of the Merger (the "Closing Date"), BTV
Acquisition will enter into an agreement with a bank or trust company
selected by BTV Acquisition and reasonably acceptable to the Company (the
"Exchange Agent"). Prior to the Effective Time, BTV Acquisition will
deposit or cause to be deposited with or for the account of the Exchange
Agent, in trust for the benefit of the Company's holders of Class A Stock
(other than Class A Stock held by Dissenting Stockholders and shares to be
cancelled without consideration pursuant to the Merger Agreement) (such
amount being hereinafter referred to as the "Exchange Fund").
As soon as reasonably practicable after the Effective Time, the
Exchange Agent will mail to each record holder of shares of Class A Stock
immediately prior to the Effective Time a letter of transmittal containing
instructions for use in surrendering certificates formerly representing
shares of Class A Stock (the "Certificates") in exchange for the Merger
Consideration. No stockholder should surrender any Certificates until the
stockholder receives the letter of transmittal and other materials for such
surrender. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with a letter of transmittal, duly executed, and
such other customary documents as may be required pursuant to the
instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each share of Class A
Stock formerly represented by such Certificate, without any interest
thereon, less any required withholding of taxes, and the Certificate so
surrendered will be cancelled. The Merger Consideration will be delivered
by the Exchange Agent as promptly as practicable following surrender of a
Certificate and delivery of the Letter of Transmittal and any other related
transmittal documents. Cash payments may be made by check unless otherwise
required by a depositary institution in connection with the book-entry
delivery of securities.
If payment of the Merger Consideration is to be made to a person other
than the person in whose name the Certificate surrendered is registered, it
will be a condition of payment that the Certificate so surrendered will be
properly endorsed or otherwise be in proper form for transfer and that the
Exchange Agent receives evidence that any applicable transfer or other
taxes have been paid.
STOCKHOLDERS SHOULD NOT SEND THEIR CERTIFICATES NOW AND SHOULD SEND
THEM ONLY PURSUANT TO INSTRUCTIONS SET FORTH IN LETTERS OF TRANSMITTAL TO
BE MAILED TO STOCKHOLDERS AS SOON AS PRACTICABLE AFTER THE EFFECTIVE TIME.
IN ALL CASES, THE MERGER CONSIDERATION WILL BE PROVIDED ONLY IN ACCORDANCE
WITH THE PROCEDURES SET FORTH IN THIS PROXY STATEMENT AND SUCH LETTERS OF
TRANSMITTAL.
Six months after the Effective Time, the Exchange Agent will return to
the Surviving Corporation any portion of the Exchange Fund which remains
undistributed to the holders of the Class A Stock (including the proceeds
of any investments thereof), and any holders of Class A Stock who have not
theretofore complied with the above-described procedures to receive payment
of the Merger Consideration may look only to the Surviving Corporation for
payment.
TRANSFERS OF CLASS A STOCK
At the Effective Time, the stock transfer books of the Company will be
closed, and there will be no further registration of transfers of shares of
Class A Stock thereafter on the records of the Company. If, after the
Effective Time, Certificates are presented to the Exchange Agent or the
Surviving Corporation, they will be cancelled and exchanged for the Merger
Consideration as provided above and pursuant to the terms of the Merger
Agreement (subject to applicable law in the case of Dissenting
Stockholders).
TREATMENT OF STOCK OPTIONS
Except as to Mr. Johnson and any other executive officers of the
Company who enter into agreements with BTV Acquisition relating to
alternative treatment of their Options, at the Effective Time each
outstanding option to acquire Class A Stock, whether or not then
exercisable (the "Options"), will be cancelled and the 1991 Executive
Stock Option Plan, as amended (the "Company Option Plan"), will be assumed
by the Surviving Corporation. In consideration of such cancellation, the
Surviving Corporation will pay to the holder of each such cancelled Option,
within five days of the Effective Time, an amount determined by multiplying
(i) the excess, if any, of the Merger Consideration over the applicable
exercise price per share of such Option by (ii) the number of shares of
Class A Stock issuable upon exercise of the Option, subject to any required
withholding of taxes (the "Option Consideration"). At the Effective Time,
all Options, other than those with respect to which the holder has agreed
with BTV Acquisition as to the continuation thereof, will be converted
into, and will thereafter only represent the right to receive, the Option
Consideration.
At the Effective Time, all Options held by Mr. Johnson will
automatically become options to acquire an equal number of shares of common
stock of the Surviving Corporation at an aggregate exercise price equal to
the aggregate exercise price of the Options, and no payment will be made
with respect thereto.
Prior to the Effective Time, the Company will use its best efforts to
(i) obtain any consents from the holders of the Options and (ii) make any
amendments to the terms of the Company Option Plan and any options granted
thereunder that are necessary to consummate the transactions contemplated
by the Merger Agreement and payment in respect of any Options may be
withheld until the necessary consents are obtained.
Instead of the cancellation of such Options, BTV Acquisition may enter
into mutually acceptable arrangements with any holder of Options providing
that such holder's options will be treated in a different manner, provided
that in no event will any such holder be paid at the Effective Time an
amount in cash in excess of the Option Consideration such holder would have
received had such Options been cancelled as described above.
CONDITIONS
The respective obligations of BTV Acquisition, Mr. Johnson and Liberty
on the one hand, and the Company, on the other, to consummate the Merger
are subject to the following conditions, among others: (i) the approval and
adoption of the Merger Agreement by the affirmative vote of the holders of
a majority of the voting power held by holders of the Nonaffiliated Stock;
(ii) the absence of any governmental action or order which materially
restricts, prevents or prohibits consummation of the Merger; and (iii) the
expiration of any waiting period applicable under the HSR Act.
The obligations of BTV Acquisition to effect the Merger are subject
to, among other things, the following additional conditions: (i) the
representations and warranties of the Company, if qualified by materiality,
being true and correct and if not so qualified, being true and correct in
all material respects, in each case as of the Effective Time as though made
on and as of the Effective Time; (ii) the Company having performed or
complied in all material respects with agreements and covenants required
by the Merger Agreement to be performed or complied with prior to the
Effective Time; (iii) all consents having been obtained by the Company
other than those the failure of which to obtain would not have a material
adverse effect; (iv) BTV Acquisition having obtained sufficient financing
to fund the transactions contemplated by the Merger Agreement; (v) no
threatened or pending litigation seeking to restrain or prohibit the
consummation of the transactions contemplated by the Merger Agreement; and
(vi) Dissenting Stockholders not representing more than 10% of the
outstanding shares of Nonaffiliated Stock.
The obligations of the Company to effect the Merger are also subject
to the additional condition that all the covenants in the Merger Agreement
to be complied with or performed by BTV Acquisition, Mr. Johnson and
Liberty shall have been complied with and performed in all material
respects prior to the Effective Time and the representations and warranties
of BTV Acquisition, Mr. Johnson and Liberty shall if qualified by
materiality be true and correct and if not so qualified be true and correct
in all material respects, in each case as of the Effective Time as if made
on and as of the Effective Time.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties of BTV Acquisition, Mr. Johnson, Liberty and the Company. The
representations of BTV Acquisition, Mr. Johnson and Liberty relate to,
among other things, the organization and qualification to do business of
BTV Acquisition and Liberty, the authority of the parties to enter into the
Merger Agreement, no conflict, required filings and consents, financing and
absence of brokers. The representations of the Company relate to, among
other things, corporate organization and qualification, capitalization,
authority to enter into the Merger Agreement, no conflict, required filings
and consents, certain regulatory consents and approvals, compliance with
law, certain Exchange Act filings with the SEC and financial statements,
absence of certain changes or events, employee benefit plans, taxes,
absence of litigation, FCC and copyright matters, opinion of Goldman Sachs
and the absence of brokers. The Company's representations are subject to
Mr. Johnson not being aware of any inaccuracies in such representations.
COVENANTS
The Company has agreed to conduct its business in the ordinary and
usual course prior to the Effective Time. In this regard, the Company has
agreed that it will not, without the prior written consent of BTV
Acquisition, Mr. Johnson or Liberty engage in certain types of
transactions. In addition, BTV Acquisition, Mr. Johnson, Liberty and the
Company have made further agreements regarding the access to the Company's
records; preparation and filing of this Proxy Statement and the Schedule
13E-3 with the SEC; indemnification of the Company's officers and
directors; directors' and officers' liability insurance; reasonable best
efforts to fulfill the conditions to the other party's obligation to
consummate the Merger and public announcements.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that from and after the Effective Time,
the Surviving Corporation shall indemnify the present and former officers
and directors of the Company, to the same extent and upon the terms and
conditions provided in the Company's certificate of incorporation and
bylaws, and to the full extent permitted under the DGCL against all losses,
expenses, claims, damages, liabilities or amounts paid in settlement with
the approval of the Surviving Corporation (which approval shall not
unreasonably be withheld) in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on the fact that such
person is or was a director or officer of the Company and arising out of
actions or omissions occurring in connection with the Merger.
The Merger Agreement provides that the Surviving Corporation shall
maintain in effect, for not less than six years from the Effective Time,
the policies of the directors' and officers' liability insurance most
recently maintained by the Company with respect to matters occurring prior
to the Effective Time to the extent available, provided that the Surviving
Corporation may substitute policies of at least the same coverage
containing terms and conditions which are no less advantageous as long as
such substitution does not result in gaps or lapses in coverage.
Nonetheless, in no event shall the Surviving Corporation be required to
expend more than 150% of the current annual premiums paid by the Company
(the "Premium Amount") to maintain or procure such insurance coverage and
in the event the Surviving Corporation is unable to obtain the required
insurance, the Surviving Corporation will obtain as much comparable
insurance as is available for the Premium Amount per year.
NO SOLICITATION; FIDUCIARY OBLIGATIONS OF DIRECTORS
The Merger Agreement provides that the Company generally shall not,
nor shall it permit any of its subsidiaries to (i) initiate, solicit, or
encourage the making of any Alternative Transaction (as described below) or
(ii) provide any information regarding the Company to any third party, or
participate in, facilitate or encourage, any inquiries of the making of any
Alternative Transaction. The Board of Directors of the Company may engage
in negotiations or provide information to a third party in response to an
unsolicited written inquiry, if the Board first determines in good faith
(i) based on the written advice of its financial advisor, that the inquiry,
proposal or offer is reasonably likely to result in a proposal for an
Alternative Transaction which is (A) more favorable to the Company's
stockholders than the Merger and (B) capable of consummation, or (ii) based
on the written advice of outside legal counsel, that it is required to do
so in order to comply with its fiduciary duties. The Merger Agreement
defines Alternative Transaction as any transaction or series of
transactions (other than those contemplated by the Merger Agreement)
resulting in (i) any change of control of the Company, (ii) any merger or
consolidation of the Company in which another person acquires beneficial
ownership of 25% or more of the aggregate voting power of all voting
securities of the Company or the Surviving Corporation, (iii) any tender
offer or exchange offer for or any acquisition of any securities of the
Company which would result in another person beneficially owning 25% or
more of the voting securities of the Company or (iv) any sale or other
disposition of assets of the Company or any of its subsidiaries if the fair
market value of such assets exceeds 25% of the aggregate fair market value
of the assets of the Company and its subsidiaries.
DIRECTORS AND OFFICERS OF THE COMPANY FOLLOWING THE MERGER; CERTIFICATE OF
INCORPORATION; BYLAWS
The Merger Agreement provides that the current directors of BTV
Acquisition will be the directors of the Surviving Corporation. Mr.
Johnson and Mr. Bennett will be the initial directors of the Surviving
Corporation. The Buying Group is presently considering inviting Messrs.
Lewis, Malone, Washington and Wilkins and Mrs. Johnson to join the Board of
Directors of the Surviving Corporation following the Merger; however, no
determination has been made in such regard. The Merger Agreement also
provides that the current officers of the Company will be the officers of
the Surviving Corporation.
The certificate of incorporation and bylaws of BTV Acquisition will be
the certificate of incorporation and bylaws of the Surviving Corporation,
until thereafter amended, except for appropriate changes to reflect that
the name of the Surviving Corporation will be BET Holdings, Inc.
TERMINATION
The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after the adoption of the agreement by
the stockholders of the Company, by the mutual written consent of the
Company and BTV Acquisition, or by either the Company or BTV Acquisition
(i) if any permanent injunction, order or decree or other action of any
Governmental Entity preventing the consummation of the Merger shall have
become final and nonappealable; or (ii) if the Merger has not been
consummated by September 30, 1998 (provided that such termination shall not
be available to any party whose failure to fulfill any obligation under the
Merger Agreement has been the cause of or resulted in the failure of the
closing to occur on or before such date).
The Company may terminate the Merger Agreement at any time prior to
the Effective Time, either before or after its adoption by the
stockholders, (i) upon a material breach of any covenant by BTV
Acquisition, Mr. Johnson or Liberty which is not cured or if any
representation or warranty of the Company, Mr. Johnson or Liberty shall
have become untrue in any material respect, in either case such that such
breach or untruth is not capable of being cured by September 30, 1998; or
(ii) if BTV Acquisition is unable to obtain a commitment for the financing
for the transactions contemplated by the Merger Agreement by May 15, 1998.
BTV Acquisition may terminate the Merger Agreement at any time prior
to the Effective Time, either before or after its adoption by the
stockholders, if (i) the Board or any committee thereof withdraws, modifies
or changes its recommendation so that it is not in favor of the Merger
Agreement or the Merger; (ii) the Board recommends or resolves to recommend
an Alternative Transaction; (iii) the required stockholder approval has not
been obtained by September 15, 1998; or (iv) upon a material breach of any
covenant or agreement contained in the Merger Agreement by the Company if
not cured, or if any representation or warranty of the Company shall have
become untrue in any material respect, in either case that such breach or
untruth is incapable of being cured by September 30, 1998.
AMENDMENT/WAIVER
Before or after adoption of the Merger Agreement by the stockholders,
the Merger Agreement may be amended by the written agreement of the parties
thereto at any time prior to the Effective Time if such amendment is
approved by the Special Independent Committee and provided, that, after any
such stockholder approval, no amendment may be made which under applicable
law may not be made without the approval of the stockholders of the Company
if such approval has not been obtained.
At any time prior to the Effective Time, either the Company, on the
one hand, or BTV Acquisition, on the other, may extend the time for
performance of any of the obligations or other acts of the other party to
the Merger Agreement, waive any inaccuracies in the representations and
warranties of the other party contained in the Merger Agreement or in any
document delivered pursuant to the Merger Agreement, or waive compliance by
the other party with any agreements or conditions contained in the Merger
Agreement. Any extension or waiver granted by the Company will be valid
only if it has been approved by the Special Independent Committee.
LITIGATION
Shortly after the public announcement of the $48 Offer, several
lawsuits were filed by stockholders of the Company against the Buying
Group, the Company and the Company's directors alleging, among other
things, that the $48 per share price offered for the Class A Stock by the
Buying Group was inadequate. During the September 11-13, 1997 period, the
Behrens Complaint and four other class action complaints were filed in the
Court of Chancery in the State of Delaware. The Behrens Complaint was
served on the Company and its directors on September 15, 1997. On October
14, 1997, the Court of Chancery executed an order consolidating those five
complaints into the Consolidated Action. On October 7, 1997, the
Baskerville Complaint was filed in the D.C. Court to challenge the proposed
buyout of holders of the Nonaffiliated Stock. See "SPECIAL FACTORS --
Purpose and Background of the Merger" for a chronological discussion of the
Consolidated Action and the Baskerville Complaint.
During late 1997 and early 1998, plaintiffs' counsel in the
Consolidated Action discussed with counsel to the Buying Group the
plaintiffs' views regarding the deficiencies of the $48 Offer, including
the inadequacy of the initial price and the absence of a separate vote to
approve the proposed merger by the holders of a majority of the
Nonaffiliated Stock. Counsel for plaintiffs and the Buying Group did not
engage in settlement negotiations during these discussions. In March 1998,
counsel for the Buying Group informed counsel for plaintiffs in the
Consolidated Action of the Buying Group's willingness to consider
modifications to the $48 Offer in order to secure the approval of the
Special Independent Committee for the proposed transaction and, if
possible, to establish a basis for the potential settlement of the
Consolidated Action. On March 13-15, 1998, counsel and the financial
advisor to plaintiffs in the Consolidated Action negotiated with counsel to
the Buying Group regarding the terms for an agreement-in-principle to
settle the Consolidated Action.
On March 15, 1998 counsel for plaintiffs and defendants in the
Consolidated Action executed the MOU, which outlined an agreement-in-
principle regarding the terms of a settlement of the Consolidated Action.
Subject to Court approval, third-party consents and other conditions, the
MOU provided for the termination of the Consolidated Action and its
dismissal with prejudice based upon and subject to, among other things, (i)
a merger in which the holders of the Nonaffiliated Stock receive $63 cash
per share; (ii) the merger being conditioned upon the favorable vote by
the holders of a majority of the Nonaffiliated Stock; and (iii) plaintiffs'
counsel having had the opportunity to review and comment on preliminary
shareholder disclosure materials relating to the merger, and to negotiate
with defendants' counsel to resolve any issues raised by plaintiffs'
counsel concerning the adequacy of these disclosure materials. The MOU
also provided that plaintiffs, through their counsel, would use their best
efforts to pursue the settlement of the Consolidated Action and would
cooperate with the Company and the Buying Group in preparing the papers
necessary to define, pursue and effectuate a dismissal of the Baskerville
Complaint pending in the D.C. Court. At no time have the defendants in
either the Consolidated Action or the Baskerville Complaint admitted any
fault, liability or wrongdoing as to any facts or claims alleged or
asserted in any complaint filed in the Consolidated Action or the
Baskerville Complaint.
The MOU also provides that, subject to the terms and conditions of the
MOU and the terms and conditions of the formal stipulation of settlement,
the Company will pay, on behalf of and for the benefit of those directors
of the Company named as defendants in the Consolidated Action, such fees
and expenses as may be awarded by the Court. Further, the Company has
agreed in the MOU to pay all reasonable costs and expenses incurred in
providing notice of the settlement to the record and beneficial owners of
Common Stock of the Company during the period from and including the close
of business on September 9, 1997 through and including the date of
consummation of the Merger (other than the Company, the Buying Group, and
those holders of Common Stock named as individual defendants in the
Consolidated Action).
The consummation of the Merger is conditioned upon there being no
pending or threatened litigation. See "THE MERGER AGREEMENT --
Conditions."
DISSENTERS RIGHTS OF APPRAISAL
Pursuant to Section 262 of the DGCL, any holder of Class A Stock who
does not wish to accept the Merger Consideration may dissent from the
Merger and elect to have the fair value of such stockholder's shares of
Class A Stock (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) judicially determined and paid
to such stockholder in cash, together with a fair rate of interest, if any,
provided that such stockholder complies with the provisions of Section 262.
The following discussion is not a complete statement of the law pertaining
to appraisal rights under the DGCL, and is qualified in its entirety by the
full text of Section 262, which is provided in its entirety as Exhibit C to
this Proxy Statement. All references in Section 262 and in this summary to
a "stockholder" are to the record holder of the shares of Class A Stock as
to which appraisal rights are asserted. A person having a beneficial
interest in shares of Class A Stock held of record in the name of another
person, such as a broker or nominee, must act promptly to cause the record
holder to follow properly the steps summarized below and in timely manner
to perfect appraisal rights.
Under Section 262, where a proposed merger is to be submitted for
approval at a meeting of stockholders, as in the case of the Special
Meeting, the corporation, not less than 20 days prior to the meeting, must
notify each of its stockholders entitled to appraisal rights that such
appraisal rights are available and include in such notice a copy of Section
262. This Proxy Statement shall constitute such notice to the holders of
Common Shares and the applicable statutory provisions of the DGCL are
attached to this Proxy Statement as Appendix C. Any stockholder who wishes
to exercise such appraisal rights or who wishes to preserve the right to do
so should review carefully the following discussion and Exhibit C to this
Proxy Statement because failure to comply with the procedures specified in
Section 262 timely and properly will result in the loss of appraisal
rights. Moreover, because of the complexity of the procedures for
exercising the right to seek appraisal of the Class A Stock, the Company
believes that stockholders who consider exercising such rights should seek
the advice of counsel.
Any holder of Class A Stock wishing to exercise the right to dissent
from the Merger and demand appraisal under Section 262 of the DGCL must
satisfy each of the following conditions:
(A) Such stockholder must deliver to the Company a written
demand for appraisal of such stockholder's shares before the vote on
the Merger Agreement at the Special Meeting, which demand will be
sufficient if it reasonably informs the Company of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares;
(B) Such stockholder must not vote its shares of Class A Stock
in favor of the Merger Agreement. Because a proxy which does not
contain voting instructions will, unless revoked, be voted in favor of
the Merger Agreement, a stockholder who votes by proxy and who wishes
to exercise appraisal rights must vote against the Merger Agreement or
abstain from voting on the Merger Agreement; and
(C) Such stockholder must continuously hold such shares from the
date of making the demand through the Effective Time. Accordingly, a
stockholder who is the record holder of shares of Class A Stock on the
date the written demand for appraisal is made but who thereafter
transfers such shares prior to the Effective Time will lose any right
to appraisal in respect of such shares.
Neither voting (in person or by proxy) against, abstaining from voting
on or failing to vote on the proposal to approve and adopt the Merger
Agreement will constitute a written demand for appraisal within the meaning
of Section 262. The written demand for appraisal must be in addition to
and separate from any such proxy or vote.
Only a holder of record of shares of Class A Stock issued and
outstanding immediately prior to the Effective Time is entitled to assert
appraisal rights for the shares of Class A Stock registered in that
holder's name. A demand for appraisal should be executed by or on behalf
of the stockholder of record, fully and correctly, as such stockholder's
name appears on such stock certificates, should specify the stockholder's
name and mailing address, the number of shares of Class A Stock owned and
that such stockholder intends thereby to demand appraisal of such
stockholder's Class A Stock. If the shares are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution
of the demand should be made in that capacity, and if the shares are owned
of record by more than one person as in a joint tenancy or tenancy in
common, the demand should be executed by or on behalf of all owners. An
authorized agent, including one or more joint owners, may execute a demand
for appraisal on behalf of a stockholder; however, the agent must identify
the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is acting as agent for such owner or
owners. A record holder such as a broker who holds shares as nominee for
several beneficial owners may exercise appraisal rights with respect to the
shares held for one or more beneficial owners while not exercising such
rights with respect to the shares held for one or more beneficial owners;
in such case, the written demand should set forth the number of shares as
to which appraisal is sought, and where no number of shares is expressly
mentioned the demand will be presumed to cover all shares held in the name
of the record owner. Stockholders who hold their shares in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights
are urged to consult with their brokers to determine the appropriate
procedures for the making of a demand for appraisal by such a nominee.
A stockholder who elects to exercise appraisal rights pursuant to
Section 262 should mail or deliver a written demand to: BET Holdings,
Inc., One BET Plaza, 1900 W Street, N.E., Washington, D.C. 20018-1211,
Attention: Byron F. Marchant, Secretary.
Within ten days after the Effective Time, the Surviving Corporation
must send a notice as to the effectiveness of the Merger to each former
stockholder of the Company who has made a written demand for appraisal in
accordance with Section 262 and who has not voted in favor of the Merger
Agreement. Within 120 days after the Effective Time, but not thereafter,
either the Surviving Corporation or any Dissenting Stockholder who has
complied with the requirements of Section 262 may file a petition in the
Delaware Chancery Court demanding a determination of the value of the
shares of Class A Stock held by all Dissenting Stockholders. The Company
is under no obligation to and has no present intent to file a petition for
appraisal, and stockholders seeking to exercise appraisal rights should not
assume that the Surviving Corporation will file such a petition or that the
Surviving Corporation will initiate any negotiations with respect to the
fair value of such shares. Accordingly, stockholders who desire to have
their shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and in the
manner prescribed in Section 262. Inasmuch as the Company has no
obligation to file such a petition, the failure of a stockholder to do so
within the period specified could nullify such stockholder's previous
written demand for appraisal. In any event, at any time within 60 days
after the Effective Time (or at any time thereafter with the written
consent of the Company), any stockholder who has demanded appraisal has the
right to withdraw the demand and to accept payment of the Merger
Consideration.
Pursuant to the Merger Agreement, the Company has agreed to give BTV
Acquisition prompt notice of any demands for appraisal received by it,
withdrawals of such demands, and any other instruments served pursuant to
the DGCL and received by the Company and relating thereto. BTV Acquisition
shall direct all negotiations and proceedings with respect to demands for
appraisal under the DGCL. The Company shall not, except with the prior
written consent of BTV Acquisition, make any payment with respect to any
demands for appraisal, or offer to settle, or settle, any such demands.
Within 120 days after the Effective Time, any stockholder who has
complied with the provisions of Section 262 to that point in time will be
entitled to receive from the Surviving Corporation, upon written request, a
statement setting forth the aggregate number of shares not voted in favor
of the Merger Agreement and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares. The
Surviving Corporation must mail such statement to the stockholder within 10
days of receipt of such request or within 10 days after expiration of the
period for delivery of demands for appraisals under Section 262, whichever
is later.
A stockholder timely filing a petition for appraisal with the Court of
Chancery must deliver a copy to the Surviving Corporation, which will then
be obligated within 20 days to provide the Delaware Court of Chancery with
a duly verified list containing the names and addresses of all stockholders
who have demanded appraisal of their shares. After notice to such
stockholders, the Delaware Court of Chancery is empowered to conduct a
hearing on the petition to determine which stockholders are entitled to
appraisal rights. The Delaware Court of Chancery may require stockholders
who have demanded an appraisal for their shares and who hold stock
represented by certificates to submit their certificates to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings,
and if any stockholder fails to comply with the requirement, the Delaware
Court of Chancery may dismiss the proceedings as to that stockholder.
After determining the stockholders entitled to an appraisal, the
Delaware Court of Chancery will appraise the "fair value" of their shares,
exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any,
to be paid upon the amount determined to be the fair value. The costs of
the action may be determined by the Delaware Chancery Court and taxed upon
the parties as the Delaware Chancery Court deems equitable. Upon
application of a Dissenting Stockholder, the Delaware Chancery Court may
also order that all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding, including, without
limitation, reasonable attorneys' fees and the fees and expenses of
experts, be charged pro rata against the value of all of the shares
entitled to appraisal. STOCKHOLDERS CONSIDERING SEEKING APPRAISAL SHOULD
BE AWARE THAT THE FAIR VALUE OF THEIR SHARES AS DETERMINED UNDER SECTION
262 COULD BE MORE THAN, THE SAME AS OR LESS THAN THE MERGER CONSIDERATION
THEY WOULD RECEIVE PURSUANT TO THE MERGER AGREEMENT IF THEY DID NOT SEEK
APPRAISAL OF THEIR SHARES. STOCKHOLDERS SHOULD ALSO BE AWARE THAT
INVESTMENT BANKING OPINIONS ARE NOT OPINIONS AS TO FAIR VALUE UNDER SECTION
262.
In determining fair value and, if applicable, a fair rate of interest,
the Delaware Chancery Court is to take into account all relevant factors.
In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the
factors that could be considered in determining fair value in an appraisal
proceeding, stating that "proof of value by any techniques or methods that
are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered, and that "fair price
obviously requires consideration of all relevant factors involving the
value of a company." The Delaware Supreme Court stated that, in making
this determination of fair value, the court must consider market value,
asset value, dividends, earnings prospects, the nature of the enterprise
and any other facts that could be ascertained as of the date of the merger
that throw any light on future prospects of the merged corporation. In
Weinberger, the Delaware Supreme Court stated that "elements of future
value, including the nature of the enterprise, that are known or
susceptible of proof as of the date of the merger and not the product of
speculation, may be considered." Section 262 provides that fair value is
to be "exclusive of any element of value arising from the accomplishment or
expectation of the merger."
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the
shares subject to such demand for any purpose or be entitled to the payment
of dividends or other distributions on those shares (except dividends or
other distributions payable to holders of record of shares as of a record
date prior to the Effective Time).
Any stockholder may withdraw its demand for appraisal and accept the
Merger Consideration by delivering to the Surviving Corporation a written
withdrawal of such stockholder's demand for appraisal, except that (i) any
such attempt to withdraw made more than 60 days after the Effective Time
will require written approval of the Surviving Corporation and (ii) no
appraisal proceeding in the Delaware Chancery Court shall be dismissed as
to any stockholder without the approval of the Delaware Chancery Court, and
such approval may be conditioned upon such terms as the Delaware Chancery
Court deems just. If the Surviving Corporation does not approve a
stockholder's request to withdraw a demand for appraisal when such approval
is required or if the Delaware Chancery Court does not approve the
dismissal of an appraisal proceeding, the stockholder would be entitled to
receive only the appraised value determined in any such appraisal
proceeding, which value could be lower than the value of the Merger
Consideration.
FAILURE TO COMPLY STRICTLY WITH ALL OF THE PROCEDURES SET FORTH IN
SECTION 262 OF THE DGCL WILL RESULT IN THE LOSS OF A STOCKHOLDER'S
STATUTORY APPRAISAL RIGHTS. CONSEQUENTLY, ANY STOCKHOLDER WISHING TO
EXERCISE APPRAISAL RIGHTS IS URGED TO CONSULT LEGAL COUNSEL BEFORE
ATTEMPTING TO EXERCISE SUCH RIGHTS.
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The following table sets forth selected consolidated financial data
for the Company and its subsidiaries (i) as of and for the six months ended
January 31, 1998 and 1997 and (ii) as of and for each of the five fiscal
years in the period ended July 31, 1997. No separate financial information
is provided for BTV Acquisition since BTV Acquisition is a special purpose
entity formed in connection with the Merger and has no independent
operations. No pro forma data giving effect to the Merger have been
provided because the Company does not believe such information is material
to stockholders in evaluating the proposed Merger and the Merger Agreement.
The financial information for the Company as of and for each of the
five fiscal years in the period ended July 31, 1997 has been derived from
audited consolidated financial statements of the Company. The financial
information as of and for the six months ended January 31, 1998 and 1997
has been derived from unaudited consolidated financial statements of the
Company and, in the opinion of management, includes all adjustments
(consisting only of normal recurring adjustments) necessary to present
fairly the information set forth therein. Operating results for such
unaudited interim periods should not be considered indicative of results to
be expected for the entire year.
The following financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements,
accompanying notes and other financial information included in the
Company's Annual Report on Form 10-K for the fiscal year ended July 31,
1997, as amended, and the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1998, and incorporated herein by
reference.
(Unaudited)
(in thousands, except share data Six Months Ended
and ratio) January 31, Fiscal Year Ended July 31,
---------------- -----------------------------------------------
INCOME STATEMENT DATA 1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
Operating revenues $84,938 $72,495 $154,227 $132,275 $115,222 $97,510 $74,218
Income from operations 30,384 24,962 53,775 42,837 37,517 26,410 23,609
Income from continuing operations 16,858 13,784 28,022 22,678 19,912 14,776 12,640
Discontinued operations - (1,085) (4,235) (615) - - -
Net income 16,858 12,699 23,787 22,063 19,912 14,776 12,640
Ratio of earnings to fixed charges(1) 11.4:1 9.1:1 9.8:1 8.5:1 N/A N/A N/A
(Unaudited)
(in thousands, except share data) Six Months Ended
January 31, Fiscal Year Ended July 31,
---------------- -----------------------------------------------
PER COMMON SHARE DATA(2) 1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
Net income per common share:
Basic:
Income from continuing operations $1.01 $0.82 $1.68 $1.27 $1.00 $0.72 $0.61
Net income 1.01 0.76 1.42 1.24 1.00 0.72 0.61
Diluted:
Income from continuing operations 0.97 0.80 1.63 1.23 1.00 0.72 0.61
Net income 0.97 0.74 1.38 1.21 1.00 0.72 0.61
Shares used in computing earnings per
share:
Basic 16,709 16,744 16,703 17,834 19,867 20,490 20,844
Diluted 17,450 17,211 17,213 18,221 19,961 20,590 20,887
Cash dividends declared - - - - - - -
(Unaudited)
(in thousands, except share data) January 31, July 31,
---------------- -----------------------------------------------
BALANCE SHEET DATA 1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
Total assets $183,063 $167,008 $173,511 $150,731 $157,810 $113,868 $104,842
Long term debt 51,124 70,246 62,993 60,560 35,875 12,392 13,207
Shareholders' equity 105,788 80,630 88,418 66,749 96,684 81,378 77,791
Book value per share(3) 6.33 4.84 5.29 3.98 4.90 4.07 3.75
1 For purposes of the ratio of earnings to fixed charges, earnings
represents income before income taxes from continuing operations, adjusted
for losses incurred with respect to investments accounted for under the
equity method, plus fixed charges. Fixed charges consist of interest
costs, both expensed and capitalized, amortization of debt issuance costs
and the interest portion of operating rents, which is estimated by
management to approximate one-third of aggregate operating rents.
2 Effective with the period ended January 31, 1998, the Company
was required to adopt Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"). Accordingly, net income per common
share and shares used in computing earnings per share for the six months
ended January 31, 1997 and each of the five years in the period ended July
31, 1997 have been restated to conform with the requirements of SFAS No. 128.
3 Book value per share is calculated based upon the number of
shares of Common Stock outstanding at year end.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
AGREEMENTS WITH CABLE AFFILIATES
In the normal course of its business, BET enters into agreements with
the operators of cable television systems for the carriage of BET's and
Action Pay Per View's (a subsidiary of the Company) programming. BET has
entered into agreements with a number of cable operators that are
affiliates of TCI. The agreements entered into with affiliates of TCI are
on substantially the same terms and conditions as the agreements entered
into with cable operators which are not affiliated with TCI. In fiscal
1997, BET earned approximately $16,382,000 in respect of the carriage of
BET's programming from TCI-affiliated cable operators. TCI-affiliated
cable operators accounted for approximately 24% of The BET Cable Network's
subscribers and approximately 28% of its subscriber revenue in fiscal 1997.
AGREEMENTS WITH RELATED PARTIES
In February 1994, BET Films, Inc., a subsidiary of the Company, QE +
Limited, an indirect wholly owned subsidiary of TCI, and Live
Entertainment, Inc., an unrelated third party, entered into a partnership
agreement establishing BET Film Productions, a joint venture which plans to
develop, produce and distribute motion pictures targeted primarily to
minority audiences. Under the joint venture agreement, each of the parties
owns a one-third interest in the joint venture and has agreed to contribute
up to $5 million as a capital contribution to the joint venture. To date,
$1,050,000 has been funded by the Company towards the capital contribution
obligation for the joint venture.
In December 1996, the Company and Encore Media Corporation, a wholly
owned subsidiary of Liberty, formed a joint venture, BET Movies/Starz!3,
LLC, for the purposes of the creation, operation, programming, packaging,
distribution, advertising, sales, exhibition and marketing of the BET
Movies/Starz!3 cable television programming service, a pay TV channel
within the Starz!-Encore 8 multiplex showcasing Black film artists and
targeted to African-American viewers. To date, $3,840,000 has been funded
by the Company towards the capital contribution obligation for the joint
venture. Pursuant to the terms of a term sheet executed in September 1997,
the venturers agreed to modify the venture such that the Company is not
required to make additional equity contributions to the venture.
During December 1995, the Company entered into a loan agreement with
R&S PCS, Inc. ("R&S"), an entity wholly owned by Mr. Johnson, whereby the
Company agreed to loan R&S up to $10 million on a revolving basis. Loan
advances bear interest at the prime lending rate plus 2% and are secured by
40,000 shares of the Company's common stock owned by Mr. Johnson (the
"Pledged Shares"). The largest amount outstanding during fiscal 1997 was
$8,933,000. At January 31, 1998, advances aggregating $8,893,000 were
outstanding. As of January 31, 1998, $10,405,000 (including accrued and
unpaid interest) was outstanding under the loan. Substantially all loan
advances were used by R&S to establish eligibility to participate in the
Broadband PCS C Block Auction in which R&S was a successful bidder. The
March Buying Group Letter contemplates that, at an appropriate time to be
reasonably determined, Mr. Johnson and any entities controlled by him may
take certain actions that would result in both the Company owning the
rights to certain PCS licenses now held by R&S and the release of the
Pledged Shares. Subject to Liberty's consent, such actions may include,
but are not limited to, the sale, transfer or assignment of all of Mr.
Johnson's (or R&S's) right, title and interest in and to such licenses, or
a merger of R&S, on a tax-free basis, with or into BTV Acquisition or the
Company, or another entity, as reasonably determined.
TRANSACTIONS WITH MANAGEMENT
During May 1996, the Company purchased from Mr. Johnson certain
promissory notes in the aggregate principal amount of $2.2 million that had
been issued originally by a third party to Mr. Johnson. In connection with
this transaction, Mr. Johnson guaranteed repayment of these notes plus
certain other related notes already held by the Company from that same
third party. All notes receivable guaranteed by Mr. Johnson bear interest
at the prime lending rate plus 2%, payable monthly, are secured by certain
real property, and mature at varying dates through the Company's fiscal
year ending July 31, 2001. Interest income earned from notes receivable
guaranteed by Mr. Johnson was $400,000 during fiscal year 1997.
MARKET FOR THE CLASS A STOCK
CLASS A STOCK MARKET PRICE INFORMATION; DIVIDEND INFORMATION
The Company's Class A Stock is traded on the NYSE under the symbol
"BTV". The following tables show the per share high and low sales prices
reported in the consolidated transaction reporting system for transactions
in the Class A Stock for the calendar year periods indicated. No cash
dividends have been paid during the last two years by the Company on the
Class A Stock. The Company has an unsecured revolving senior credit
facility of up to $75 million, which expires December 31, 2000 and 10.55%
senior secured notes due January 15, 2001, secured by one of the Company's
satellite transponders. The loan agreements underlying the revolving
senior credit facility and the senior secured notes include several
restrictive financial covenants, one of which limits the amount of cash
available for dividend distributions.
MARKET PRICE OF CLASS A STOCK
High Low
---- ---
Calendar Year 1996
- - - ------------------
First Quarter $32 1/8 $22 5/8
Second Quarter 30 26
Third Quarter 29 3/4 23 1/2
Fourth Quarter 30 24 5/8
Calendar Year 1997
- - - ------------------
First Quarter $31 3/8 $25 1/8
Second Quarter 34 1/2 27 1/4
Third Quarter 53 1/2 32
Fourth Quarter 57 3/8 50
Calendar Year 1998
- - - ------------------
First Quarter $61 13/16 $52 11/16
Second Quarter (through April 29, 1998) 62 3/16 60 3/4
On September 10, 1997, the last full trading day prior to the day on
which the $48 Offer was publicly announced, the closing price for the Class
A Stock on the NYSE was $41.
On March 13, 1998, the last full trading day prior to the day on which
the execution of the Merger Agreement was publicly announced, the closing
price for the Class A Stock on the NYSE was $54 1/2.
On [ ], 1998, the last trading day prior to the date of this
Proxy Statement, the closing price for the Class A Stock on the NYSE was
$[ ].
The market price for Class A Stock is subject to fluctuation and
stockholders are urged to obtain current market quotations. No assurance
can be given as to the future price of or market for Class A Stock.
CLASS A STOCK PURCHASE INFORMATION
From March 2, 1998 through May 1, 1998, none of the Company, Mr.
Johnson, Liberty, TCI, BTV Acquisition, any director, executive officer or
controlling person of the Company, Liberty, TCI or BTV Acquisition, no
pension, profit-sharing or similar plan of the Company, Liberty, TCI or BTV
Acquisition, or any associate or majority-owned subsidiary of the Company,
Mr. Johnson, Liberty, TCI or BTV Acquisition has effected any purchases or
sales of Class A Stock.
The following table shows for the fiscal year periods indicated the
amount of shares of Class A Stock purchased by the Company, the range of
prices paid and the average purchase price for all such purchases. During
the periods set forth below, Mr. Johnson, BTV Acquisition, TCI and TCI's
subsidiaries did not purchase any Class A Stock.
Shares of Class A Range of Prices
Stock Purchased Paid per Share Average Purchase Price
----------------- ---------------- ----------------------
Fiscal Year 1996
- - - ----------------
First Quarter
0 -- --
Second Quarter 1,518,300(1) $19.39 $19.39
Third Quarter 0 -- --
Fourth Quarter 200 $25.50 $25.50
Fiscal Year 1997
- - - ----------------
First Quarter 33,400 $24.375-$30.00 $28.316
Second Quarter 98,400 $24.875-$27.875 $26.939
Third Quarter 18,000 $26.75-$26.25 $27.172
Fourth Quarter 0 -- --
Fiscal Year 1998
- - - ----------------
First Quarter 0 -- --
Second Quarter 0 -- --
Third Quarter
(1) The Company purchased the shares in December 1995, along with
1,518,300 shares of Class B Stock, from Time Warner Entertainment
Company, L.P., a partnership controlled by Time Warner Inc. and the
then beneficial owner of such shares. In connection with the share
purchase, the Company entered into a non-competition agreement with
Time Warner Inc. generally restricting Time Warner Inc. and its
affiliates for a limited time from engaging in the provision of a
basic cable television program service primarily targeted to Black
audiences.
SECURITIES OWNERSHIP
BENEFICIAL OWNERSHIP OF MORE THAN 5% OF CLASS A STOCK
The following table sets forth certain information as of March 31,
1998, concerning the beneficial ownership of the Company's Class A Stock by
each person or group known by the Company to own more than 5% of the Class
A Stock (assuming, as described in note (a) to the table, the conversion by
the Buying Group of the Class B Stock and the Class C Stock into Class A
Stock). The persons indicated below have sole voting and investment power
with respect to the shares indicated as owned by them, except as otherwise
stated in the notes to the table. Shares issuable upon exercise of options
that are exercisable currently or within the next 60 days are deemed to be
outstanding for the purpose of computing the percentage ownership and
overall voting power of persons beneficially owning such options, but have
not been deemed to be outstanding for the purpose of computing the
percentage ownership or overall voting power of any other person.
Number of Shares of Class Percentage of Class A
Name of Beneficial Owner A Stock Beneficially Owned Stock Beneficially Owned
- - - ------------------------ -------------------------- ------------------------
Mr. Johnson and TCI 10,669,303 (a) 62.8%(b)
GAMCO Investors, Inc. and
certain related entities 2,327,350 (c) 23.1%
Capital Group Cos., Inc. 662,100 (d) 6.6%
and certain related entities
(a) Assumes the conversion of all shares of Class B Stock (100% of
which is beneficially owned by TCI) and Class C Stock (100% of
which is beneficially owned by Mr. Johnson) into shares of Class
A Stock on a one-for-one basis. See "INFORMATION CONCERNING THE
SPECIAL MEETING -- Record Date; Voting at the Meeting; Quorum."
Of these shares, Mr. Johnson beneficially owns 2,039,703 shares
of Class A Stock, holds Options (currently exercisable or
exercisable within the next 60 days) to acquire 146,400 shares of
Class A Stock, and owns 4,820,000 shares of Class C Stock, and
TCI (through Liberty) owns 1,831,600 shares of Class A Stock and
1,831,600 shares of Class B Stock. The shares of Class A Stock
beneficially owned by Mr. Johnson (including shares issuable upon
exercise of such options) constitute approximately 21.2% of the
outstanding shares of Class A Stock (without giving effect to the
conversion of Class C Stock into Class A Stock) and the shares of
Class A Stock beneficially owned by TCI constitute approximately
18.2% of the outstanding shares of Class A Stock (without giving
effect to the conversion of Class B Stock into Class A Stock).
With respect to Mr. Johnson, the foregoing shares (i) include
110,600 shares of Class A Stock owned beneficially by Sheila
Crump Johnson, Mr. Johnson's wife, as to which Mr. Johnson
disclaims beneficial ownership and (ii) exclude Options to
acquire 115,600 shares of Class A Stock that are not exercisable
currently or within the next 60 days. See "SECURITIES OWNERSHIP
-- Beneficial Ownership of Class A Stock by Certain Parties
Related to the Company or the Buying Group." By virtue of their
status as a "group" for purposes of Rule 13d-5 of the Exchange
Act, each of Mr. Johnson and TCI may be deemed to have shared
voting and dispositive power over the shares owned by the other
person. The business addresses for each of Mr. Johnson and TCI
are set forth in "THE PARTIES."
(b) Because each share of Class B Stock and Class C Stock generally
is entitled to ten votes per share while the Class A Stock is
entitled to one vote per share, Mr. Johnson and TCI may be deemed
to beneficially own equity securities of the Company representing
approximately 92% of the voting power of the Company. See
"INFORMATION CONCERNING THE SPECIAL MEETING -- Record Date;
Voting at the Meeting; Quorum."
(c) Based solely on information contained in Amendment No. 14 dated
April 6, 1998 to the report on Schedule 13D filed originally on
December 21, 1993 by Gabelli Funds, Inc. and certain related
entities. The shares listed consist of shares held by Gabelli
Funds, Inc. (613,500), GAMCO Investors, Inc. (1,547,550), Gabelli
Foundation, Inc. (5,000), MJG Associates, Inc. (2,500), Gabelli
Associates Limited (22,000), Gabelli Associates Fund (100,000),
Gabelli International Limited (30,800), Gemini Capital Management
Limited (3,000) and Gabelli International II Limited (3,000).
Mr. Mario Gabelli is deemed to have beneficial ownership of all
such shares other than shares beneficially owned by Marc Gabelli
and Gemini Capital Management. Marc Gabelli is deemed to have
beneficial ownership of the shares owned beneficially by Gemini
Capital Management and Gabelli International II Limited. MJG
Associates is deemed to have beneficial ownership of all the
shares beneficially owned by Gabelli International Limited and
Gabelli International II Limited. Gabelli Funds, Inc. is deemed
to have beneficial ownership of all such shares, other than
shares beneficially owned by Mario Gabelli, Marc Gabelli, Gemini
Capital Management and Gabelli Foundation, Inc. The business
address for such persons is One Corporate Center, Rye, New York
10580-1434. Of the 2,327,350 shares of Class A Stock reported,
each entity has the sole power to vote or direct the vote and
sole power to dispose or to direct the disposition of the
securities reported for it, either for its own benefit or for the
benefit of its investment clients or its partners, as the case
may be, except that: (i) GAMCO Investors, Inc. does not have
authority to vote 69,000 of the reported shares; (ii) Gabelli
Funds, Inc., which presently provides discretionary advisory
services to various funds which are registered investment
companies (the "Funds"), has sole dispositive and voting power
with respect to the 613,500 shares held by the Funds, so long as
the aggregate voting interest of all joint filers does not exceed
25% of their total voting interest in the Company and in that
event, the Proxy Voting Committee of each of the Funds shall
respectively vote that Fund's shares; (iii) at any time, the
Proxy Voting Committee of each Fund may take and exercise in its
sole discretion the entire voting power with respect to the
shares held by such Fund under special circumstances such as
regulatory considerations; and (iv) the power of Mario Gabelli
and Gabelli Funds, Inc. is indirect with respect to the shares
beneficially owned directly by the other reporting entities.
(d) Based solely upon information contained in Amendment No. 3 dated
February 10, 1998 to the report on Schedule 13G filed originally
on February 12, 1997 by The Capital Group Companies, Inc.,
Capital Research and Management Company and SMALL CAP World Fund,
Inc. Capital Research and Management Company, a wholly owned
subsidiary of The Capital Group Companies, Inc., serves as
investment adviser to SMALLCAP World Fund, Inc. The business
address for such person is 333 South Hope Street, Los Angeles,
California 90071. The Capital Group Companies, Inc. and Capital
Research and Management Company both have dispositive power over
the 662,100 shares and SMALLCAP World Fund, Inc. has sole voting
power over the 662,100 shares.
BENEFICIAL OWNERSHIP OF CLASS A STOCK BY CERTAIN PARTIES RELATED TO THE
COMPANY OR THE BUYING GROUP
This section provides certain information as of April 15, 1998 with
respect to the beneficial ownership of the Company's Class A Stock by the
persons or entities identified below. See "SECURITIES OWNERSHIP --
Beneficial Ownership of More Than 5% of Class A Stock" for information as
to beneficial ownership of the Company's Class A Stock by the Buying Group.
Under the SEC rules generally, a person is deemed to be a "beneficial
owner" of a security if he has or shares the power to vote or direct the
voting of such security, or the power to dispose or to direct the
disposition of such security. Thus, more than one person may be deemed a
beneficial owner of the same security. Except as otherwise indicated, each
person listed below has informed the Company that such person has (i) sole
voting and investment power with respect to such person's shares of stock,
except to the extent that authority is shared by spouses under applicable
law, and (ii) record and beneficial ownership with respect to such person's
shares of stock. Shares issuable upon exercise of options that are
exercisable currently or within the next 60 days are deemed to be
outstanding for the purpose of computing the percentage ownership and
overall voting power of persons beneficially owning such options, but have
not been deemed to be outstanding for the purpose of computing the
percentage ownership or overall voting power of any other person.
The Company, BTV Acquisition, Liberty and TCI believe that the
present intention of their respective directors and executive officers who
own Class A Stock is to vote all Class A Stock as to which they possess
voting power for approval and adoption of the Merger Agreement.
THE COMPANY. The following table set forth information concerning the
beneficial ownership of the Company's Class A Stock by each director,
executive officer and controlling person of the Company, any pension,
profit-sharing or similar plan of the Company, or any associate or
majority-owned subsidiary of the Company, and by all directors, executive
officers and nominees of the Company as a group:
Number of Percentage of Outstanding
Name of Beneficial Owner Shares Owned Class A Stock Owned
- - - ------------------------ ------------ -------------------
Robert L. Johnson (1)............... 2,186,103 21.2
Sheila Crump Johnson (2)............ 110,600 1.0
John C. Malone, Ph.D. (3)........... 0 *
Robert R. Bennett (4)............... 0 *
Denzel Washington................... 0 *
Herbert P. Wilkins, Sr. (5)......... 5,113 *
Delano E. Lewis..................... 0 *
Debra L. Lee (6).................... 198,550 1.9
James A. Ebron (7).................. 157,800 1.5
William T. Gordon(8)................ 183,842 1.8
Janis P. Thomas (9)................. 198,100 1.9
Jefferi K. Lee(10).................. 178,000 1.7
Curtis N. Symonds(11)............... 146,695 1.4
Louis Carr(12)...................... 6,000 *
Maurita Coley(13)................... 18,000 *
Byron Marchant...................... 0 *
Scott Mills......................... 0 *
All directors and executive
officers of the Company as a
group(14)........................ 3,278,203 28.7
* Less than one percent.
(1) Includes (i) 146,400 shares of Class A Stock which are subject to
purchase upon exercise of Options exercisable currently or within
the next 60 days and (ii) 110,600 shares of Class A Stock owned
by Sheila Crump Johnson, Mr. Johnson's wife, of which 110,500
shares are subject to purchase upon exercise of Options. Mr.
Johnson disclaims beneficial ownership of all shares owned by his
wife. Excludes (i) Class A Stock issuable upon conversion of
Class C Stock and (ii) an additional 115,600 Options owned by Mr.
Johnson that are not exercisable currently or within the next 60
days. For additional information on Mr. Johnson's beneficial
ownership of equity securities of the Company and the voting
powers associated with them, see "INFORMATION CONCERNING THE
SPECIAL MEETING -- Record Date; Voting at the Meeting; Quorum"
and "SECURITIES OWNERSHIP -- Beneficial Ownership of More Than 5%
of Class A Stock."
(2) Excludes shares of Common Stock owned by Robert L. Johnson, Mrs.
Johnson's husband, as to which Mrs. Johnson disclaims beneficial
ownership. Includes 110,500 shares of Class A Common Stock which
are subject to purchase upon exercise of Options. The remaining
100 shares are directly owned by Mrs. Johnson. Mrs. Johnson
owns an additional 34,000 Options not reflected in the table that
will become exercisable and receive the Option Consideration upon
consummation of the Merger. See "SPECIAL FACTORS Interests of
Certain Persons in the Merger; Certain Relationships."
(3) Dr. Malone is a director and Chairman of the Board of Liberty.
Dr. Malone is also Chairman of the Board and Chief Executive
Officer of TCI. Dr. Malone disclaims beneficial ownership of
1,831,600 shares of Class A Stock and 1,831,600 shares of Class B
Stock owned of record by LMC BET, Inc. ("LMC BET"), a wholly
owned subsidiary of Liberty, and beneficially owned by TCI, none
of which have been attributed to him in the table.
(4) Mr. Bennett is an Executive Vice President of TCI and the
President and Chief Executive Officer of Liberty. Mr. Bennett
disclaims beneficial ownership of 1,831,600 shares of Class A
Stock and 1,831,600 shares of Class B Stock owned of record by
LMC BET and beneficially owned by TCI, none of which have been
attributed to him in the table.
(5) Includes 4,436 shares as to which Mr. Wilkins shares voting and
investment power with two limited partners of Syndicated
Communications Venture Partners II, L.P.
(6) Includes (i) 198,000 shares of Class A Stock subject to purchase
upon exercise of Options owned by Ms. Lee that are exercisable
currently or within the next 60 days; (ii) 100 shares of Class A
Stock held by her spouse, with respect to which Ms. Lee disclaims
beneficial ownership; and (iii) 100 shares of Class A Stock held
by an investment club in which Ms. Lee is a member, with respect
to which Ms. Lee disclaims beneficial ownership. The remaining
350 shares are directly owned by Ms. Lee. Ms. Lee owns an
additional 34,000 Options not reflected in the table that will
become exercisable and receive the Option Consideration upon
consummation of the Merger. See "SPECIAL FACTORS Interests of
Certain Persons in the Merger; Certain Relationships."
(7) Includes 157,800 shares of Class A Stock subject to purchase upon
exercise of Options owned by Mr. Ebron that are exercisable
currently or within the next 60 days. Mr. Ebron owns an
additional 34,000 Options not reflected in the table that will
become exercisable and receive the Option Consideration upon
consummation of the Merger. See "SPECIAL FACTORS Interests of
Certain Persons in the Merger; Certain Relationships."
(8) Includes 183,000 shares of Class A Stock subject to purchase upon
exercise of Options owned by Mr. Gordon that are exercisable
currently or withing the next 60 days. The remaining 842 shares
are directly owned by Mr. Gordon. Mr. Gordon owns an additional
34,000 Options not reflected in the table that will become
exercisable and receive the Option Consideration upon
consummation of the Merger. See "SPECIAL FACTORS Interests of
Certain Persons in the Merger; Certain Relationships."
(9) Includes 198,000 shares of Class A Stock subject to purchase upon
exercise of Options owned by Ms. Thomas that are exercisable
currently or within the next 60 days. Ms. Thomas shares voting
and investment power in the remaining 100 shares with her spouse.
Ms. Thomas owns an additional 34,000 Options not reflected in the
table that will become exercisable and receive the Option
Consideration upon consummation of the Merger. See "SPECIAL
FACTORS -- Interests of Certain Persons in the Merger; Certain
Relationships."
(10) Includes 178,000 shares of Class A Stock subject to purchase upon
exercise of Options owned by Mr. Lee that are exercisable
currently or within the next 60 days. Mr. Lee owns an
additional 34,000 Options not reflected in the table that will
become exercisable and receive the Option Consideration upon
consummation of the Merger. See "SPECIAL FACTORS Interests of
Certain Persons in the Merger; Certain Relationships."
(11) Includes 146,695 shares of Class A Stock subject to purchase upon
exercise of Options owned by Mr. Symonds that are exercisable
currently or within the next 60 days. Mr. Symonds owns an
additional 34,000 Options not reflected in the table that will
become exercisable and receive the Option Consideration upon
consummation of the Merger. See "SPECIAL FACTORS Interests of
Certain Persons in the Merger; Certain Relationships."
(12) Includes 6,000 shares of Class A Stock subject to purchase upon
exercise of Options owned by Mr. Carr that are exercisable
currently or within the next 60 days. Mr. Carr owns an
additional 12,000 Options not reflected in the table that will
become exercisable and receive the Option Consideration upon
consummation of the Merger. See "SPECIAL FACTORS Interests of
Certain Persons in the Merger; Certain Relationships."
(13) Includes 18,000 shares of Class A Stock subject to purchase upon
exercise of Options owned by Ms. Coley that are exercisable
currently or within the next 60 days. Ms. Coley owns an
additional 12,000 Options not reflected in the table that will
become exercisable and receive the Option Consideration upon
consummation of the Merger. See "SPECIAL FACTORS Interests of
Certain Persons in the Merger; Certain Relationships."
(14) Excludes Class A Stock issuable upon conversion of Class C Stock.
TCI AND LIBERTY. No director, executive officer or controlling person
of TCI or Liberty, or any pension, profit-sharing or similar plan of TCI or
Liberty or any associate or majority-owned subsidiary of TCI or Liberty
beneficially owns any Class A Stock of the Company. Dr. John C. Malone,
the Chairman of the Board and Chief Executive Officer of TCI and a director
and Chairman of the Board of Liberty, disclaims beneficial ownership of
1,831,600 shares of Class A Stock and 1,831,600 shares of Class B Stock
owned of record by LMC BET, Inc., a wholly owned subsidiary of Liberty, and
beneficially owned by TCI. Mr. Robert R. Bennett, an Executive Vice
President of TCI and the President and Chief Executive Officer of Liberty,
also disclaims beneficial ownership of the 1,831,600 shares of Class A
Stock and 1,831,600 shares of Class B Stock owned of record by LMC BET,
Inc. and beneficially owned by TCI.
BTV ACQUISITION. None of BTV Acquisition, any pension, profit-sharing
or similar plan of BTV Acquisition or any associate or majority-owned
subsidiary of BTV Acquisition beneficially owns any shares of Class A
Stock. No director, executive officer or controlling person of BTV
Acquisition beneficially owns any shares of Class A Stock other than Mr.
Johnson and TCI. The beneficial ownership information for Mr. Johnson is
provided above in this section under the subheading "The Company" and the
beneficial ownership information for TCI is provided above in this section
under the subheading "TCI."
ASSOCIATES OF MR. JOHNSON. FW Strategic Partners, L.P., an investment
partnership in which Mr. Johnson is a limited partner, beneficially owns
842,105 shares of the Company's Class A Stock. No other associate of Mr.
Johnson beneficially owns any of the Company's Class A Stock other than his
spouse, Sheila Crump Johnson. The beneficial ownership information for
Sheila Crump Johnson is provided above in this section under the subheading
"The Company."
OWNERSHIP OF BTV ACQUISITION COMMON STOCK BY DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY
BTV Acquisition is owned 65% by Mr. Johnson and 35% by Liberty. None
of the officers and directors of the Company (other than Mr. Johnson and,
with respect to the shares owned by Liberty, Messrs. Bennett and Malone)
currently own any shares of common stock of BTV Acquisition; however, the
Buying Group has offered certain executive officers of the Company the
opportunity to continue certain of their Options in the Surviving
Corporation following the Merger. The terms upon which such executive
officers would receive an equity interest in the Surviving Corporation and
the form of such equity interest are currently under discussion.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the name and business address of each director,
executive officer and controlling person of the Company, the present
principal occupation or employment of each such person and the name,
principal business and address of the corporation or other organization in
which such occupation or employment of each such person is conducted, and
the material occupations, positions, offices and employment and the name,
principal business and address of any corporation or other organization in
which any material occupation, position, office or employment of each such
person was held during the last five years. Each person listed below is a
citizen of the United States. Unless otherwise indicated below, the
business address of each director and executive officer is One BET Plaza,
1900 W Place, N.E., Washington, D.C. 20018-1211.
Name Business Address and Principal Occupations
- - - --- ------------------------------------------
Robert L. Johnson Mr. Johnson founded BET, the Company's primary
operating subsidiary, in 1979. Mr. Johnson has
served as President, Chief Executive Officer and a
director of BET since its creation. Since 1991,
Mr. Johnson has served as the Chairman of the
Company's Board of Directors. Since 1991, Mr.
Johnson has also served as Chief Executive Officer
of the Company and has served as its President from
1991 until March 1996. Mr. Johnson is also the
Chairman of DCI, a Washington, D.C. cable operating
company which he founded in 1980, and served as a
director of a predecessor of Liberty from December
1991 until August 1994. Since January 1994, Mr.
Johnson has served as a director of Hilton Hotels
Corporation and has served as a director of US
Airways Group, Inc. since January 1998.
John C. Malone Dr. Malone has served as a director of the Company
since 1991, as a director of BET since 1979 and as the
Chairman of BET from 1979 to 1991. Dr. Malone has
served as a director of TCI since June of 1994 and as
Chairman of the Board of TCI since November 1996. Dr.
Malone has served as Chief Executive Officer of TCI
since January 1994; President of TCI from January 1994
through March 1997; Chief Executive Officer of TCI
Communications, Inc., a subsidiary of TCI and
predecessor company to TCI ("TCIC"), from March 1992
to October 1994; and President of TCIC from 1973 to
October 1994. Since 1973 Dr. Malone has served as a
director of TCIC. Dr. Malone has served as Chairman
of the Board and a director of Tele-Communications
International, Inc., a majority owned subsidiary of TCI
("TCI International") since May 1995 and has served as
a director of TCI Pacific Communications, Inc., a
subsidiary of TCI ("TCI Pacific"), since July 1996. In
addition, Dr. Malone is President and a director of
many of TCI's subsidiaries. Dr. Malone is a director
of The Bank of New York, At Home Corporation, TCI
Satellite Entertainment, Inc. ("TCI Satellite"),
Lenfest Communications, Inc. ("Lenfest") and
Cablevision Systems Corporation ("CSC"). The business
address of Dr. Malone and the address for TCI is 5619
DTC Parkway, Englewood, CO 80111.
Robert R. Bennett Mr. Bennett has served as a director of the Company
since 1997. Since April 1997, Mr. Bennett has
served as an Executive Vice President of TCI and as
President and Chief Executive Officer of Liberty.
From June 1995 through March 1997, Mr. Bennett was
an Executive Vice President, Chief Financial
Officer, Secretary and Treasurer of Liberty. Mr.
Bennett served as Senior Vice President of Liberty
from September 1991 to June 1995. Mr. Bennett has
served as a director of TCI Music, Inc. since
January 1997 and as a director of Limited Video
Satellite Group, Inc. since February, 1998. The
business address of Mr. Bennett and the address for
Liberty is 8101 E. Prentice Avenue, Englewood, CO
80134.
Herbert P. Wilkins, Sr. Mr. Wilkins has served as a director of the
Company since 1991 and has served as a director of
BET since 1983. Since 1990, Mr. Wilkins has been
the President of Syncom Management Company, Inc.,
formally, W&J Management Company, Inc., which
manages a group of minority oriented venture
capital funds, including Syndicated
Communications, Inc., Syncom Capital Corporation,
Syndicated Communications Venture Partners II,
L.P. and Syndicated Communications Venture
Partners III, L.P. From 1977 to 1989, Mr. Wilkins
served as President of Syndicated Communications,
Inc. He has also been a director of DCI since
1982. Of the funds managed by Syncom Management
Company, Inc., Syndicated Communications, Inc. is
a shareholder of DCI. Mr. Wilkins has served as
a director of Cowles Media Company since 1992.
The business address of Mr. Wilkins and the
address for Syncom Management Company, Inc. is
8401 Colesville Road, Suite 300, Silver Spring, MD
20910.
Delano E. Lewis Mr. Lewis has served as a director of the Company
since 1994. He has been President and Chief
Executive Officer of National Public Radio since
January 1994. From January 1990 to January 1994,
Mr. Lewis served as Chief Executive Officer of C&P
Telephone Company, a subsidiary of Bell Atlantic.
From July 1988 to January 1990, Mr. Lewis was
President of C&P Telephone Company. Mr. Lewis also
serves as a director of Colgate Palmolive, Guest
Services and Halliburton Company. The business
address of Mr. Lewis and the address for National
Public Radio is 635 Massachusetts Avenue, N.W.,
Washington, D.C. 20001-3753.
Denzel Washington Mr. Washington has served as a director of the
Company since 1996. He is an Academy Award winning
and critically acclaimed feature film actor. Mr.
Washington also serves as director of the Sundance
Institute. Mr. Washington's business address is
c/o Brian Murphy, Murphy & Kress, 2401 Main Street,
Santa Monica, California 90405.
Sheila Crump Johnson Mrs. Johnson has served as a director of the
Company since 1991 and a director of BET since
1979. Mrs. Johnson has also served as Executive
Vice President, Corporate Affairs of the Company
since September 1992 and as Vice President,
Corporate Affairs of BET since 1990. From
September 1991 to September 1992, she served as
Vice President, Corporate Affairs of the Company.
Prior to 1990, Mrs. Johnson was a lecturer and
author in the area of early childhood music
education.
Debra L. Lee Ms. Lee has served as President and Chief Operating
Officer since March 1996. Prior to that time Ms.
Lee served as an Executive Vice President of the
Company since September 1992. From September 1991
until May 1997, she served as the General Counsel
and Secretary of the Company. From September 1991
to September 1992, she served as a Vice President
of the Company. Ms. Lee has also served as Vice
President and General Counsel of BET since April
1986. In July 1991, she became the Secretary of
BET.
William T. Gordon, III Mr. Gordon has served as Executive Vice President,
Chief Financial Officer and Treasurer since August
1993. From 1987 to 1993, Mr. Gordon was a partner
with the accounting firm of Price Waterhouse LLP.
Mr. Gordon was BET's audit partner on behalf of
Price Waterhouse LLP between 1989 and early 1992.
Mr. Gordon joined Price Waterhouse LLP in 1975.
James A. Ebron Mr. Ebron has served as Executive Vice President,
Corporate Media Sales since September 1995. He
previously served as Executive Vice President, Media
Sales since 1992. Prior to that time, Mr. Ebron served
as Vice President, Network Sales of the Company from
September 1991 to September 1992 and as Vice President,
Network Sales of BET from August 1983 until September
1991.
Jefferi K. Lee Mr. Lee has served as Executive Vice President,
Network Operations and Programming since September
1992. Mr. Lee served as Vice President, Network
Operations of the Company from September 1991 to
September 1992 and of BET since September 1982.
Curtis N. Symonds Mr. Symonds has served as Executive Vice President,
Affiliate Sales and Marketing since September 1992.
Mr. Symonds served as Vice President, Affiliate
Marketing of the Company from September 1991 to
September 1992 and of BET since July 1988.
Janis P. Thomas Ms. Thomas has served as Executive Vice President,
Brand Marketing and Licensing since August 1997.
She previously served as Executive Vice President,
Marketing and Merchandising from May 1996 to August
1997. Ms. Thomas served as Executive Vice
President, Direct Marketing and Advertising
Services from September 1992 to April 1996. Ms.
Thomas served as Vice President, Advertising
Services of the Company from September 1991 to
September 1992 and of BET since September 1982.
Louis Carr Mr. Carr has served as Senior Vice President,
National Media Sales since January 1995. Prior to
that time, Mr. Carr served as Vice President,
Midwest Advertising from August 1992 to January
1995. From August 1989 to August 1992, he served
as Director, Midwest Advertising. He joined the
Company as an account executive in August 1986.
Maurita Coley Ms. Coley has served as Senior Vice President, Network
Operations and Programming, since August 1995. Prior
to that time, Ms. Coley served as Senior Vice
President, Legal Affairs of the Company from February
1993 through August 1995. Prior to February 1993, Ms.
Coley was a partner with the Washington, D.C. law firm
of Cole, Raywid and Braverman. Ms. Coley joined Cole,
Raywid & Braverman in November 1983.
Byron F. Marchant Mr. Marchant has served as Senior Vice President
and General Counsel since May 1997. Mr. Marchant
was a partner at Patton Boggs, L.L.P. from 1996 to
1997. Prior to 1996, Mr. Marchant was Senior Vice
President and General Counsel for
TeleCommunications Systems, Inc. Mr. Marchant has
also held previous positions as senior legal
advisor to Commissioner Andrew Barrett of the
Federal Communications Commission and as an
attorney with the law firm of Sidley & Austin.
Scott Mills Mr. Mills has served as Senior Vice President,
Business Development since September 1997. Prior
to that time, Mr. Mills was a Vice President with
the investment banking firm of Lehman Brothers
since 1993.
Robert L. Johnson and Sheila Crump Johnson are married to one another.
No other family relationships exist among any executive officers or
directors of the Company.
DIRECTORS AND EXECUTIVE OFFICERS OF BTV ACQUISITION
Mr. Johnson and Mr. Bennett are the initial directors and executive
officers of BTV Acquisition. Information regarding Mr. Johnson and Mr.
Bennett is set forth above in this section under the subheading "Directors
and Executive Officers of the Company." The Buying Group is presently
considering inviting Messrs. Lewis, Malone, Washington and Wilkins and Mrs.
Johnson to join the Board of Directors of the Surviving Corporation
following the Merger; however, no determination has been made in such
regard.
DIRECTORS AND EXECUTIVE OFFICERS OF TCI
Set forth below are the name and business address of each director,
executive officer and controlling person of TCI (other than Dr. John C.
Malone and Mr. Robert R. Bennett), the present principal occupation or
employment of each such person and the name, principal business and address
of the corporation or other organization in which such occupation or
employment of each such person is conducted, and the material occupations,
positions, offices and employment and the name, principal business and
address of any corporation or other organization in which any material
occupation, position, office or employment of each such person was held
during the last five years. Information regarding Dr. Malone, the Chairman
of the Board and Chief Executive Officer of TCI, and Mr. Bennett, an
Executive Vice President of TCI and the President and Chief Executive
Officer of Liberty, is set forth above in this section under the subheading
"Directors and Executive Officers of the Company." Each person listed
below is a citizen of the United States. Unless otherwise indicated below,
the business address of each director and executive officer is 5619 DTC
Parkway, Englewood, CO 80111.
Name Business Address and Principal Occupations
- - - ---- ------------------------------------------
John W. Gallivan Mr. Gallivan has served as a director of TCI since
June 1994. Mr. Gallivan served as the Chairman of
the Board and a director of Kearns-Tribune
Corporation ("Kearns") from 1953 until the
acquisition of Kearns by TCI in July 1997. In
August 1997, Mr. Gallivan was appointed as a
director of Kearns following Kearns becoming a
subsidiary of TCI. Mr. Gallivan served as a
director of TCIC from 1980 to August 1994, and has
served as a director of TCIC since January 1996.
Mr. Gallivan is a director of the Silver King
Mining Company. Mr. Gallivan's business address
and the address for Kearns is 400 Tribune Building,
Salt Lake City, UT 84111.
Paul A. Gould Mr. Gould has served as a director of TCI since
December 1996. Mr. Gould has been a Managing
Director and an Executive Vice President of Allen &
Company Incorporated, an investment banking
services company, for more than the last five
years. Mr. Gould has served as a director of TCI
International since July 1995. Mr. Gould is a
director of Ascent Entertainment Group, Inc. and
Sunburst Hospitality Corporation. Mr. Gould's
business address and the address for Allen &
Company is 711 5th Avenue, New York, NY 10022
Jerome H. Kern Mr. Kern has served as a director of TCI since June
1994. Mr. Kern is a consultant and has been Special
Counsel with the law firm of Baker & Botts, L.L.P.
since July 1996 and was a senior partner with Baker &
Botts, L.L.P. from September 1992 to July 1996. Mr.
Kern served as a director of TCIC from December 1993
to August 1994, has served as a director of TCI
International since May 1995, and has served as a
director of TCI Pacific, since February 1998. Mr.
Kern's business address and the address for Baker &
Botts, L.L.P. is 599 Lexington Avenue, New York, NY,
10022.
Leo J. Hindery, Jr. Mr. Hindery has served as a director of TCI since
May 1997. Mr. Hindery has served as the President
and Chief Operating Officer of TCI since March
1997. Mr. Hindery has served as President and
Chief Executive Officer of TCIC since March 1997
and has served as President and Chief Executive
Officer of TCI Pacific since September 1997. Mr.
Hindery has served as a director of TCIC since
March 1997, has served as a director of TCI Pacific
since September 1997, and has served as Chairman of
the Board and a director of TCI Music, Inc., a
subsidiary of TCI ("TCI Music"), since January
1997. Mr. Hindery was appointed a director of TCI
International in April. In addition, Mr. Hindery
is President, Chief Executive Officer and/or a
director of many of TCI's subsidiaries. Mr.
Hindery was previously founder, Managing General
Partner and Chief Executive Officer of InterMedia
Partners, a cable TV operator, and its affiliated
entities from 1988 to march 1997. Mr. Hindery is a
director of United Video Satellite Group, Inc.
("UVSG") and At Home Corporation, both of which are
consolidated subsidiaries of TCI. Mr. Hindery is
also a director of TCI Satellite, Lenfest and CSC.
Robert A. Naify Mr. Naify has served as a director of TCI since
June 1994. Mr. Naify is Co-Chairman and a director
of The Todd-AO Corporation. Mr. Naify served as a
TCIC director from June 1987 to August 1994. Mr.
Naify's business address is and the address of The
Todd-AO Corporation is 172 Goldengate Avenue, San
Fransisco, CA 94102.
Donne F. Fisher Mr. Fisher has served as a director of TCI since
June 1994. Mr. Fisher was an Executive Vice
President of TCI from January 1994 through January
1, 1996. On January 1, 1996, Mr. Fisher resigned
his position as Executive Vice President of TCI and
has been providing consulting services to TCI since
January 1996. Mr. Fisher served as an Executive
Vice President of TCIC from December 1991 to
October 1994. Mr. Fisher has served as a TCIC
director since 1980, has served as a director of
TCI Pacific since July 1996, and has served as a
director of TCI Music since January 1997. Mr.
Fisher is a director of General Communications,
Inc.
Kim Magness Mr. Magness has served as a director of TCI since
June 1994. Mr. Magness manages numerous personal
and business investments, and is Chairman and
President of a company developing liners for
irrigation canals. Mr. Magness served as a
director of TCIC from 1985 to August 1994 and from
January 1996 to October 1997. Mr. Magness'
business address is 4000 E. Belleview Avenue,
Greenwood Village, CO 81121.
J. C. Sparkman Mr. Sparkman has served as a director of TCI since
December 1996. Mr. Sparkman served as an Executive
Vice President of TCI from January 1994 to March 1995.
Mr. Sparkman retired in March 1995 and has provided
consulting services to TCI since March 1995. Mr.
Sparkman served as an Executive Vice President of TCIC
from 1987 to October 1994. Mr. Sparkman is a director
of Shaw Communications, Inc. and TCI Music.
Stephen M. Brett Mr. Brett has served as an Executive Vice
President, the General Counsel, and the Secretary
of TCI since January 1994. Mr. Brett has served as
an Executive Vice President of TCIC since October
1997, served as a Senior Vice President of TCIC
from 1991 to October 1997, and has served as
General Counsel of TCIC since 1991. Mr. Brett is a
Vice President and Secretary of most of TCI's
subsidiaries.
Gary K. Bracken Mr. Bracken has served as the Controller of TCIC
since 1969. Mr. Bracken has served as an Executive
Vice President of TCIC since December 1997 and has
served as Senior Vice President of TCIC from
December 1991 to December 1997. Mr. Bracken has
been a Senior Vice President of TCI Pacific since
July 1996.
Gary S. Howard Mr. Howard has served as an Executive Vice President of
TCI since December 1997. Mr. Howard has served as
President and Chief Executive Officer of TCI Ventures
Group, LLC, a subsidiary of TCI ("Ventures LLC"),
since December 1997. Mr. Howard has served as Chief
Executive Officer of TCI Satellite, a distributor of
satellite-based television services, since December
1996 and also served as President of TCI Satellite
from February 1995 to August 1997. Since June 1997,
Mr. Howard also has served as Chief Executive Officer
of UVSG. Mr. Howard served as President of UVSG from
June 1997 to September 1997, a Senior Vice President
of TCIC from October 1994 to December 1996 and as a
Vice President of TCIC from December 1991 to October
1994.
Marvin L. Jones Mr. Jones has served as an Executive Vice President
of TCI since April 1998. Mr. Jones has served as
an Executive Vice President and the Chief Operating
Officer of TCIC since March 1997. Mr. Jones was
appointed a director of TCIC in October 1997. From
November 1996 to March 1997, Mr. Jones served as
the President of one of TCIC's three cable units.
Previously, Mr. Jones was a consultant in the cable
television industry from 1991 to November 1996.
Mr. Jones is a Vice President of various TCI
subsidiaries.
Larry E. Romrell Mr. Romrell has served as an Executive Vice
President of TCI since January 1994. Mr. Romrell
has served as the Executive Vice President and
Chief Executive Officer of TCI Business Alliance
and Technology Co., Inc., a subsidiary of TCI, a
Senior Vice President of Ventures LLC since
December 1997, and President of TCI Technology
Ventures, Inc., a subsidiary of TCI, from September
1994 to October 1997. Mr. Romrell served as Senior
Vice President of TCIC from 1991 to October 1994.
Bernard W. Schotters, II Mr. Schotters has served as Senior Vice President
and Treasurer of TCI since October 1997. Mr.
Schotters has served as an Executive Vice
President of TCIC since December 1997 and served
as Senior Vice President-Finance of TCIC from
December 1991 to December 1997. Mr. Schotters has
served as Treasurer of TCIC since December 1991.
Mr. Schotters is a Vice President and Treasurer of
most of TCI's subsidiaries.
DIRECTORS AND EXECUTIVE OFFICERS OF LIBERTY
Set forth below are the name and business address of each director,
executive officer and controlling person of Liberty (other than Dr. John C.
Malone and Mr. Robert R. Bennett), the present principal occupation or
employment of each such person and the name, principal business and address
of the corporation or other organization in which such occupation or
employment of each such person is conducted, and the material occupations,
positions, offices and employment and the name, principal business and
address of any corporation or other organization in which any material
occupation, position, office or employment of each such person was held
during the last five years. Information regarding Dr. Malone, a director
of Liberty, and Mr. Bennett, a director and executive officer of Liberty,
is set forth above in this section under the subheading "Directors and
Executive Officers of the Company." Unless otherwise indicated below, each
person listed below is a citizen of the United States and the business
address of each director and executive officer is 8101 East Prentice
Avenue, Englewood, CO 80111.
Name Business Address and Principal Occupations
- - - --- ------------------------------------------
Vivian J. Carr Ms. Carr has served as Vice President-Investor
Relations for Liberty since June 1993. Prior to
such date, Ms. Carr served as Director of Investor
Relations for Liberty.
David Flowers Mr. Flowers has served as a Vice President-Treasurer
of Liberty since April 1997. From June 1995 to April
1997, Mr. Flowers served as Vice President-Portfolio
Manager of Liberty. From January 1993 to June 1995,
Mr. Flowers was Managing Director-Communications
Finance for Toronto Dominion Bank. Mr. Flowers is a
Canadian citizen.
David A. Jensen Mr. Jensen has served as Vice President of Liberty
since May 1997. From November 1993 to May 1997,
Mr. Jensen served as Director and Vice President of
Programming for TCI. From February 1993 to
November 1993, Mr. Jensen was a tele-communications
consultant and provided services to TCI. Mr.
Jensen served as Deputy Assistant Secretary for
International Economic Policy (Africa, the Near
East and South Asia) with the United States
Department of Commerce from January 1991 to January
1993.
David B. Koff Mr. Koff has served as Senior Vice President of
Liberty since February 1998. From August 1994 to
February 1998, Mr. Koff was Vice President,
Corporate Development of Liberty. Mr. Koff served
as Special Counsel to Liberty from March 1993 to
August 1994.
INDEPENDENT ACCOUNTANTS
The firm of Price Waterhouse LLP has served as the Company's
independent accountants since fiscal 1989. The consolidated financial
statements of the Company for the fiscal year ended July 31, 1997,
incorporated herein by reference to the Company's Annual Report on Form
10-K, as amended, have been audited by Price Waterhouse LLP, independent
accountants, as stated in their report appearing therein. It is expected
that representatives of Price Waterhouse LLP will be present at the Special
Meeting, both to respond to appropriate questions of stockholders of the
Company and to make a statement if they so desire.
STOCKHOLDER PROPOSALS
If the Merger is consummated, there will be no public stockholders of
the Company and no public participation in any future meetings of
stockholders of the Company. However, if the Merger is not consummated,
the Company's public stockholders will continue to be entitled to attend
and participate in the Company's stockholder meetings. Pursuant to Rule
14a-8 promulgated by the SEC, any stockholder of the Company who wishes to
present a proposal at the next Annual Meeting of Stockholders of the
Company (in the event the Merger is not consummated), and who wishes to
have such proposal included in the Company's proxy statement for that
meeting must deliver a copy of such proposal to the Company at One BET
Plaza, 1900 W Place, N.E., Washington, D.C. 20018-1211, Attention:
Corporate Secretary, within a reasonable time before the Company delivers
its proxy statement to stockholders for that meeting in order for such
proposal to be considered by the Board of Directors for inclusion in the
proxy statement.
In order for a stockholder to bring other business before a
stockholder meeting, timely notice must be received by the Company within a
reasonable time before the Company delivers its proxy statement to
stockholders for that stockholder meeting. Such notice must include a
description of the proposed business, the reasons therefor, and other
specific matters. These requirements are separate from and in addition to
the requirements a stockholder must meet to have a proposal considered for
inclusion in the Company's proxy statement. In each case, the notice must
be given to the Secretary of the Company at the address listed above. Any
stockholder desiring a copy of the Company's Bylaws will be furnished one
without charge upon written request to the Secretary.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows the Company to "incorporate by reference" information
into its Proxy Statement, which means that the Company can disclose
important information by referring you to another document filed separately
with the SEC. The following documents are incorporated by reference in
this Proxy Statement and are deemed to be a part hereof:
(1) The Company's Annual Report on Form 10-K for the fiscal year
ended July 31, 1997, as amended by Amendment No. 1, filed on
November 28, 1997, to the Company's Annual Report on Form 10-K/A
for such fiscal year, and by Amendment No. 2, filed on January
14, 1998, to the Company's Annual Report on Form 10-K/A for such
fiscal year;
(2) The Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended January 31, 1998;
(3) The Company's Current Report on Form 8-K filed on March 20, 1998;
and
(4) All documents filed by the Company pursuant to Section 13(a) and
15(d) of the Exchange Act since July 31, 1997.
Any statement contained in a document incorporated by reference shall
be deemed to be modified or superseded for all purposes to the extent that
a statement contained in this Proxy Statement modifies or replaces such
statement.
The Company also incorporates by reference the information contained
in all other documents the Company files with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement and before the Special Meeting. The information contained in any
such document will be considered part of this Proxy Statement from the date
the document is filed and will supplement or amend the information
contained in this Proxy Statement.
The Company undertakes to provide by first class mail, without charge
and within one business day of receipt of any request, to any person to
whom a copy of this Proxy Statement has been delivered, a copy of any or
all of the documents referred to above which have been incorporated by
reference in this Proxy Statement, other than exhibits to such documents
(unless such exhibits are specifically incorporated by reference therein).
The Company's Annual Report on Form 10-K for the fiscal year ended July 31,
1997, as amended, is accompanied by a list briefly describing all the
exhibits not contained therein. The Company will furnish any exhibit upon
the payment of a specified reasonable fee, which fee will be limited to the
Company's reasonable expenses in furnishing such exhibit. Requests for
such copies should be directed to Secretary, BET Holding, Inc., One BET
Plaza, 1900 W Place, N.E., Washington, D.C. 20018-1211; telephone number
(202) 608-2000.
OTHER BUSINESS
The Board of Directors does not know of any other matters to be
presented for action at the Special Meeting other than as set forth in this
Proxy Statement. If any other business should properly come before the
meeting, the persons named in the accompanying form of proxy intend to vote
thereon in accordance with their best judgment unless they are directed by
a proxy to do otherwise.
AVAILABLE INFORMATION
Because the merger is a "going private" transaction, BTV Acquisition,
Mr. Johnson, TCI, and the Company have filed a Rule 13e-3 Transaction
Statement on Schedule 13E-3 under the Exchange Act with respect to the
Merger. The Schedule 13E-3 and the reports, proxy statements and other
information contain additional information about the Company. A copy of
the written report presented by Goldman Sachs to the Special Independent
Committee, including Goldman Sachs' opinion as to the fairness of the
consideration to be received in the Merger, was filed as an exhibit to such
Schedule 13E-3. Copies of the Schedule 13E-3 are available for inspection
and copying at the principal executive offices of the Company during
regular business hours by any interested stockholder of the Company, or a
representative who has been so designated in writing, and may be inspected
and copied, or obtained by mail by written request directed to Secretary,
BET Holdings, Inc., One BET Plaza, 1900 W Place, N.E., Washington, D.C.
20018-1211; telephone number (202) 608-2000.
The Company is currently subject to the informational requirements of
the Exchange Act and in accordance therewith files periodic reports, proxy
statements and other information with the SEC relating to its business,
financial and other matters. Copies of such reports, proxy statements and
other information, as well as the Schedule 13E-3, may be copied (at
prescribed rates) at the public reference facilities maintained by the SEC
at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549 and at the following Regional Offices of the SEC: 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center,
Suite 1300, New York, New York 10048. For further information concerning
the SEC's public reference rooms, you may call the SEC at 1-800-SEC-0330.
Some of this information may also be accessed on the World Wide Web through
the SEC's Internet address at "http://www.sec.gov." The Company's Class A
Stock is listed on the NYSE, and materials may also be inspected at its
offices, 20 Broad Street, New York, New York 10005.
By Order of the Board of Directors
Byron F. Marchant
Secretary
Washington, D.C.
[ , 1998]
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AMONG
ROBERT L. JOHNSON,
LIBERTY MEDIA CORPORATION,
BTV ACQUISITION CORPORATION
AND
BET HOLDINGS, INC.
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.02. Effective Time . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.03. Closing . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.04. Effects of the Merger . . . . . . . . . . . . . . . . . .
SECTION 1.05. Certificate of Incorporation . . . . . . . . . . . . . . .
SECTION 1.06. Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.07. Directors and Officers . . . . . . . . . . . . . . . . . .
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities . . . . . . . . . . . . . . . . .
SECTION 2.02. Exchange of Certificates and Cash . . . . . . . . . . . .
SECTION 2.03. Stock Transfer Books . . . . . . . . . . . . . . . . . . .
SECTION 2.04. Stock Options; Payment Rights . . . . . . . . . . . . . .
SECTION 2.05. Dissenting Shares . . . . . . . . . . . . . . . . . . . .
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualifications; Subsidiaries . . . . . .
SECTION 3.02. Certificate of Incorporation and Bylaws . . . . . . . . .
SECTION 3.03. Capitalization . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.04. Authority Relative to This Agreement . . . . . . . . . . .
SECTION 3.05. No Conflict; Required Filings and Consents . . . . . . . .
SECTION 3.06. Compliance; Permits . . . . . . . . . . . . . . . . . . .
SECTION 3.07. SEC Filings; Financial Statements . . . . . . . . . . . .
SECTION 3.08. Absence of Certain Changes and Events . . . . . . . . . .
SECTION 3.09. Employee Benefit Plans . . . . . . . . . . . . . . . . . .
SECTION 3.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.11. Absence of Litigation . . . . . . . . . . . . . . . . . .
SECTION 3.12. Franchises, Intellectual Property, Etc. . . . . . . . . .
SECTION 3.13. FCC and Copyright Matters. . . . . . . . . . . . . . . . .
SECTION 3.14. Opinion of Financial Advisor . . . . . . . . . . . . . . .
SECTION 3.15. Board Approval . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.16. Brokers . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.17. No Actual Knowledge . . . . . . . . . . . . . . . . . . .
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF JOHNSON, LIBERTY AND BUYER
SECTION 4.01. Authority Relative to This Agreement . . . . . . . . . . .
SECTION 4.02. No Conflict; Required Filings and Consents . . . . . . . .
SECTION 4.03. Organization and Qualification . . . . . . . . . . . . . .
SECTION 4.04. Certificate of Incorporation and Bylaws . . . . . . . . .
SECTION 4.05. Authority Relative to This Agreement . . . . . . . . . . .
SECTION 4.06. No Conflict; Required Filings and Consents . . . . . . . .
SECTION 4.07. Organization and Qualification. . . . . . . . . . . . . .
SECTION 4.08. Certificate of Incorporation and Bylaws . . . . . . . . .
SECTION 4.09. Authority Relative to This Agreement . . . . . . . . . . .
SECTION 4.10. No Conflict; Required Filings and Consents . . . . . . . .
SECTION 4.11. Brokers . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.12. Financing . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger . .
ARTICLE VI
ADDITIONAL COVENANTS
SECTION 6.01. Access to Information; Confidentiality . . . . . . . . . .
SECTION 6.02. Proxy Statement; Schedule 13E-3 . . . . . . . . . . . . .
SECTION 6.03. Action by Stockholders . . . . . . . . . . . . . . . . . .
SECTION 6.04. No Solicitation . . . . . . . . . . . . . . . . . . . . .
SECTION 6.05. Directors' and Officers' Indemnification . . . . . . . . .
SECTION 6.06. Notification of Certain Matters . . . . . . . . . . . . .
SECTION 6.07. Further Action; Best Efforts . . . . . . . . . . . . . . .
SECTION 6.08. Public Announcements. . . . . . . . . . . . . . . . . . .
SECTION 6.09. Conveyance Taxes . . . . . . . . . . . . . . . . . . . . .
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party to Effect the Merger
SECTION 7.02. Additional Conditions to Obligations of Buyer . . . . . .
SECTION 7.03. Additional Conditions to Obligations of the Company . . .
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.02. Effect of Termination . . . . . . . . . . . . . . . . . .
SECTION 8.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.04. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.05. Fees, Expenses and Other Payments . . . . . . . . . . . .
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations, Warranties and Agreements
SECTION 9.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.03. Certain Definitions . . . . . . . . . . . . . . . . . . .
SECTION 9.04. Headings . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.05. Severability . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.06. Entire Agreement . . . . . . . . . . . . . . . . . . . . .
SECTION 9.07. Assignment . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.08. Parties in Interest . . . . . . . . . . . . . . . . . . .
SECTION 9.09. Governing Law . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.11. Enforcement of this Agreement . . . . . . . . . . . . . .
SECTION 9.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT A Certificate of Incorporation of BTV Acquisition Corporation
EXHIBIT B Bylaws of BTV Acquisition Corporation
INDEX OF DEFINED TERMS
Defined Term Page
Agreement
Alternative Transaction
Benefit Plans
Buyer
Buyer Material Adverse Effect
Buyer Representatives
Certificates
Class A Stock
Class B Stock
Class C Stock
Closing
Closing Date
Code
Common Stock
Communications Act
Company
Company Charter
Company Disclosure Schedule
Company Material Adverse Effect
Company Option Plan
Company Permits
Company SEC Reports
Company Stockholder Approval
Company Stockholders' Meeting
Company Subsidiary
Confidentiality Agreement
Copyright Act
DGCL
Dissenting Shares
Effective Time
ERISA
ESPP
Exchange Act
Exchange Agent
Exchange Agent Agreement
Exchange Fund
Expenses
Fair Market Value
FCC
Financing
Governmental Entity
HSR Act
Indemnified Parties
IRS
Johnson
Liberty
Liberty Group
Liberty Material Adverse Effect
Merger
Merger Consideration
Options
Preferred Stock
Premium Amount
Proxy Statement
Rights
Schedule 13E-3
Section 203
Securities Act
Special Committee
Surviving Certificate
Surviving Corporation
taxes
TCI
Transmittal Documents
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 15, 1998 (the
"Agreement"), among ROBERT L. JOHNSON ("Johnson"), LIBERTY MEDIA
CORPORATION, a Delaware corporation ("Liberty"), BTV ACQUISITION
CORPORATION., a Delaware corporation ("Buyer"), and BET HOLDINGS, INC., a
Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State
of Delaware (the "DGCL"), Buyer will merge with and into the Company (the
"Merger");
WHEREAS, the Board of Directors of the Company, based on the
recommendation of the Special Committee (as defined below), has determined
that the Merger is fair to, and in the best interests of, the Company and
its stockholders (other than Johnson, Liberty and their respective
affiliates) and has approved this Agreement and has approved the Merger and
the other transactions contemplated hereby and has recommended adoption of
this Agreement by the stockholders of the Company.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL, at
the Effective Time (as defined below), Buyer shall be merged with and into
the Company. Following the Merger, the separate existence of Buyer shall
cease and the Company shall continue as the surviving corporation of the
Merger (the "Surviving Corporation").
SECTION 1.02. Effective Time. At the Closing, the parties hereto
shall cause the Merger to be consummated by filing a certificate of merger
with the Secretary of State of the State of Delaware and by making any
related filings required under the DGCL in connection with the Merger. The
Merger shall become effective at such time as the certificate of merger is
duly filed with the Secretary of State of the State of Delaware or at such
later time as is agreed to by the parties hereto and as is specified in the
certificate of merger (the "Effective Time").
SECTION 1.03. Closing. Unless this Agreement shall have been
terminated pursuant to Section 8.01 and subject to the satisfaction or, if
permissible, waiver of the conditions set forth in Article VII, the closing
of the Merger (the "Closing") will take place as promptly as practicable
(and in any event, within ten business days) after satisfaction or waiver
of the conditions set forth in Article VII, at the offices of the Company,
unless another date, time or place is agreed to in writing by the parties
hereto (such date, the "Closing Date").
SECTION 1.04. Effects of the Merger. From and after the Effective
Time, the Merger shall have the effects set forth in the DGCL (including,
without limitation, Sections 259, 260 and 261 thereof). Without limiting
the generality of the foregoing, and subject thereto, at the Effective
Time, all the properties, rights, privileges, powers and franchises of the
Company and Buyer shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Buyer shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 1.05. Certificate of Incorporation. The certificate of
incorporation of the Company shall be amended in the Merger to read in its
entirety as set forth in Exhibit A hereto, and as so amended shall be the
certificate of incorporation of the Surviving Corporation (the "Surviving
Certificate") until thereafter amended in accordance with the DGCL.
SECTION 1.06. Bylaws. The bylaws of the Company shall be amended in
the Merger to read in its entirety as set forth in Exhibit B hereto, and as
so amended shall be the bylaws of the Surviving Corporation until
thereafter amended in accordance with the Surviving Certificate and the
DGCL.
SECTION 1.07. Directors and Officers. From and after the Effective
Time, (a) until their respective successors are duly elected or appointed
and qualified in accordance with applicable law, the directors of Buyer at
the Effective Time shall be the directors of the Surviving Corporation and
(b) the officers of the Company at the Effective Time shall be the officers
of the Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Buyer, the
Company or the holders of any of the following securities:
(a) Each share of the Class A Common Stock, par value $.02 per share
(the "Class A Stock") issued and outstanding immediately prior to the
Effective Time (other than any shares of Class A Stock to be canceled
pursuant to Section 2.01(b) and any Dissenting Shares (as defined below))
shall be converted into the right to receive $63.00 in cash, without
interest (the "Merger Consideration"). At the Effective Time, each share
of Class A Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each certificate
previously evidencing any such share (other than shares to be canceled
pursuant to Section 2.01(b) and any Dissenting Shares) shall thereafter
represent only the right to receive, upon the surrender of such certificate
in accordance with the provisions of Section 2.02, an amount in cash per
share equal to the Merger Consideration. The holders of such certificates
previously evidencing such shares of Class A Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to
such shares of Class A Stock except as otherwise provided herein or by law.
(b) Each share of capital stock of the Company (i) held in the
treasury of the Company or by any wholly owned subsidiary of the Company or
(ii) owned by Buyer, Johnson, Liberty or any of their respective
subsidiaries (including any shares of Class A Stock, Class B Common Stock,
par value $.02 per share (the "Class B Stock"), or Class C Common Stock,
par value $.02 per share (the "Class C Stock"), owned by any such persons)
shall automatically be canceled, retired and cease to exist without any
conversion thereof and no payment shall be made with respect thereto.
(c) Each share of common stock of Buyer outstanding immediately prior
to the Effective Time shall be converted into and become one share of
common stock of the Surviving Corporation and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
SECTION 2.02. Exchange of Certificates and Cash. (a) Exchange
Agent. On or before the Closing Date, Buyer shall enter into an agreement
(the "Exchange Agent Agreement") with a bank or trust company selected by
Buyer and reasonably acceptable to the Company (the "Exchange Agent"),
authorizing such Exchange Agent to act as Exchange Agent in connection with
the Merger. Prior to the Effective Time, Buyer shall deposit or shall
cause to be deposited with or for the account of the Exchange Agent, for
the benefit of the holders of shares of Class A Stock (other than
Dissenting Shares and shares to be canceled pursuant to Section 2.01(b)),
an amount in cash equal to the Merger Consideration payable pursuant to
Section 2.01(a) (such cash funds are hereafter referred to as the "Exchange
Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Buyer will instruct the Exchange Agent to mail to each
holder of record of a certificate or certificates which immediately prior
to the Effective Time evidenced outstanding shares of Class A Stock (other
than Dissenting Shares and shares to be canceled pursuant to Section
2.01(b)) (the "Certificates"), (i) a form letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Buyer may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
Buyer, together with a letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to such instructions
(collectively, the "Transmittal Documents"), the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration
for each share of Class A Stock formerly represented by such Certificate,
without any interest thereon, less any required withholding of taxes, and
the Certificate so surrendered shall thereupon be canceled. In the event
of a transfer of ownership of shares of Class A Stock which is not
registered in the transfer records of the Company, the Merger Consideration
may be issued and paid in accordance with this Article II to the transferee
of such shares if the Certificate evidencing such shares of Class A Stock
is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer, evidence that any applicable stock
transfer taxes have been paid and the related Transmittal Documents. The
Merger Consideration will be delivered by the Exchange Agent as promptly as
practicable following surrender of a Certificate and the related
Transmittal Documents. Cash payments may be made by check unless otherwise
required by a depositary institution in connection with the book-entry
delivery of securities. No interest will be payable on such Merger
Consideration regardless of any delay in making payments. Until
surrendered in accordance with this Section 2.02, each Certificate shall be
deemed at any time after the Effective Time to evidence only the right to
receive, upon such surrender, the Merger Consideration for each share of
Class A Stock formerly represented by such Certificate. The Exchange Fund
shall not be used for any purpose other than as set forth in this Article
II. Any interest, dividends or other income earned on the investment of
cash held in the Exchange Fund shall be for the account of the Surviving
Corporation.
(c) Termination of Exchange Fund. Any portion of the Exchange Fund
(including the proceeds of any investments thereof) which remains
undistributed to the holders of Class A Stock for six months after the
Effective Time shall be delivered to the Surviving Corporation, upon
demand. Any holders of Class A Stock who have not theretofore complied
with this Article II shall thereafter look only to the Surviving
Corporation for payment of the Merger Consideration.
(d) No Liability. None of Buyer, Johnson, Liberty, the Surviving
Corporation or the Company shall be liable to any holder of shares of Class
A Stock for any cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If Certificates are
not surrendered prior to the date that is two years after the Effective
Time, unclaimed funds payable with respect to such Certificates shall, to
the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any
person previously entitled thereto.
(e) Withholding Rights. Buyer and the Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Class A Stock such
amounts as Buyer or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the United States Internal
Revenue Code of 1986, as amended (the "Code"), or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by
Buyer or the Exchange Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares
of Class A Stock in respect of which such deduction and withholding was
made by Buyer or the Exchange Agent.
(f) Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing shares of Class A Stock shall have been lost,
stolen or destroyed, the holder of such lost, stolen or destroyed
Certificate(s) shall execute an affidavit of that fact upon request. The
holder of any such lost, stolen or destroyed Certificate(s) shall also
deliver a reasonable indemnity against any claim that may be made against
Buyer or the Exchange Agent with respect to the Certificate(s) alleged to
have been lost, stolen or destroyed. The affidavit and any indemnity which
may be required hereunder shall be delivered to the Exchange Agent, who
shall be responsible for making payment for such lost, stolen or destroyed
Certificates(s) pursuant to the terms hereof.
SECTION 2.03. Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no
further registration of transfers of shares of Class A Stock, Class B Stock
or Class C Stock (collectively, the "Common Stock") thereafter on the
records of the Company. Any Certificates presented to the Exchange Agent
or the Surviving Corporation for any reason at or after the Effective Time
shall be exchanged for the Merger Consideration pursuant to the terms
hereof.
SECTION 2.04. Stock Options; Payment Rights. (a) Each Option (as
defined below) (other than any Options held by Johnson or by Liberty or any
of its subsidiaries) which is outstanding immediately prior to the
Effective Time, whether or not then exercisable, shall be canceled and the
Company Option Plan (as defined below) shall be assumed by the Surviving
Corporation, in each case at and as of the Effective Time, and each holder
of such canceled Options shall be paid by the Surviving Corporation as soon
as practicable, but in any event within five days after the Effective Time,
for each such Option, an amount determined by multiplying (i) the excess,
if any, of the Merger Consideration over the applicable exercise price per
share of such Option by (ii) the number of shares issuable upon exercise of
such Option, subject to any required withholding of taxes.
(b) At the Effective Time, all Options held by Johnson shall
automatically become options to acquire an equal number of shares of
common stock of the Surviving Corporation at an aggregate exercise price
equal to the aggregate exercise price of the Options, and no payment shall
be made at the Effective Time with respect thereto.
(c) Prior to the Effective Time, the Company shall use its best
efforts to (i) obtain any consents from holders of the Options and (ii)
make any amendments to the terms of the Company Option Plan and any Options
granted thereunder that, in the case of either (i) or (ii) are necessary or
appropriate to give effect to the transactions contemplated by this Section
2.04. Notwithstanding any other provisions of this Section 2.04, payment
in respect of any Options may be withheld until all necessary consents are
obtained.
(d) In lieu of the cancellation of Options referred to in Section
2.04(a) hereof, prior to the Effective Time the Buyer may enter into
mutually acceptable arrangements with any holder of Options providing that
such holder's Options will be treated in a manner other than as provided in
Section 2.04(a); provided, however, that in no event will such holder be
paid at the Effective Time an amount in cash in excess of the amount such
holder would have received had such holder's Options been cancelled in
accordance with Section 2.04(a).
SECTION 2.05. Dissenting Shares. (a) Notwithstanding any other
provision of this Agreement to the contrary, shares of Class A Stock that
are outstanding immediately prior to the Effective Time and which are held
by stockholders (i) who shall not have voted in favor of adoption of this
Agreement or consented thereto in writing and (ii) who shall be entitled to
and shall have demanded properly in writing appraisal for such shares in
accordance with Section 262 of the DGCL ("Dissenting Shares"), shall not be
converted into or represent the right to receive the Merger Consideration
unless such stockholders fail to perfect, withdraw or otherwise lose their
right to appraisal. Such stockholders shall be entitled to receive payment
of the appraised value of such Dissenting Shares in accordance with the
provisions of the DGCL. If, after the Effective Time, any such stockholder
fails to perfect, withdraws or loses its right to appraisal, such shares of
Class A Stock shall be treated as if they had been converted as of the
Effective Time into a right to receive the Merger Consideration, without
interest thereon, upon surrender of the Certificate or Certificates that
formerly evidenced such shares of Class A Stock in the manner set forth in
Section 2.02.
(b) The Company shall give Buyer prompt notice of any demands for
appraisal received by it, withdrawals of such demands, and any other
instruments served pursuant to the DGCL and received by the Company and
relating thereto. Buyer shall direct all negotiations and proceedings with
respect to demands for appraisal under the DGCL. The Company shall not,
except with the prior written consent of Buyer, make any payment with
respect to any demands for appraisal, or offer to settle, or settle, any
such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer, Johnson and
Liberty, subject to Section 3.17, that:
SECTION 3.01. Organization and Qualifications; Subsidiaries. The
Company and each subsidiary of the Company (a "Company Subsidiary") is a
corporation, partnership or other legal entity duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has the requisite
power and authority and all necessary governmental approvals, to own, lease
and operate its properties and to carry on its business as it is now being
conducted. The Company and each Company Subsidiary is duly qualified or
licensed and in good standing to do business in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature
of its business makes such qualification or licensing necessary, except for
such failures to be so qualified or licensed and in good standing that
would not, individually or in the aggregate, have a material adverse effect
on the business, results of operations or financial condition of the
Company and the Company Subsidiaries, taken as a whole (a "Company Material
Adverse Effect").
SECTION 3.02. Certificate of Incorporation and Bylaws. The Company
has heretofore furnished or made available to Buyer a complete and correct
copy of the certificate of incorporation and the bylaws or equivalent
organizational documents, each as amended to the date hereof, of the
Company and each Company Subsidiary. Such certificates of incorporation,
bylaws and equivalent organizational documents are in full force and
effect. Neither the Company nor any Company Subsidiary is in violation of
any provision of its certificate of incorporation, bylaws or equivalent
organizational documents.
SECTION 3.03. Capitalization. The authorized capital stock of the
Company consists of 50,000,000 shares of Class A Stock, 15,000,000 shares
of Class B Stock, 15,000,000 shares of Class C Stock, and 15,000,000 shares
of preferred stock, par value of $.01 per share ("Preferred Stock"). As of
February 28, 1998, (a) 10,066,720 shares of Class A Stock, 1,831,600 shares
of Class B Stock and 4,820,000 shares of Class C Stock were outstanding,
all of which were validly issued, fully paid and nonassessable; (b) no
shares of Preferred Stock were issued and outstanding and no action had
been taken by the Board of Directors of the Company with respect to the
designation of the rights and preferences of any series of Preferred Stock;
(c) 2,781,595 shares of Class A Stock were reserved for issuance upon the
exercise of outstanding stock options (the "Options") granted pursuant to
the Company's 1991 Executive Stock Option Plan, as amended and restated as
of August 1, 1994 and further amended as of December 1, 1995 (the "Company
Option Plan"); (d) 2,839,600 shares of Class A Stock, 1,518,300 shares of
Class B Stock, no shares of Class C Stock and no shares of Preferred Stock
were held in the treasury of the Company; (e) no Company Subsidiary owns
any shares of the Company's capital stock; (f) there are no securities of
any Company Subsidiary outstanding which are convertible into or
exercisable or exchangeable for capital stock of the Company; (g) 6,651,600
shares of Class A Stock were reserved for future issuance upon conversion
of shares of Class B Stock and Class C Stock; and (h) 144,485 shares of
Class A Stock have been reserved for issuance under the Company's 1997
Employee Stock Purchase Plan (the "ESPP"). Except as set forth above, no
shares of capital stock or other voting securities of the Company have been
issued, are reserved for issuance or are outstanding. Except as set forth
in this Section 3.03 or in Section 3.03 of the Company's Disclosure
Schedule dated as of the date hereof and attached hereto and incorporated
hereby by reference (the "Company Disclosure Schedule"), there are no
options, stock appreciation rights, warrants or other rights, agreements,
arrangements, understandings or commitments of any character (collectively,
"Rights") relating to the issued or unissued capital stock of the Company
or any Company Subsidiary, or obligating the Company or any Company
Subsidiary to issue, grant or sell any shares of capital stock or other
equity interests in (or securities which are convertible into or
exercisable or exchangeable for any such shares or equity interests in) the
Company or any Company Subsidiary. Since February 28, 1998, the Company
has not issued any shares of its capital stock or Rights in respect
thereof, other than the issuance of shares of Class A Stock upon the
exercise of the Options referred to above or in satisfaction of the
Company's obligations under the ESPP. All shares of Class A Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be
duly authorized, validly issued, fully paid and nonassessable. Except as
set forth in Section 3.03 of Company Disclosure Schedule, there are no
outstanding contractual obligations of the Company or any Company
Subsidiary to repurchase, redeem or otherwise acquire any shares of Class A
Stock or any capital stock of any Company Subsidiary, or make any material
investment (in the form of a loan, capital contribution or otherwise) in,
any Company Subsidiary or any other person. No stock appreciation rights
have been issued or granted under the Company Option Plan. Each
outstanding share of capital stock of each Company Subsidiary has been duly
authorized and validly issued, and is fully paid and nonassessable and is
owned by the Company or another Company Subsidiary, free and clear of all
security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on the Company's or such other Company
Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever.
SECTION 3.04. Authority Relative to This Agreement. The Company has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than, with respect
to the Merger, the adoption of this Agreement by the holders of a majority
of the aggregate voting power of the issued and outstanding shares of the
Class A Stock, the Class B Stock and the Class C Stock, voting together as
a single class (the "Company Stockholder Approval"), and the filing and
recordation of appropriate merger documents as required by, and in
accordance with, the DGCL). This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by the other parties hereto, constitutes the legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting the rights of creditors generally and by
general principles of equity. The Company represents and warrants that the
limitations upon business combinations set forth in Section 203 of the DGCL
("Section 203") are not applicable to this Agreement, the Merger and the
transactions contemplated by this Agreement.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Company will not, (i) conflict with or violate
the Company's Restated Certificate of Incorporation (the "Company Charter")
or its by-laws, or the certificate of incorporation, by-laws or other
equivalent organizational documents of any Company Subsidiary or (ii)
except as set forth in Section 3.05 of Company Disclosure Schedule,
(x) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any Company Subsidiary or by which any
property or asset of the Company or any Company Subsidiary is bound or
affected or (y) result in any breach of or constitute a default (or an
event which, with notice, lapse of time or both, would become a default)
under, result in the loss of a material benefit under, or give to others
any right of termination, amendment, acceleration, increased payments or
cancellation of, or result in the creation of a lien or other encumbrance
on any property or asset of the Company or any Company Subsidiary pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any Company Subsidiary is a party or by which the Company or any
Company Subsidiary or any property or asset of the Company or any Company
Subsidiary is bound or affected, except, in the case of clause (ii), for
any such conflicts, violations, breaches, defaults or other occurrences
which (A) would not prevent or delay consummation of the Merger in any
material respect or otherwise prevent the Company from performing its
obligations under this Agreement in any material respect, and (B) would
not, individually or in the aggregate, have a Company Material Adverse
Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby by the Company will
not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic
or foreign (each a "Governmental Entity"), except (i) for (A) any
applicable requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (B) the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR Act"), (C) the filing and
recordation of appropriate merger and similar documents as required by the
DGCL, and (D) filings under the rules and regulations of the New York Stock
Exchange, Inc. and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, (x) would not prevent or delay consummation of the Merger in
any material respect or otherwise prevent the Company from performing its
obligations under this Agreement in any material respect, and (y) would
not, individually or in the aggregate, have a Company Material Adverse
Effect.
(c) The representation in this Section 3.05 is being made, with
respect to any consents, approvals, authorizations or permits of, or
filings or notifications to, the Federal Communications Commission (the
"FCC"), based upon the assumption that Johnson will, at the Effective Time,
own in excess of 50% of the outstanding capital stock of the Buyer.
SECTION 3.06. Compliance; Permits. (a) Except as set forth in
Section 3.06 of the Company Disclosure Schedule, neither the Company nor
any Company Subsidiary is in conflict with, or in default or violation of
(with or without notice, lapse of time or both) (i) any law, rule,
regulation, order, judgment or decree applicable to the Company or any
Company Subsidiary or by which any of their respective properties or assets
are bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
or obligation to which the Company or any Company Subsidiary is a party or
by which the Company or any Company Subsidiary or any of their respective
properties or assets is bound or affected, except for any such conflicts,
defaults or violations that would not, individually or in the aggregate,
have a Company Material Adverse Effect.
(b) The Company and the Company Subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals from Governmental
Entities which are material to operation of the business of the Company and
the Company Subsidiaries taken as a whole (collectively, the "Company
Permits"). The Company and the Company Subsidiaries are in compliance, and
will be in compliance on the Closing Date, with the terms of the Company
Permits, except where the failure to so comply would not, individually or
in the aggregate, have a Company Material Adverse Effect.
SECTION 3.07. SEC Filings; Financial Statements. (a) The Company
has filed all forms, reports and documents required to be filed by it with
the SEC since July 31, 1995, and has heretofore made available to Buyer, in
the form filed with the SEC (excluding any exhibits thereto), (i) its
Annual Reports on Form 10-K, for the fiscal years ended July 31, 1995, 1996
and 1997, (ii) its Quarterly Report on Form 10-Q for the quarter ended
January 31, 1998, (iii) all proxy statements relating to the Company's
meetings of stockholders (whether annual or special) held on or after July
31, 1995, and (iv) all other forms, reports and other registration
statements (other than Quarterly Reports on Form 10-Q not referred to in
clause (ii) above and preliminary materials), including any and all
amendments or supplements to any of the items referred to herein, filed by
the Company with the SEC since July 31, 1995 (the forms, reports and other
documents referred to in clauses (i), (ii), (iii) and (iv) above being
referred to herein, collectively, as the "Company SEC Reports"). The
Company SEC Reports and any forms, reports and other documents filed by the
Company with the SEC after the date of this Agreement (x) were or will be
prepared in accordance with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), and the Exchange Act, as the case may
be, and the rules and regulations thereunder, and (y) did not at the time
they were filed, or will not at the time they are filed, contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. No Company Subsidiary is required to file any form, report or
other document with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Company SEC Reports was prepared
in accordance with United States generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as
may be indicated in the notes thereto), and each fairly presented the
consolidated financial position, results of operations and cash flows of
the Company and its consolidated subsidiaries as at the respective dates
thereof and for the respective periods indicated therein (subject, in the
case of unaudited statements, to normal and recurring year-end adjustments
which were not and are not expected, individually or in the aggregate, to
be material in amount). Since July 31, 1997, there has been no change in
any of the significant accounting (including tax accounting) policies,
practices or procedures of the Company or any Company Subsidiary.
(c) Except (i) as set forth in Section 3.07 of the Company Disclosure
Schedule, (ii) as and to the extent set forth in the Company SEC Reports
filed with the SEC prior to the date of this Agreement, or (iii) since July
31, 1997, as incurred in the ordinary course of business and not in
violation of this Agreement (assuming this Agreement was in effect as of
July 31, 1997), the Company and the Company Subsidiaries do not have any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise), other than liabilities and obligations which
would not, individually or in the aggregate, have a Company Material
Adverse Effect.
SECTION 3.08. Absence of Certain Changes and Events. Except as set
forth in Section 3.08 of the Company Disclosure Schedule or disclosed in
any Company SEC Report filed since October 31, 1997 and prior to the date
of this Agreement, since October 31, 1997, (a) the Company and the Company
Subsidiaries have conducted their respective businesses only in the
ordinary course and have not taken any of the actions set forth in
paragraphs (a) through (n) of Section 5.01 and (b) there has not been any
material adverse change in the business, financial condition or results of
operations of the Company and the Company Subsidiaries, taken as a whole.
SECTION 3.09. Employee Benefit Plans. With respect to all the
employee benefit plans, programs and arrangements maintained for the
benefit of any current or former employee, officer or director of the
Company or any Company Subsidiary (the "Benefit Plans"), except as set
forth in Section 3.09 of the Company Disclosure Schedule or in the Company
SEC Reports filed prior to the date of this Agreement: (a) none of the
Benefit Plans is a multi-employer plan within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); (b) none of
the Benefit Plans promises or provides retiree medical or life insurance
benefits to any person; (c) each Benefit Plan intended to be qualified
under Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service (the "IRS") that it is so
qualified and nothing has occurred since the date of such letter that could
reasonably be expected to affect the qualified status of such Benefit Plan
other than occurrences that would not, individually or in the aggregate,
have a Company Material Adverse Effect; (d) each Benefit Plan has been
operated in all material respects in accordance with its terms and the
requirements of applicable law; (v) neither the Company nor any Company
Subsidiary has incurred any direct or indirect liability under, arising out
of or by operation of Title IV of ERISA in connection with the termination
of, or withdrawal from, any Benefit Plan or other retirement plan or
arrangement, and no fact or event exists that could reasonably be expected
to give rise to any such liability, other than any liability that would
not, individually or in the aggregate, have a Company Material Adverse
Effect; and (e) the Company and the Company Subsidiaries have not incurred
any liability under, and have complied in all material respects with, the
Worker Adjustment Retraining Notification Act, and no fact or event exists
that could give rise to liability under such act, other than any liability
that would not, individually or in the aggregate, have a Company Material
Adverse Effect. Except as set forth in Section 3.09 of the Company
Disclosure Schedule or the Company SEC Reports, the aggregate accumulated
benefit obligations of each Benefit Plan subject to Title IV of ERISA (as
of the date of the most recent actuarial valuation prepared for such
Benefit Plan) do not exceed the fair market value of the assets of such
Benefit Plan (as of the date of such valuation). Other than as
specifically provided in Section 5.01(f), the execution and delivery of
this Agreement and the consummation of the Merger will not (i) result in an
acceleration of any participant's rights under the ESPP, (ii) entitle any
participant to purchase a number of shares which exceeds the number of
shares he would otherwise be entitled to purchase if this Agreement had not
been entered into or the Merger were not to be consummated, (iii) result in
additional persons becoming entitled to elect to become participants in the
ESPP, or (iv) entitle any participant to increase the amount of his
periodic payroll deduction amounts paid to the ESPP.
SECTION 3.10. Taxes. (a) Except as set forth in Section 3.10 of
the Company Disclosure Schedule, each of the Company and the Company
Subsidiaries has filed all tax returns and reports required to be filed by
it or requests for extensions to file such returns or reports have been
timely filed, granted and have not expired, except to the extent that such
failures to file or to have extensions granted, individually or in the
aggregate, would not have a Company Material Adverse Effect. All returns
filed by the Company and each of the Company Subsidiaries are complete and
accurate in all material respects. The Company and each of the Company
Subsidiaries have timely paid (or the Company has paid on its behalf) all
taxes shown as due on such returns, and the most recent financial
statements contained in the Company SEC Reports reflect an adequate reserve
for all taxes payable by the Company and the Company Subsidiaries for all
taxable periods and portions thereof accrued through the date of such
financial statements. Except as set forth in the Company Disclosure
Schedule, no deficiencies for any taxes have been proposed, asserted or
assessed against the Company or any Company Subsidiary that are not
adequately reserved for, except for deficiencies that individually or in
the aggregate would not have a Company Material Adverse Effect, and no
requests for waivers of the time to assess any such taxes have been granted
or are pending.
(b) As used in this Section 3.10, the term "taxes" shall include all
Federal, state, local and foreign income, franchise, alternative or add-on
minimum tax, gross receipts, transfer, withholding on amounts paid to or by
the Company or any Company Subsidiary, payroll, employment, license,
property, sales, use, excise and other taxes, tariffs or governmental
charges of any nature whatsoever, together with any interest, penalty or
addition to tax attributable to such taxes.
SECTION 3.11. Absence of Litigation. Except as set forth in Section
3.11 of the Company Disclosure Schedule or disclosed by the Company in the
Company SEC Reports, as of the date of this Agreement there are no claims,
actions, suits, investigations or proceedings pending or, to the best
knowledge of the Company, threatened against the Company or any Company
Subsidiary, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, (x) that, individually
or in the aggregate, would, or reasonably could be expected to, have a
Company Material Adverse Effect, or (y) which seek to restrain, enjoin or
delay consummation of the Merger or any of the other transactions
contemplated hereby.
SECTION 3.12. Franchises, Intellectual Property, Etc. The Company
and the Company Subsidiaries collectively possess or have the right to use
all franchises, intellectual property rights, licenses and other rights as
are material and necessary for the conduct of the Company's business, with
no known conflict with the valid rights of others which could reasonably be
expected to have a Company Material Adverse Effect. No event has occurred
which permits or, to the best knowledge of the Company, could reasonably be
expected to permit, the revocation or termination of any such franchise,
intellectual property right, license or other right, which revocation or
termination could reasonably be expected to have a Company Material Adverse
Effect.
SECTION 3.13. FCC and Copyright Matters. The Company and each of the
Company Subsidiaries (a) have duly and timely filed all filings which are
required to be filed by it under the Communications Act of 1934, as amended
(the "Communications Act"), and (b) are in all material respects in
compliance with the Communications Act, including, without limitation, the
rules and regulations of the FCC. The Company and each of the Company
Subsidiaries has recorded or deposited with and paid to the United States
Copyright Office, the Register of Copyrights and the Copyright Royalty
Tribunal all notices, statements of account, royalty fees and other
documents and instruments required under Title 17 of the United States
Code, as amended (the "Copyright Act"), other than where the failure to
have done any of the foregoing would not, individually or in the aggregate,
result in a Company Material Adverse Effect, and, to the best knowledge of
the Company, neither the Company nor any of the Company Subsidiaries is
liable to any person for copyright infringement under the Copyright Act as
a result of its business operations.
SECTION 3.14. Opinion of Financial Advisor. Goldman, Sachs & Co. has
delivered its opinion to the effect that, as of the date hereof, the
consideration to be received by the stockholders of the Company (other than
Johnson, Liberty and their respective affiliates) pursuant to the Merger is
fair to such stockholders from a financial point of view.
SECTION 3.15. Board Approval. The Board of Directors of the Company,
based on the recommendation of the Special Independent Committee of the
Board of Directors of the Company (the "Special Committee"), at a meeting
duly called and held, unanimously (a) determined that this Agreement and
the Merger are fair to and in the best interests of the Company's
stockholders (other than Johnson, Liberty and their respective affiliates),
(b) approved this Agreement, the Merger and the other transactions
contemplated hereby, and (c) resolved to recommend adoption of this
Agreement by the Company's stockholders.
SECTION 3.16. Brokers. No broker, finder or investment banker (other
than Goldman, Sachs & Co.) is entitled to any brokerage, finder's or other
fee or commission in connection with this Agreement, the Merger and the
other transactions contemplated hereby based upon arrangements made by or
on behalf of the Company. The Company has heretofore furnished to Buyer a
complete and correct copy of all agreements between the Company and
Goldman, Sachs & Co. as of the date hereof pursuant to which such firm
would be entitled to any payment relating to the Merger and the other
transactions contemplated hereby.
SECTION 3.17. No Actual Knowledge. The representations and
warranties in this Article III are subject to the following: As of the
date of execution of this Agreement, based upon his actual knowledge as an
officer of the Company, Johnson is not aware (a) of any representation or
warranty of the Company set forth in this Article III which is not true and
correct or (b) of any facts or circumstances which could reasonably be
expected to result in any such representation or warranty being untrue or
incorrect, in each case, where such failure of any representations or
warranties to be true and correct, individually or in the aggregate, would
reasonably be expected to result in a Company Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF JOHNSON, LIBERTY AND BUYER
Johnson hereby makes to the Company the representations and warranties
set forth below in Sections 4.01 through 4.02.
SECTION 4.01. Authority Relative to This Agreement. Johnson has all
necessary power and authority to execute and deliver this Agreement, to
perform his obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
Johnson and the consummation by Johnson of the transactions contemplated
hereby have been duly and validly authorized by all necessary action and no
other proceedings on the part of Johnson are necessary to authorize this
Agreement or to consummate such transactions (other than the filing and
recordation of appropriate merger documents as required by the DGCL). This
Agreement has been duly and validly executed and delivered by Johnson and,
assuming the due authorization, execution and delivery by the other parties
hereto, constitutes the legal, valid and binding obligation of Johnson,
enforceable against him in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights of
creditors generally and by general principles of equity.
SECTION 4.02. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Johnson do not, and the
performance of the transactions contemplated hereby by Johnson will not,
(i) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Johnson or by which any property or asset of Johnson
is bound or affected, or (ii) assuming the release or waiver of certain
security interests and other restrictions encumbering certain shares of
Common Stock beneficially owned by Johnson to be obtained in connection
with the receipt of the financing for the Merger, result in any breach of
or constitute a default (or an event which, with notice, lapse of time or
both, would become a default) under, result in the loss of a material
benefit under or give to others any right of termination, amendment,
acceleration, increased payments or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Johnson
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or any other instrument or obligation to
which Johnson is a party or by which his property or assets are bound or
affected, except in the case of clauses (i) and (ii), for any such
conflicts, violations, breaches, defaults or other occurrences which would
not prevent or delay consummation of the Merger in any material respect or
otherwise prevent Johnson from performing his obligations under this
Agreement in any material respect.
(b) The execution and delivery of this Agreement by Johnson do not,
and the performance of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby by Johnson will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) for (A) any applicable
requirements of the Exchange Act, (B) the pre-merger notification
requirements of the HSR Act and (C) the filing and recordation of
appropriate merger and similar documents as required by the DGCL and (ii)
where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or
delay consummation of the Merger in any material respect or otherwise
prevent Johnson from performing his obligations under this Agreement in any
material respect.
Liberty hereby makes to the Company the representations and warranties
set forth below in Sections 4.03 through 4.06:
SECTION 4.03. Organization and Qualification. Liberty is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and has the requisite power and authority
and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted.
Liberty is duly qualified or licensed and in good standing to do business
in each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or
licensed and in good standing that would not, individually or in the
aggregate, have a material adverse effect on the business, results of
operations or financial condition of Liberty and its subsidiaries, taken as
a whole (a "Liberty Material Adverse Effect").
SECTION 4.04. Certificate of Incorporation and Bylaws. Liberty has
heretofore made available to the Company a complete and correct copy of its
certificate of incorporation and bylaws, each as amended to the date
hereof. Such certificate of incorporation and bylaws are in full force and
effect.
SECTION 4.05. Authority Relative to This Agreement. Liberty has all
necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Liberty and the consummation by Liberty of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Liberty
are necessary to authorize this Agreement or to consummate such
transactions (other than the filing and recordation of appropriate merger
documents as required by the DGCL). This Agreement has been duly and
validly executed and delivered by Liberty and, assuming the due
authorization, execution and delivery by the other parties hereto,
constitutes the legal, valid and binding obligation of Liberty, enforceable
against Liberty in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights of creditors
generally and by general principles of equity.
SECTION 4.06. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Liberty do not, and the
performance of the transactions contemplated hereby by Liberty will not,
(i) conflict with or violate the certificate of incorporation or by-laws of
Liberty, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Liberty or by which any property or asset
of Liberty is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which, with notice, lapse of time or
both, would become a default) under, result in the loss of a material
benefit under or give to others any right of termination, amendment,
acceleration, increased payments or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Liberty
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or any other instrument or obligation to
which Liberty is a party or by which Liberty or any property or asset of
Liberty is bound or affected, except in the case of clauses (ii) and (iii),
for any such conflicts, violations, breaches, defaults or other occurrences
which (x) would not prevent or delay consummation of the Merger in any
material respect or otherwise prevent Liberty from performing its
obligations under this Agreement in any material respect, and (y) would
not, individually or in the aggregate, have a Liberty Material Adverse
Effect.
(b) The execution and delivery of this Agreement by Liberty do not,
and the performance of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby by Liberty will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) for (A) any applicable
requirements, if any, of the Exchange Act and state takeover laws, (B) the
pre-merger notification requirements of the HSR Act and (C) filing and
recordation of appropriate merger and similar documents as required by the
DGCL and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not (x) prevent or delay consummation of the Merger in any material respect
or otherwise prevent Liberty from performing its obligations under this
Agreement in any material respect, and (y) would not, individually or in
the aggregate, have a Liberty Material Adverse Effect.
Buyer, Johnson and Liberty hereby make to the Company the
representations and warranties set forth below in Sections 4.07 through
4.12:
SECTION 4.07. Organization and Qualification. Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of
the State of Delaware and has the requisite power and authority and all
necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted. Buyer is duly
qualified or licensed and in good standing to do business in each
jurisdiction where the character of the properties owned, leased or operate
by it or the nature of its business makes such qualification or licensing
necessary except for such failures to be so qualified or licensed and in
good standing that would not, individually or in the aggregate, have a
material adverse effect on the business, results of operations or financial
condition of Buyer and its subsidiaries, taken as a whole (a "Buyer
Material Adverse Effect"). Since the date of its incorporation, Buyer has
not engaged in any activities other than in connection with or as
contemplated by this Agreement or in connection with arranging any
financing required to consummate Transactions. Buyer does not have any
operating subsidiaries.
SECTION 4.08. Certificate of Incorporation and Bylaws. Buyer has
heretofore made available to the Company a complete and correct copy of its
certificate of incorporation and bylaws, each as amended to the date
hereof. Such certificate of incorporation and bylaws are in full force and
effect.
SECTION 4.09. Authority Relative to This Agreement. Buyer has all
necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Buyer
are necessary to authorize this Agreement or to consummate such
transactions (other than the filing and recordation of appropriate merger
documents as required by the DGCL). This Agreement has been duly and
validly executed and delivered by Buyer and, assuming the due
authorization, execution and delivery by the Company, constitutes the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting the rights of creditors generally and by general
principles of equity.
SECTION 4.10. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Buyer do not, and the
performance of the transactions contemplated hereby by Buyer will not, (i)
conflict with or violate the certificate of incorporation or by-laws of
Buyer, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Buyer or by which any property or asset of
Buyer is bound or affected, or (iii) result in any breach of or constitute
a default (or an event which, with notice, lapse of time or both, would
become a default) under, result in the loss of a material benefit under or
give to others any right of termination, amendment, acceleration, increased
payments or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Buyer pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or any other instrument or obligation to which Buyer is a party or by which
Buyer or any property or asset of Buyer is bound or affected, except in the
case of clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences which (x) would not prevent or
delay consummation of the Merger in any material respect or otherwise
prevent Buyer from performing its obligations under this Agreement in any
material respect, and (y) would not, individually or in the aggregate, have
a Buyer Material Adverse Effect.
(b) The execution and delivery of this Agreement by Buyer do not, and
the performance of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby by Buyer will not, require any
consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) for (A) any applicable
requirements, if any, of the Exchange Act, (B) the pre-merger notification
requirements of the HSR Act, (C) filing and recordation of appropriate
merger and similar documents as required by the DGCL, and (D) any
applicable approvals of the FCC, and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, (x) would not prevent or delay consummation of the Merger in
any material respect or otherwise prevent Buyer from performing its
obligations under this Agreement in any material respect, and (y) would
not, individually or in the aggregate, have a Buyer Material Adverse
Effect.
SECTION 4.11. Brokers. No broker, finder or investment banker (other
than Salomon Brothers Inc) is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger and the other transactions
contemplated hereby based upon arrangements made by or on behalf of Buyer,
Johnson or Liberty.
SECTION 4.12. Financing. (a) Buyer has delivered to the Company a
true and complete copy of a letter from The Bank of New York Company, Inc.
and BNY Capital Markets, Inc. to the effect that, based upon their review
of certain information provided by the Company, and subject to the
qualifications and conditions set forth therein, The Bank of New York
Company, Inc. and BNY Capital Markets, Inc. are highly confident, as of the
date of such letter, that they, directly or through any of their
affiliates, could successfully arrange and fully syndicate a secured credit
facility which would provide the Buyer at the Effective Time with the
Financing (as defined below).
(b) In addition, Buyer shall use its reasonable efforts to obtain by
May 15, 1998 (subject to reasonable extension, consent to which will not be
unreasonably withheld) a firm commitment by an appropriate financial source
to provide the Financing, subject only to customary conditions in
transactions of this type. If any portion of the Financing represented by
such commitment thereafter becomes unavailable, Buyer will promptly notify
the Company and will also use its reasonable efforts to obtain the
Financing from another source or sources, on and subject to the same terms
and conditions as the portion of the Financing that has become unavailable,
in order to consummate the transactions contemplated hereby. If Buyer is
unable to obtain a financing commitment by the date specified herein (as
such date may be extended), the Company may, at its option, terminate this
Agreement, and neither Buyer nor the Company shall have any further
obligations hereunder.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger.
The Company covenants and agrees that, between the date of this Agreement
and the Effective Time, unless Buyer, Johnson or Liberty shall have
consented, neither the Company nor any Company Subsidiary shall, except as
set forth in Section 5.01 of the Company Disclosure Schedule:
(a) conduct its business in any manner other than in the ordinary
course of business consistent with past practice;
(b) amend or propose to amend its certificate of incorporation or by-
laws;
(c) (i) authorize for issuance, issue, grant, sell, pledge, redeem
or acquire for value any of its or their securities, including
options, warrants, commitments, stock appreciation rights,
subscriptions, rights to purchase or otherwise (other than the
issuance of equity securities upon the conversion of outstanding
convertible securities or in connection with any dividend
reinvestment plan or any Benefit Plan with an employee stock fund
or employee stock ownership plan feature, consistent with
applicable securities laws, or the exercise of options or
warrants outstanding as of the date of this Agreement and in
accordance with the terms of such options or warrants in effect
on the date of this Agreement) or (ii) sell, pledge or otherwise
dispose of any material assets, except for sales of assets in the
ordinary course of business;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property, or otherwise,
with respect to any of its capital stock, except dividends
declared and paid by a wholly-owned Company Subsidiary only to
the Company, or subdivide, reclassify, recapitalize, split,
combine or exchange any of its shares of capital stock;
(e) incur, assume or become obligated with respect to any material
amount of indebtedness for borrowed money or make any loans or
advances, except borrowings under existing bank lines of credit
in the ordinary course of business;
(f) increase the compensation payable or to become payable to its
executive officers or employees, except for increases in the
ordinary course of business in accordance with past practices, or
grant any severance or termination pay to or enter into any
employment or severance agreement with any of its director or
executive officer, or establish, adopt, enter into or amend in
any material respect or take action to accelerate any rights or
benefits under any collective bargaining agreement or any
employee benefit plan, agreement or policy; provided, however,
that the Company shall be permitted to (i) amend the ESPP to
provide that the first Investment Date (as defined in the ESPP)
scheduled to occur following the Effective Time will be
accelerated so that such Investment Date will occur immediately
prior to the Effective Time, (ii) terminate the ESPP immediately
following such Investment Date and simultaneous with the
Effective Time and refund any unused payroll deductions then held
by the ESPP to the appropriate ESPP participants, and (iii) amend
or modify the Company's incentive plans set forth in Section
5.01(f) of the Company Disclosure Schedule in such manner as is
reasonably necessary to preserve the rights of the participants
in such plans, including, without limitation, amending such
incentive plans to provide for any pay-out of awards under such
plans prior to the Effective Time; provided, that Buyer shall
have consented in writing to any such amendment or modification
referred to in clauses (i), (ii) to (iii) above, such consent not
to be unreasonably withheld.
(g) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice,
with respect to accounting policies or procedures (including tax
accounting policies and procedures);
(h) acquire by merger or consolidation, or by purchase of assets, or
by any other manner, any material business;
(i) mortgage or otherwise encumber or subject to any lien any of its
properties or assets, except for liens in connection with
indebtedness incurred as permitted by clause (e) above;
(j) take any action that would, or could reasonably be expected to
result in, any of its representations and warranties set forth in
this Agreement being untrue or in any of the conditions to the
Merger set forth in Article VII not being satisfied;
(k) make any tax election or settle or compromise any income tax
liability material to the Company and the Company Subsidiaries,
taken as a whole;
(l) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of liabilities reflected or
reserved against in, or contemplated by, the consolidated
financial statements (or the notes thereto) of the Company
included in the Company SEC Reports, or incurred in the ordinary
course of business consistent with past practice;
(m) settle or compromise any pending or threatened suit, action or
claim relating to the transactions contemplated hereby; or
(n) authorize any of, or commit or agree to take any of, the
foregoing actions.
ARTICLE VI
ADDITIONAL COVENANTS
SECTION 6.01. Access to Information; Confidentiality. (a) From
the date hereof to the Effective Time, the Company shall (and shall cause
the Company Subsidiaries and the officers, directors, employees, auditors
and agents of the Company and each of the Company Subsidiaries to) afford
the officers, employees and agents of Buyer (the "Buyer Representatives")
reasonable access at all reasonable times to its officers, employees,
agents, properties, offices, plants and other facilities, books and
records, and shall furnish such Buyer Representatives with all financial,
operating and other data and information as may from time to time be
reasonably requested. All information obtained will be subject to the
Confidentiality Agreement, dated as of October 2, 1997, between the
Company, Johnson and Liberty (the "Confidentiality Agreement").
(b) No investigation pursuant to this Section 6.01 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 6.02. Proxy Statement; Schedule 13E-3. (a) As soon as
practicable after the date of this Agreement, the Company shall prepare and
file with the SEC a proxy statement, in form and substance reasonably
satisfactory to the Buyer, relating to the meeting of the Company's
stockholders to be held in connection with the Merger (together with any
amendments thereof or supplements thereto, the "Proxy Statement"). Each of
Johnson, Liberty and Buyer shall furnish to the Company such information
concerning himself or itself as the Company may reasonably request in
connection with the preparation of the Proxy Statement. The Proxy
Statement will comply in all material respects with applicable federal
securities laws, except that no representation is made by the Company with
respect to information supplied by Johnson, Liberty or Buyer for inclusion
in the Proxy Statement. As promptly as practicable after the Proxy
Statement has been cleared by the SEC, the Company shall mail the Proxy
Statement to its stockholders. The Proxy Statement shall include the
opinion of Goldman Sachs referred to in Section 3.14 hereof.
(b) The information provided by each of the Company, Buyer, Liberty
and Johnson for use in the Proxy Statement shall not, at (i) the time the
Proxy Statement (or any amendment thereof or supplement thereto) is first
mailed to the stockholders of the Company or (ii) the time of the Company
stockholders' meeting contemplated by such Proxy Statement, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. If at any time prior to the Effective Time any
event or circumstance relating to any party hereto, or their respective
officers or directors, should be discovered by such party which should be
set forth in an amendment or a supplement to the Proxy Statement, such
party shall promptly inform the Company and Buyer thereof and take
appropriate action in respect thereof.
(c) As soon as practicable after the date of this Agreement, Johnson,
Liberty, Buyer and the Company shall file with the SEC a Rule 13E-3
Transaction Statement on Schedule 13E-3 ("Schedule 13E-3"), with respect to
the Merger. Each of the parties hereto agrees to use its reasonable best
efforts to cooperate and to provide each other with such information as any
of such parties may reasonably request in connection with the preparation
of the Schedule 13E-3. Each party hereto agrees promptly to supplement,
update and correct any information provided by it for use in the Schedule
13E-3 if and to the extent that it is or shall have become incomplete,
false or misleading.
SECTION 6.03. Action by Stockholders. Except as otherwise required
by the fiduciary duties of the Board of Directors of the Company (as
determined in good faith by the Board following the receipt of written
advice of the Company's outside legal counsel to such effect), (a) the
Company, acting through its Board of Directors, shall, in accordance with
applicable law, the Company Charter and the Company's bylaws, duly call,
give notice of, convene and hold a special meeting of stockholders (the
"Company Stockholders' Meeting") as soon as practicable after the date of
this Agreement for the purpose of adopting this Agreement and (b) the
Company will, through the Board of Directors based on the recommendation of
the Special Committee, (i) recommend to its stockholders the adoption of
this Agreement, and (ii) use its best efforts to obtain the Company
Stockholder Approval. Johnson, Liberty and Buyer shall vote all shares of
Class A Stock, Class B Stock and Class C Stock owned by them in favor of
the adoption of this Agreement.
SECTION 6.04. No Solicitation. (a) The Company shall immediately
cease any existing discussions or negotiations with any parties conducted
heretofore with respect to any acquisition of all or any material portion
of the assets of, or any equity interest in, the Company or any of the
Company Subsidiaries, or any business combination with the Company or any
of the Company Subsidiaries. The Company shall not, nor shall it permit
any of the Company Subsidiaries, or its or their respective officers,
directors, employees, agents or representatives (including, without
limitation, any investment banking firm, attorney or accountant retained by
it) to, initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal with respect to an Alternative
Transaction (as defined below), engage in any discussions or negotiations
concerning, or provide to any other person any information or data relating
to the Company or any of the Company Subsidiaries for the purposes of, or
otherwise cooperate in any way with or assist or participate in, facilitate
or encourage, any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to the stockholders
of the Company) which constitutes, or could reasonably be expected to lead
to, a proposal or offer to seek or effect an Alternative Transaction, or
agree to or endorse any Alternative Transaction; provided, however, that,
at any time prior to obtaining the Company Stockholder Approval, the
Company may (subject to compliance with the penultimate sentence of this
Section 6.04(a)), in response to a bona fide unsolicited written inquiry,
proposal or offer with respect to an Alternative Transaction (x) furnish
information with respect to the Company and the Company Subsidiaries to the
person making such inquiry, proposal or offer subject to a confidentiality
agreement having terms no less favorable to the Company than those
contained in the Confidentiality Agreement, and (y) participate in
negotiations concerning such Alternative Transaction, if, before furnishing
such information or engaging in such negotiations, the Board of Directors
of the Company determines in good faith (i) following the receipt of
written advice of its financial advisor, that the inquiry, proposal or
offer is reasonably likely to result in a proposal for an Alternative
Transaction which is (A) more favorable to the Company's stockholders than
the transaction contemplated hereby and (B) capable of consummation, or
(ii) following the receipt of written advice of outside legal counsel, that
it is required to do so in order to comply with its fiduciary duties.
"Alternative Transaction" means a transaction or series of related
transactions (other than the transactions contemplated by this Agreement)
resulting in (i) any change of control of the Company, (ii) any merger or
consolidation of the Company in which another person acquires beneficial
ownership of 25% or more of the aggregate voting power of all voting
securities of it or the surviving corporation, as the case may be, (iii)
any tender offer or exchange offer for, or any acquisitions of, any
securities of the Company which, if consummated, would result in another
person beneficially owning 25% or more of the aggregate voting power of all
voting securities of it, or (iv) any sale or other disposition of assets of
the Company or any of the Company Subsidiaries if the Fair Market Value (as
defined below) of such assets exceeds 25% of the aggregate Fair Market
Value of the assets of the Company and the Company Subsidiaries, taken as a
whole before giving effect to such sale or other disposition. The "Fair
Market Value" of any assets or securities shall mean the fair market value
of such assets or securities as determined by the Board of Directors of the
Company in good faith. Prior to furnishing any information or
participating in any negotiations with regard to an Alternative
Transaction, the Company shall notify Buyer immediately of such inquiry,
proposal or offer received by, any such information requested from, or any
such discussions or negotiations sought to be initiated or continued with,
the Company, any of its subsidiaries or any of the Company's or any
subsidiary's directors, officers, employees, agents or representatives
indicating, in connection with such notice, the name of such person and the
material terms and conditions of any such inquiry, proposal or offer. The
Company agrees that it will keep Buyer informed, on a current basis, of the
status and terms of any such inquiries, proposals or offers.
(b) Nothing in this Section 6.04 shall (i) permit the Company to
enter into any agreement with respect to an Alternative Transaction during
the term of this Agreement (it being agreed that during the term of this
Agreement the Company shall not enter into any agreement with any person
that provides for, or in any way facilitates, an Alternative Transaction,
other than a confidentiality agreement in customary form upon terms and
conditions no more favorable to such third party than the terms and
conditions contained in the Confidentiality Agreement), or (ii) affect any
other obligation of the Company under this Agreement.
SECTION 6.05. Directors' and Officers' Indemnification. (a) From
and after the Effective Time, the Surviving Corporation shall indemnify,
defend and hold harmless, to the same extent and upon the terms and
conditions provided in the Company Charter or the Company's Bylaws, each as
in effect on the date hereof, and in each case to the full extent permitted
under the DGCL, the present and former officers and directors of the
Company (collectively, the "Indemnified Parties") against all losses,
expenses, claims, damages, liabilities or amounts paid in settlement with
the approval of the Surviving Corporation (which approval shall not
unreasonably be withheld) in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on the fact that such
person is or was a director or officer of the Company and arising out of
actions or omissions occurring in connection with the transactions
contemplated by this Agreement.
(b) The Surviving Corporation shall maintain in effect for not less
than six (6) years from the Effective Time the policies of the directors'
and officers' liability insurance most recently maintained by the Company
(provided that the Surviving Corporation may substitute therefor policies
of at least the same coverage containing terms and conditions which are no
less advantageous for so long as such substitution does not result in gaps
or lapses in coverage) with respect to matters occurring prior to the
Effective Time to the extent available; provided, however, that (i) in no
event shall the Surviving Corporation be required to expend more than an
amount per year equal to 150% of current annual premiums paid by the
Company (the "Premium Amount") to maintain or procure insurance coverage
pursuant hereto and (ii) in the event the Surviving Corporation is unable
to obtain the insurance called for by this Section 6.05(b), the Surviving
Corporation will obtain as much comparable insurance as is available for
the Premium Amount per year.
(c) This Section 6.05 is intended to be for the benefit of, and shall
be enforceable by, the Indemnified Parties, their heirs and personal
representatives, and shall be binding on the Surviving Corporation and its
respective successors and assigns.
SECTION 6.06. Notification of Certain Matters. The Company shall
give prompt notice to Buyer, and Buyer shall give prompt notice to the
Company, of (a) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause (i) any
representation or warranty contained in this Agreement to be untrue or
inaccurate or (ii) any covenant, condition or agreement contained in this
Agreement not to be complied with or satisfied and (b) any failure of the
Company or Buyer (or Johnson or Liberty), as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 6.06 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
SECTION 6.07. Further Action; Best Efforts.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall (i) make promptly its respective filings and
thereafter make any other required submissions under the HSR Act with
respect to the Merger and the other transactions contemplated hereby, and
(ii) use its reasonable best efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations or otherwise to
consummate and make effective the Merger and the other transactions
contemplated hereby, including, without limitation, using its reasonable
best efforts to obtain (x) the Financing and (y) all licenses, permits,
waivers, orders, consents, approvals, authorizations, qualifications and
orders of Governmental Entities and parties to contracts with the Company
and the Company Subsidiaries as are necessary for the consummation of the
Merger and the other transactions contemplated hereby.
(b) Notwithstanding the provisions of Section 6.07(a), nothing
contained in this Agreement shall obligate Tele-Communications, Inc.
("TCI"), Liberty or any of their subsidiaries (collectively, the "Liberty
Group") to take any action to consummate the Merger and the other
transactions contemplated hereby, the consummation of which is dependent or
conditioned on the receipt of any governmental or regulatory approval or
consent, in the event that the approval or consent so received specifically
includes conditions or restrictions in addition to those imposed by laws
and regulations of general applicability as in effect from time to time
(including conditions in addition to those imposed by existing laws and
regulations which require the prior approval of any governmental or
regulatory agency to the taking of any action or the consummation of any
transaction), the direct or indirect effect of which is or would be, to
restrict, limit or otherwise subject to penalty the members of the Liberty
Group in the ownership of their respective assets or the conduct of their
respective businesses. For purposes of the foregoing, a condition,
restriction or limitation arising out of any such approval or consent shall
be deemed to be a restriction or limitation on the members of the Liberty
Group (regardless of whether such member is a party to or otherwise legally
obligated by such consent or approval) to the extent that the taking of an
action or the consummation of a transaction by such member of the Liberty
Group would result in any member of the Liberty Group, the Company or any
Company Subsidiary being in breach or violation of such consent or approval
or otherwise causing such consent or approval to terminate or expire.
(c) In case at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each party to this Agreement shall use
their reasonable best efforts to take all such action.
SECTION 6.08. Public Announcements. Buyer and the Company shall
consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or the
transactions contemplated hereby and shall not issue any such press release
or make any such public statement without the prior consent of the other
party, which consent shall not be unreasonably withheld; provided, however,
that a party may, without the prior consent of the other party, issue such
press release or make such public statement as may be required by law,
regulation or any listing agreement or arrangement to which the Company,
Buyer or a member of the Liberty Group is a party with a national
securities exchange or the Nasdaq Stock Market if it has used all
reasonable efforts to consult with the other party and to obtain such
party's consent but has been unable to do so in a timely manner.
SECTION 6.09. Conveyance Taxes. Buyer and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications, or other documents regarding any real
property transfer or gains, sales, use, transfer, value added, stock
transfer and stamp taxes, any transfer, recording, registration and other
fees, and any similar taxes which become payable in connection with the
transactions contemplated by this Agreement that are required or permitted
to be filed on or before the Effective Time.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger and
the other transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions,
any or all of which may be waived, in whole or in part, to the extent
permitted by applicable law:
(a) Stockholder Approval. In addition to the obtaining of the
Company Stockholder Approval, this Agreement shall have been approved and
adopted by the affirmative vote of a majority of the voting power of the
shares owned by stockholders of the Company other than Johnson, Liberty or
any of their respective controlled affiliates.
(b) No Order. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is in
effect and which materially restricts, prevents or prohibits consummation
of the Merger or the other transactions contemplated by this Agreement;
provided, however, that the parties shall use their reasonable best efforts
(subject to Section 6.07) to cause any such decree, judgment, injunction or
other order to be vacated or lifted.
(c) HSR Act. Any waiting period applicable to the consummation of
the Transactions under the HSR Act shall have expired or been terminated,
and no action shall have been instituted by the Department of Justice or
the Federal Trade Commission challenging or seeking to enjoin the
consummation of the Merger, which action shall not have been withdrawn or
terminated.
SECTION 7.02. Additional Conditions to Obligations of Buyer. The
obligation of Buyer to effect the Merger is are also subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement, without giving
effect to any notification to Buyer delivered pursuant to Section 6.06,
shall, if qualified by materiality, be true and correct, and if not so
qualified, be true and correct in all material respects, in each case as of
the Effective Time as though made on and as of the Effective Time, except
(i) for changes specifically permitted by this Agreement and (ii) that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date.
(b) Agreement and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Effective Time.
(c) Consents Under Agreements. The Company shall have obtained the
consent or approval of each person whose consent or approval shall be
required in connection with the Merger under all loan or credit agreements,
notes, mortgages, indentures, leases or other agreements or instruments to
which it or any of the Company Subsidiaries is a party or is otherwise
bound or obligated, except those for which failure to obtain such consents
and approvals would not have or give rise to a Company Material Adverse
Effect.
(d) Financing. Buyer shall have obtained sufficient funds (i) to pay
the Merger Consideration, refinance or finance certain indebtedness of the
Company, Black Entertainment Television, Inc., a wholly owned subsidiary of
the Company, Buyer, and certain principals of Buyer, and pay all expenses
in connection with the transactions contemplated hereby, and (ii) for
general corporate purposes (the "Financing"), on terms reasonably
satisfactory to Buyer, and the proceeds of such Financing shall have been
received by or made immediately available to Buyer at or immediately prior
to the Closing.
(e) No Litigation. There shall not be (x) pending or threatened any
suit, action or proceeding by any Governmental Entity or (y) pending any
suit, action or proceeding by any other person, in any case, before any
court or governmental authority, agency or tribunal, domestic or foreign
(i) seeking to restrain or prohibit the consummation of the Merger or any
of the other transactions contemplated by this Agreement or seeking to
obtain from the Company, Buyer, Johnson or Liberty any damages, (ii)
seeking to prohibit or limit the ownership or operation by Buyer, Johnson
or Liberty of any material portion of the business or assets of the Company
or any of the Company Subsidiaries, or to compel the Company or any the
Company Subsidiaries to dispose of or hold separate any material portion of
its business or assets as a result of the Merger or any of the other
transactions contemplated by this Agreement, (iii) seeking to impose
limitations on the ability of Johnson or Liberty to acquire or hold, or
exercise full rights of ownership of, any shares of Common Stock,
including, without limitation, the right to vote the Common Stock owned by
him or it on all matters properly presented to the stockholders of the
Company, (iv) seeking material damages, (v) seeking to prohibit Johnson or
Liberty from effectively controlling in any material respect the business
or operations of the Company or the Company Subsidiaries, or (vi) which
otherwise is reasonably likely to have a Company Material Adverse Effect.
(f) Dissenting Shares. On the Closing Date, Dissenting Shares shall
aggregate no more than 10% of the then outstanding shares of Class A Stock
not owned by Johnson, Liberty or their respective controlled affiliates.
(g) Officer's Certificate. Buyer shall have received a certificate
of an appropriate officer of the Company to the effect that the conditions
set forth in Section 7.02(a), (b), (c), (e) and (f) have been satisfied at
the Effective Time.
SECTION 7.03. Additional Conditions to Obligations of the Company.
The obligation of the Company to effect the Merger is also subject to the
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Buyer, Johnson and Liberty contained in this Agreement,
without giving effect to any notification to the Company delivered pursuant
to Section 6.06, shall, if qualified by materiality, be true and correct,
and if not so qualified, be true and correct in all material respects, in
each case as of the Effective Time as though made on and as of the
Effective Time, except (i) for changes specifically permitted by this
Agreement and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of
such date.
(b) Agreement and Covenants. Buyer, Johnson and Liberty shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it
or him at or prior to the Effective Time.
(c) Officer's Certificate. The Company shall have received a
certificate of an appropriate officer of Buyer to the effect that the
conditions set forth in Section 7.03(a) and (b) have been satisfied at the
Effective Time.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after adoption of this
Agreement by the stockholders of the Company:
(a) by mutual consent of the Company and Buyer;
(b) by Buyer upon a material breach of any covenant or agreement on
the part of the Company set forth in this Agreement which has not been
cured, or if any representation or warranty of the Company shall have
become untrue in any material respect, in either case such that such breach
or untruth is incapable of being cured by September 30, 1998;
(c) by the Company (i) upon a material breach of any covenant or
agreement on the part of Buyer, Johnson or Liberty set forth in this
Agreement which has not been cured, or if any representation or warranty of
the Company, Johnson or Liberty shall have become untrue in any material
respect, in either case such that such breach or untruth is incapable of
being cured by September 30, 1998 or (ii) as provided in Section 4.12(b);
(d) by either Buyer or the Company, if any permanent injunction,
order, decree, ruling or other action by any Governmental Entity preventing
the consummation of the Merger shall have become final and nonappealable;
(e) by either Buyer or the Company, if the Merger shall not have been
consummated before September 30, 1998 (provided that the right to
terminate this Agreement under this Section 8.01(e) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
has been the cause of or resulted in the failure of the Effective Time to
occur on or before such date);
(f) by Buyer if: (i) the Board of Directors of the Company (or any
committee thereof) shall withdraw, modify or change its recommendation so
that it is not in favor of this Agreement or the Merger or shall have
resolved to do any of the foregoing; (ii) the Board of Directors of the
Company shall have recommended or resolved to recommend to its stockholders
an Alternative Transaction; or (iii) the stockholder approval required
pursuant to Section 7.01(a) shall not have been obtained by September 15,
1998.
The right of any party hereto to terminate this Agreement pursuant to
this Section 8.01 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto,
any person controlling any such party or any of their respective officers
or directors, whether prior to or after the execution of this Agreement.
SECTION 8.02. Effect of Termination. Except as provided in Section
8.05 or Section 9.01(b), in the event of the termination of this Agreement
pursuant to Section 8.01, this Agreement shall forthwith become void, there
shall be no liability on the part of any party hereto, or any of their
respective officers or directors, to the other and all rights and
obligations of any party hereto shall cease; provided, however, that
nothing herein shall relieve any party from liability for the wilful breach
of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
SECTION 8.03. Amendment. Before or after adoption of this Agreement
by the stockholders of the Company, this Agreement may be amended by the
parties hereto at any time prior to the Effective Time; provided, however,
that (a) any such amendment shall have been approved by the Special
Committee and (b) after adoption of this Agreement by the stockholders of
the Company, no amendment which under applicable law may not be made
without the approval of the stockholders of the Company may be made without
such approval. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time,
either the Company, on the one hand, or Buyer, on the other, may (a) extend
the time for the performance of any of the obligations or other acts of the
other party hereto, (b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance by the other party with any of
the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed
by the party or parties to be bound thereby and, with respect to extensions
or waivers granted by the Company, if the Special Committee shall have
approved such waiver or extension.
SECTION 8.05. Fees, Expenses and Other Payments. (a) Subject to
paragraph (b) of this Section 8.05, all costs and expenses (including any
expenses related to any claims or litigation in connection with the
transactions contemplated by this Agreement, or any settlement thereof),
including, without limitation, fees and disbursements of counsel, financial
advisors and accountants and other out-of-pocket expenses, incurred or to
be incurred by the parties hereto in connection with the transactions
contemplated hereby (with respect to such party, its "Expenses"), shall be
borne solely and entirely by the party which has incurred such costs and
expenses; provided, however, that all costs and expenses related to
printing and mailing the Proxy Statement shall be borne by the Company.
(b) The Company agrees that if this Agreement shall be terminated by
Buyer pursuant to Section 8.01(b) or (f), then the Company will, subject to
its receipt of reasonable supporting documentation, pay to Buyer, Johnson
and Liberty their reasonable Expenses incurred or to be incurred in
connection with the transactions contemplated by this Agreement. Any
payment required to be made pursuant to this paragraph (b) shall be made as
promptly as practicable but not later than two business days after
termination of this Agreement and, in any such case, shall be made by wire
transfer of immediately available funds to an account designated by Buyer.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations, Warranties and
Agreements. (a) Except as set forth in Section 9.01(b), the
representations, warranties and agreements of each party hereto shall
remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any other party hereto, any person
controlling any such party or any of their respective officers or
directors, whether prior to or after the execution of this Agreement.
(b) The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this
Agreement pursuant to Article VIII, except that the agreements set forth in
Articles I, II and IX and Section 6.05 shall survive the Effective Time and
those set forth in the last sentence of Section 6.01(a) and Sections 8.02
and 8.05 and Article IX shall survive termination.
SECTION 9.02. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been
duly given or made as of the date delivered or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties
at the following addresses (or at such other address for a party as shall
be specified by like changes of address) or sent by electronic transmission
to the telecopier number specified below:
(a) If to Buyer or Johnson:
Robert L. Johnson
2915 Audubon Terrace, N.W.
Washington, D.C. 20018
with a copy to:
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Attention: H. Van Sinclair
Telecopier No.: (202) 857-6395
(b) If to Buyer or Liberty:
Liberty Media Corporation
8101 East Prentice Avenue, Suite 500
Englewood, Colorado 80111
Attention: Robert R. Bennett
Telecopier No.: (303) 721-5434
with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Frederick H. McGrath
Telecopier No.: (212) 705-5125
(c) If to the Company:
BET Holdings, Inc.
One BET Plaza
1900 W Plaza N.E.
Washington, D.C. 20018-1211
Attention: President
Telecopier No.: (202) 608-2595
with separate copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attention: Michael P. Rogan
Stephen W. Hamilton
Telecopier No.: (202) 393-5760
and
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Suite 825
Washington, D.C. 20036
Attention: Arthur H. Bill
Telecopier No.: (202) 457-5151
SECTION 9.03. Certain Definitions. For purposes of this Agreement,
the term:
(a) "affiliate" means a person that, directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "business day" means any day other than a day on which (i) banks
in the State of New York are authorized or obligated to be closed or (ii)
the SEC or The New York Stock Exchange, Inc. is closed;
(c) "control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly
or as trustee or executor, of the power to direct or cause the direction of
the management or polices of a person or entity, whether through the
ownership of stock or as trustee or executor, by contract or credit
arrangement or otherwise; and
(d) "person" means any person or any corporation, partnership,
limited liability company or other legal entity.
(e) "subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary)
owns, directly or indirectly, at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions
with respect to such corporation or other organization.
SECTION 9.04. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic
or legal substance of the transactions contemplated hereby is not affected
in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled
to the extent possible.
SECTION 9.06. Entire Agreement. This Agreement (together with the
Exhibits, the Disclosure Schedules, the Confidentiality Agreement and the
other documents delivered in connection herewith), constitutes the entire
agreement of the parties and supersedes all prior agreements and
undertakings, both written and oral, between the parties, or any of them,
with respect to the subject matter hereof.
SECTION 9.07. Assignment. This Agreement shall not be assigned by
operation of law or otherwise and any purported assignment shall be null
and void, provided that any of Johnson, Liberty or Buyer may assign his or
its rights, but not his or its obligations, under this Agreement to any
subsidiary of such person.
SECTION 9.08. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in
this Agreement, express or implied (other than the provisions of Section
6.05, which provisions are intended to benefit and may be enforced by the
beneficiaries thereof), is intended to or shall confer upon any person any
right, benefit or remedy of any nature whatsoever under or by reason of
this Agreement.
SECTION 9.09. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware,
without regard to the conflict of laws rules thereof.
SECTION 9.10. Submission to Jurisdiction; Waivers. Each party hereto
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may
be brought and determined in the Court of Chancery, or other courts, of the
State of Delaware, and each party hereto hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect to his or
its property, generally and unconditionally, to the nonexclusive
jurisdiction of the aforesaid courts. Each party hereto hereby irrevocably
waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any action or proceeding with respect to this
Agreement, (a) the defense of sovereign immunity, (b) any claim that he or
it is not personally subject to the jurisdiction of the courts for any
reason other than the failure to serve process in accordance with this
Section 9.10, (c) that he or it, or its property, is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or
otherwise), and (d) to the fullest extent permitted by applicable law, that
(i) the suit, action or proceeding in any such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or proceeding is
improper and (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts.
SECTION 9.11. Enforcement of this Agreement. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which they
are entitled at law or in equity.
SECTION 9.12. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, Johnson, Liberty, Buyer, and the Company have
caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
BET HOLDINGS, INC.
By: /s/ Debra Lee
-----------------------------------
Name: Debra Lee
Title: President and Chief Operating Officer
/s/ Robert L. Johnson
--------------------------------------
Robert L. Johnson
LIBERTY MEDIA CORPORATION
By: /s/ Robert R. Bennett
-----------------------------------
Name: Robert R. Bennett
Title: President
BTV ACQUISITION CORPORATION
By: /s/ Robert L. Johnson
-----------------------------------
Name: Robert L. Johnson
Title: President
EXHIBIT B
OPINION OF GOLDMAN, SACHS & CO.
[TO BE ADDED]
EXHIBIT C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such shares,
who continuously holds such shares through the effective date of the merger
or consolidation, who has otherwise complied with subsection (d) of this
section and who has neither voted in favor of the merger or consolidation
nor consented thereto in writing pursuant to section228 of this title shall
be entitled to an appraisal by the Court of Chancery of the fair value of
the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and
also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation;
and the words "depository receipt" mean a receipt or other instrument
issued by a depository representing an interest in one or more shares, or
fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation
to be effected pursuant to section 251 (other than a merger effected
pursuant to section 251(g) of this title), section 252, section 254,
section 257, section 258, section 263 or section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the Surviving Corporation
as provided in subsection (f) of section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sections 251, 252, 254, 257, 258,263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the merger
or consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares
of any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to section 228
or section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or
of the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder
who has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any stockholder
shall have the right to withdraw his demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement
setting forth the aggregate number of shares not voted in favor of the
merger or consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days
after his written request for such a statement is received by the surviving
or resulting corporation or within 10 days after expiration of the period
for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If
the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register
in Chancery, if so ordered by the Court, shall give notice of the time and
place fixed for the hearing of such petition by registered or certified
mail to the surviving or resulting corporation and to the stockholders
shown on the list at the addresses therein stated. Such notice shall also
be given by 1 or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable.
The forms of the notices by mail and by publication shall be approved by
the Court, and the costs thereof shall be borne by the surviving or
resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented
by certificates to submit their certificates of stock to the Register in
Chancery for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such direction,
the Court may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In determining
such fair value, the Court shall take into account all relevant factors.
In determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the surviving or
resulting corporation would have had to pay to borrow money during the
pendency of the proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the appraisal
proceeding, the Court may, in its discretion, permit discovery or other
pretrial proceedings and may proceed to trial upon the appraisal prior to
the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or
resulting corporation pursuant to subsection (f) of this section and who
has submitted his certificates of stock to the Register in Chancery, if
such is required, may participate fully in all proceedings until it is
finally determined that he is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple
or compound, as the Court may direct. Payment shall be so made to each
such stockholder, in the case of holders of uncertificated stock forthwith,
and the case of holders of shares represented by certificates upon the
surrender to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting corporation
be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the
stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal
shall be filed within the time provided in subsection (e) of this section,
or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of his demand for an appraisal and an
acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e)
of this section or thereafter with the written approval of the corporation,
then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms as the
Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
PRELIMINARY COPY
PROPOSAL OF THE BOARD OF DIRECTORS: The Directors recommend a vote "FOR" Item
1 set forth below:
1. Approval of the Agreement and Plan of Merger, dated as of March 15,
1998, among Robert L. Johnson, Liberty Media Corporation, BTV
Acquisition Corporation and BET Holdings, Inc.
FOR [__] AGAINST [__] ABSTAIN [__]
Votes must be indicated (X) in black or blue ink.
In their discretion, the Proxies are Change of Address
authorized to vote upon such other and or Comments
business as may properly come before Mark Here ( )
the meeting.
(Please sign exactly as name appears
on the left.)
Dated:______________________, 1998
________________________________
Signature
________________________________
Spouse if held jointly
Sign, Date and Return this Proxy Check here if you plan to attend the
Card Promptly Using the Enclosed Special Meeting of Stockholders ( )
Envelope.
___________________
BET HOLDINGS, INC.
P R O X Y
CLASS A COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Debra L. Lee and Byron F. Marchant, or
either of them, each with full power of substitution, as proxies of the
undersigned to vote, as designated on the reverse side hereof, all shares
of Class A Common Stock of BET Holdings, Inc. held of record by the
undersigned at the Special Meeting of Stockholders to be held at
______________ on _________ __, 1998, at _____ a.m., local time, and at any
adjournment or postponement thereof.
This Proxy will be voted FOR Item 1 unless a contrary choice is
specified.
(Continued and to be signed on reverse side)
BET HOLDINGS, INC.
P.O. BOX 11101
NEW YORK, NY 10203-0107