<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
BET HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
ENTER COMPANY NAME HERE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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[_] 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.
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Notes:
<PAGE>
[LOGO OF BET HOLDINGS, INC.]
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 the Capital Hilton, 16th and K Street, N.W.,
Washington, D.C. 20036 on Thursday, July 30, 1998, at 10:00 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 ("Liberty"),
BET Holdings' next largest stockholder and a wholly owned subsidiary of Tele-
Communications, Inc. ("TCI"). Together, Mr. Johnson and Liberty currently own
approximately 63% of BET Holdings' outstanding capital stock, representing
approximately 92% of the voting power of the stockholders. Mr. Johnson and
Liberty have proposed the merger in order to buy out the remaining
stockholders.
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 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.
Since a majority of the members of the Board of Directors are associated
with Mr. Johnson, Liberty 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 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 or TCI,
is not a director of Liberty or TCI, and does not have any commercial
relationship with Mr. Johnson, Liberty 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 and Liberty'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. 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
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.
<PAGE>
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 51 to 53 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 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,
/s/ Debra L. Lee
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 July 2, 1998 and first mailed to stockholders on July
6, 1998.
<PAGE>
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 the Capital Hilton,
16th and K Street, N.W., Washington, D.C. 20036 on Thursday, July 30, 1998 at
10:00 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 Monday, June 29, 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 the offices of BET Holdings.
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
/s/ Debra L.Lee
Debra L. Lee
President and Chief Operating
Officer
Washington, D.C.
July 2, 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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER..................................... 1
SUMMARY.................................................................... 3
SPECIAL FACTORS............................................................ 9
Purpose and Background of the Merger..................................... 9
Recommendation of the Special Independent Committee and Board of
Directors; Fairness of the Merger....................................... 19
The Buying Group's Purpose and Reason for the Merger..................... 23
Opinion of Financial Advisor to the Special Independent Committee........ 24
Certain Effects of the Merger............................................ 30
Plans for the Company After the Merger................................... 31
Conduct of the Business of the Company if the Merger is not Consummated.. 31
Buying Group Letter Agreements........................................... 31
Interests of Certain Persons in the Merger; Certain Relationships........ 32
Accounting Treatment..................................................... 34
Financing of the Merger.................................................. 34
Regulatory Requirements; Third Party Consents............................ 36
Federal Income Tax Consequences of the Merger............................ 37
Fees and Expenses........................................................ 38
</TABLE>
<TABLE>
<S> <C>
INFORMATION CONCERNING THE SPECIAL MEETING ................................ 40
Time, Place, Date........................................................ 40
Purpose of the Special Meeting........................................... 40
Record Date; Voting at the Meeting; Quorum............................... 40
Required Vote............................................................ 41
Action to be Taken Under the Proxy....................................... 42
Proxy Solicitation....................................................... 42
THE PARTIES................................................................ 43
The Company.............................................................. 43
BTV Acquisition.......................................................... 43
Robert L. Johnson........................................................ 44
Liberty Media Corporation................................................ 44
Tele-Communications, Inc................................................. 44
THE MERGER AGREEMENT....................................................... 45
The Merger; Merger Consideration......................................... 45
The Exchange Fund; Payment for Shares of Class A Stock................... 45
Transfers of Class A Stock............................................... 46
Treatment of Stock Options............................................... 46
Conditions............................................................... 47
Representations and Warranties........................................... 47
Covenants................................................................ 48
Indemnification and Insurance............................................ 48
No Solicitation; Fiduciary Obligations of Directors...................... 48
Directors and Officers of the Company Following the Merger; Certificate
of Incorporation; Bylaws................................................ 49
Termination.............................................................. 49
Amendment/Waiver......................................................... 49
LITIGATION................................................................. 50
DISSENTERS RIGHTS OF APPRAISAL............................................. 51
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY........................ 54
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
CERTAIN RELATIONSHIPS AND TRANSACTIONS..................................... 56
Agreements with Cable Affiliates......................................... 56
Agreements with Related Parties.......................................... 56
Transactions with Management............................................. 56
MARKET FOR THE CLASS A STOCK............................................... 57
Class A Stock Market Price Information; Dividend Information............. 57
Common Stock Purchase Information........................................ 57
SECURITIES OWNERSHIP....................................................... 59
Beneficial Ownership of More Than 5% of Class A Stock.................... 59
Beneficial Ownership of Class A Stock by Certain Parties Related to the
Company or the Buying Group............................................. 60
Ownership of BTV Acquisition Common Stock by Directors and Executive
Officers of the Company................................................. 63
MANAGEMENT................................................................. 64
Directors and Executive Officers of the Company.......................... 64
Directors and Executive Officers of BTV Acquisition...................... 67
Directors and Executive Officers of TCI.................................. 67
Directors and Executive Officers of Liberty.............................. 70
INDEPENDENT ACCOUNTANTS.................................................... 71
STOCKHOLDER PROPOSALS...................................................... 71
DOCUMENTS INCORPORATED BY REFERENCE........................................ 71
OTHER BUSINESS............................................................. 72
AVAILABLE INFORMATION...................................................... 73
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
</TABLE>
(ii)
<PAGE>
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 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.
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. For the merger to occur, the holders of a majority of the
voting power of BET Holdings' shares not held by Mr. Johnson, Liberty and
their respective affiliates must approve the merger. To review the
background and reasons for the merger in greater detail, see pages 9 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 51 to 53.
Q: WHO CAN VOTE ON THE MERGER?
A: All stockholders of record as of the close of business on June 29, 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 simply attend the Special Meeting and vote.
1
<PAGE>
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 37 to 38.
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, Senior Vice President and Chief Administrative
Officer, BET Holdings, Inc., One BET Plaza, 1900 W Place, N.E.,
Washington, D.C. 20018-1211; telephone number (202) 608-2000.
2
<PAGE>
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, Inc. 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" (or the "Surviving Corporation" upon consummation of the Merger), to
Robert L. Johnson as "Mr. Johnson," to Liberty Media Corporation as "Liberty,"
to Tele-Communications, Inc. as "TCI" and to Mr. Johnson, TCI, Liberty and BTV
Acquisition collectively as the "Buying Group." We are also using the term
"Nonaffiliated Stock" to mean all Class A common stock of the Company not owned
by BTV Acquisition, Mr. Johnson, TCI, Liberty and their respective affiliates
and the term "Options" to mean all outstanding options to acquire Class A
common stock of the Company.
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, Liberty and the Johnson Children's Insurance Trust
(except for any Options that have been continued as an equity interest in the
Surviving Corporation, as described further in this document).
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
associated 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.
3
<PAGE>
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:
. 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.
. the opinion of Goldman, Sachs & Co. ("Goldman Sachs") addressed to the
Special Independent Committee that, as of March 15, 1998, the $63 per
share to be received by the holders of the Company's 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.
. 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 the Company's 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. On June 15, 1998, The Bank of
New York, as trustee of the Johnson Children's Insurance Trust, an irrevocable
trust established for the benefit of the children of Mr. and Mrs. Johnson,
requested the opportunity to continue to hold shares of the Surviving
Corporation after the Merger. The parties have agreed to execute an amendment
to the Merger Agreement providing that upon the consummation of the Merger no
payment shall be made with respect to the shares of Class A common stock held
by such trust and such trust will own an interest in the Surviving Corporation.
Following the effectiveness of the Merger, on a fully diluted basis, Mr.
Johnson will own 65.25% of the common stock of the Company (as the surviving
corporation in the Merger), Liberty will own 34.09% and the Johnson Children's
Insurance Trust will own .65% (assuming that no officers of the Company
continue their Options and become entitled to acquire equity interests in the
Surviving Corporation). 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 32 to 34. The Special Independent Committee and the
Board were aware of these interests and considered them in recommending and
approving the Merger.
4
<PAGE>
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 $467.2 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 and that no officers of the Company
continue their Options and become entitled to acquire equity interests in the
Surviving Corporation in the Merger in lieu of terminating such Options and
receiving cash in respect of such Options at the time of the Merger. In
addition, the parties anticipate that BTV Acquisition will require
approximately $14.3 million to pay other expenses and costs relating to the
Merger, and $27.7 million to refinance or finance indebtedness of the Company,
Mr. Johnson, and Black Entertainment Television, Inc., the Company's primary
operating subsidiary ("BET"), and to finance other general corporate purposes
for a total cost of $42 million. 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. On May 15, 1998,
BTV Acquisition delivered to the Company a commitment letter from The Bank of
New York and certain of its affiliates to arrange, syndicate and administer,
subject to certain specified conditions, senior secured revolving credit and
term loan facilities aggregating up to $625 million in order to fund the
foregoing purposes. See "SPECIAL FACTORS -- Financing of the Merger."
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 or been terminated. The required
notification and report forms were filed with the Antitrust Division and the
Federal Trade Commission, and early termination of the required waiting period
was granted at 5:14 p.m. on May 6, 1998.
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 SPECIAL MEETING
VOTING
A special meeting of stockholders of the Company will be held at 10:00 a.m.,
local time, on Thursday, July 30, 1998, at the Capital Hilton, 16th and K
Street, N.W., Washington, D.C. 20036 (the "Special Meeting"). At the Special
Meeting, 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.
5
<PAGE>
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. If any other matters are properly presented at the Special Meeting
for action, including, among other things, consideration of a motion to adjourn
such meeting to another time and/or place (including, without limitation, for
the purpose of soliciting additional proxies or allowing additional time for
the satisfaction of conditions to the Merger), the persons named in the
enclosed form of proxy and acting thereunder generally will have discretion to
vote on such matters in accordance with their best judgment. Notwithstanding
the foregoing, the persons named in the proxies will not use their
discretionary authority to use proxies voting against the Merger to vote in
favor of adjournment or postponement of the Special Meeting. The Merger is also
subject to a number of conditions. See "THE MERGER AGREEMENT -- Conditions." At
the present time the Company does not anticipate waiving any of the material
conditions of the Merger. However, if it becomes necessary to waive such
conditions, the Company will deliver revised materials and additional proxy
cards to stockholders and will give stockholders an opportunity to change their
vote. While no such waiver is contemplated at this time, if such a waiver of
any material conditions of the Merger were presented to the Board of Directors,
the Board would consider whether a majority of the holders of the Nonaffiliated
Stock would still vote in favor of the Merger as well as the impact on the
market price for the Class A common stock if the Merger were terminated, before
waiving any such conditions.
Delaware law requires that the holders of a majority of the voting power 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 to an independent vote requirement stipulating 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. Because the
Company's officers (other than Mr. Johnson) are not affiliates of Mr. Johnson
or Liberty, they have the discretion to vote the shares of Class A common stock
they own in favor of the Merger Agreement, and, with the exception of Mr.
Johnson's spouse, Mrs. Sheila Crump Johnson, their affirmative votes will count
in determining whether the independent vote requirement has been satisfied.
Mrs. Johnson's shares will not count toward satisfaction of the independent
vote requirement, but her outstanding Options will be treated in the same
manner as the Options held by other officers of the Company (other than Mr.
Johnson), as described further below. In addition, the shares of Class A common
stock held by the Johnson Children's Insurance Trust will not count toward
satisfaction of the independent vote requirement. The Company's officers as a
group (other than Mr. Johnson) currently own less than 1% of the outstanding
Class A common stock. They also own Options to acquire 1,457,995 shares of
Class A common stock, which Options will be cashed out upon consummation of the
Merger (unless an alternative arrangement is negotiated between the Buying
Group and any such officers to continue those Options as an equity interest in
the Surviving Corporation), as further described in the section of this Proxy
Statement entitled "SPECIAL FACTORS." The Company believes it is the present
intention of all such officers owning Class A common stock to vote all their
shares in favor of the Merger Agreement. Under the terms of the Merger
Agreement, the current officers of the Company will be the officers of the
Surviving Corporation following consummation of the Merger.
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 June 29, 1998 as the record date for determining who is
entitled to vote at the Special Meeting. On the record date, there were
10,071,713 shares of Class A common stock outstanding and entitled to vote held
by approximately 607 stockholders of record.
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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, without interest (the "Merger
Consideration").
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:
. 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;
. there can be no legal restraints or prohibitions that prevent completion
of the Merger; and
. 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:
. BTV Acquisition must obtain sufficient financing to complete the Merger
and to finance or refinance certain indebtedness and to pay certain
expenses of the Merger;
. 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;
. there is no litigation challenging the Merger pending or threatened;
. the Company must comply with the Merger Agreement; and
. 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:
. BTV Acquisition, Mr. Johnson and Liberty must comply with the Merger
Agreement; and
. 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:
. the Merger has not been completed by September 30, 1998;
. a final court order or other governmental action prohibits the Merger;
or
. the other party materially fails to comply with the Merger Agreement and
such failure cannot be remedied by September 30, 1998.
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The Company may terminate the Merger Agreement if:
. 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:
. the Board decides to withdraw or change its recommendation in favor of
the Merger; or
. 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.
DISSENTERS RIGHTS OF APPRAISAL
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:
. you must NOT vote in favor of the Merger; and
. 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."
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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 generally the price of the Company's stock and the
directors' concerns that the stock price did not reflect the value of the
Company and determined that the Company should explore options to increase the
stock price. To further that objective, 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, 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. Mr. Johnson and Liberty did not pursue the transaction at that
time because they believed that such a transaction would involve a substantial
time committment and they did not have sufficient time to devote to the
structuring of such a transaction at that time. As a result 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. Salomon is an internationally recognized investment banking
firm with broad experience in the media industry and was retained by the Board
of Directors of the Company in light of such experience. Salomon had from time
to time in the past rendered investment banking services to Liberty, TCI and
the Company and their respective affiliates for which it has received
customary compensation.
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 the following possible
alternatives: an outright sale of the Company to a third party, commencement
of an issuer partial tender offer or other share repurchase program by the
Company, a "going private" transaction, or the making of certain investments
or strategic acquisitions or entering into a strategic partnership. With
respect to an outright sale of the Company to a third party, Salomon observed
that such a transaction could maximize current value to stockholders and that
market timing for a sale may be excellent. Salomon advised the Board that it
had been informed by Mr. Johnson that he had no interest in pursuing a sale of
the Company, which made the alternative of an outright sale not feasible.
Salomon also noted that an outright sale was not likely to deliver full value
for the Company's high-potential early-stage ventures and that the Company's
close existing ties with TCI may make the strategic logic more difficult to
articulate to a strategic buyer. With respect to an issuer partial tender
offer or other share repurchase program by the Company, Salomon observed that
the Company's very limited public float and limited daily trading volume made
any significant open market repurchase program a practical impossibility.
Salomon also noted that a partial tender offer would further reduce market
trading in the Class A common stock. With respect to a "going private
transaction", Salomon observed that such a transaction would have the
potential to deliver a premium value for the public stockholders of the
Company, would permit the existing controlling stockholders to maintain their
control of the Company and would eliminate public market concerns regarding
the future gross prospects of the Company. Salomon also noted, however, that a
leveraged "going private" transaction would result in an adverse change in the
financial risk profile of the Company and reduce its access to public capital
as well as restrict the financial flexibility of the Company over the medium
term as results would increase the debt burden. Salomon's presentation did not
contain a valuation of the Company or discuss the fairness of the transactions
or any other particular transaction. Salomon did not deliver any opinion to
the Board regarding these various alternatives. Following such presentation,
the Board determined to take the possible alternatives presented by Salomon
under advisement but not to take any action at that time to pursue any of such
alternatives.
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Following this Board meeting, Mr. Johnson and Dr. Malone and Mr. Bennett,
representing Liberty, 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 common stock, par value $.02 per share (the "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
"SPECIAL FACTORS--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
common stock of the Company.
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.
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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 the proposed buyout of holders of the
Nonaffiliated Stock, and alleged, among other things, that the $48 Offer was
unfair to the 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 April 29, 1998, the D.C. Court stayed this action until an
August 21, 1998 status conference.
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.
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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. In addition to the core cable network, the
Company had initiated a number of new business ventures, including BET on
Jazz, Action Pay-Per-View, SoundStage Restaurants and publications. Unlike the
core cable network, these non-core business units had not yet generated
profits and in fact were generating losses. Additionally, these non-core
business units were subject to all of the risks and uncertainties customarily
associated with start-up businesses. In formulating its views concerning the
Company's future prospects, the Special Independent Committee took into
consideration both the possibility that these new businesses might contribute
to the Company's future earnings and growth and the possibility that these new
businesses might be unsuccessful. 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.
In mid-November 1997, Mr. Johnson and representatives of Liberty met by
telephone with their financial and legal advisors to discuss the October 1997
Projections. In the course of these discussions, it was noted that the May
1997 Projections had been prepared by senior management of the Company in
connection with the preparation of the annual budget for fiscal year 1998 and
that such projections had been reviewed and accepted by the Board of Directors
at its May 20, 1997 meeting, while the October 1997 Projections though
prepared by management were not prepared in connection with the preparation of
the annual budget and had not been reviewed by Mr. Johnson or the Board of
Directors. In addition, during these discussions Mr. Johnson expressed his
view that the October 1997 Projections did not reflect a realistic forecast of
the Company's potential performance because, among other factors, such
projections anticipated increases in revenues without the expense increases
customarily necessary to obtain such increased revenues. For example, Mr.
Johnson noted that the projections anticipated increases in domestic
programming ratings and advertising revenues without taking into account the
corresponding increases in program acquisition costs which would be required
in order to provide such rating and advertising revenue increases. Based upon
these discussions, the Buying Group was of the view that the May 1997
Projections were a more appropriate view of the Company's potential
performance than the October 1997 Projections and the Buying Group instructed
Salomon to express the Buying Group's views to Goldman Sachs.
On November 24, 1997, the Special Independent Committee and its legal and
financial advisors met by telephone with representatives of Gabelli Funds,
Capital Research and Management Company and Fidelity Investments, the three
institutional investors holding the largest amounts of the Company's Class A
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 advised the Special Independent Committee of their views
that the $48 price was not adequate and that a price in the $60's would be
appropriate. The Special Independent Committee did not have further
substantive communications with these investors.
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 believed, as discussed above, 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
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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 consisted of the December 1997 Projections
as adjusted by the Buying Group and its financial advisors to reflect certain
more conservative assumptions underlying such projections than those that were
contained in management's December 1997 Projections. These revised assumptions
were based, among other things, upon Mr. Johnson's views as to areas of the
December 1997 Projections which were overly optimistic, given historical and
year-to-date performance. Salomon, as a representative of the Buying Group,
analyzed the December 1997 Projections, reviewed and questioned the
reasonableness of the various assumptions used in the preparation thereof and
discussed with the Buying Group and Goldman Sachs such matters. 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%.
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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 would distract senior management of the Company from their focus on
running 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 execution of a definitive merger agreement and
the resolution of all other issues concerning a proposed merger. Mr. Johnson
contemplated that such issues would include customary matters for transactions
of this type, although the Buying Group and the Company had, as of such time,
not negotiated specific provisions. 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. Goldman Sachs'
presentation was substantially similar to the presentation made by Goldman
Sachs on March 15, 1998. The topics outlined by Goldman Sachs included the
following: stock price performance, purchase price analysis, review of
selected publicly traded companies, analysis of selected merger transactions,
discounted cash flow analysis, recapitalization analysis, and minority buyout
analysis. For a more detailed description of the material financial analyses
utilized by Goldman Sachs, see "SPECIAL FACTORS--Opinion of Financial Advisor
to the Special Independent Committee." 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, since the implied per share value of
the Company will be less to the extent that the Company's operating
performance is less than the results projected in the December 1997
Projections. 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 considered obtaining further projections from the
Company and decided not to do so. The Special Independent Committee concluded
in that regard that the four sets of projections referred to above provided it
with sufficient information relating to the Company's future operations. The
Special Independent Committee 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.
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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 indicated that the Buying Group
believed that a $63 per share price offered the stockholders a significant
premium over the market price of the Class A Stock prior to the making of the
$48 Offer and that such price was fair to the holders of the Nonaffiliated
Stock. 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. Mr. Johnson did not indicate whether or not he intended to
propose to the Board any alternative plans to enhance stockholder value in the
event that the Buying Group's offer was not accepted.
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 a majority of
the Nonaffiliated Stock separately approve the merger.
In determining that the Special Independent Committee would consider an
offer of $63 per share, subject to Goldman Sachs' ability to opine that such
price was fair to the holders of a majority of the Nonaffiliated Stock from a
financial point of view, and to the successful negotiation of the terms of the
Merger Agreement, including the requirement that the holders of a majority of
the Nonaffiliated Stock separately approve the proposed merger, 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 paid in the proposed merger. The average
closing price of the Class A Stock on the New York Stock Exchange ("NYSE")
during the 30-day period preceding September 10, 1997, the last full
trading day before 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) 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
the 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
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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 Company was not able to provide and the
Special Independent Committee was not able to identify sufficient 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 revenue, 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, start-
up enterprises.
(4) 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 as analyzed by Goldman Sachs. 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.
(5) 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. The small
public float negatively impacts the liquidity of the market for the
public's shares. The public float currently is 6,240,322 shares of Class A
Stock.
(6) 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
Common Stock of the Company, par value $.02 per share ("Class B Stock") and
Class C Common Stock of the Company, par value $.02 per share ("Class C
Stock" and, together with the Class A Stock and the Class B Stock, the
"Common Stock") into shares of Class A Stock, the Buying Group would
beneficially own 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 ten 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
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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 March 5, 1998, no third
party indications of interest for the acquisition of the Company were
communicated to the Company, the Special Independent Committee or Goldman
Sachs.
(7) 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.
(8) Availability of Dissenters Rights. The Special Independent Committee
also considered the fact that in a merger transaction dissenters rights of
appraisal would be available to the holders of the Nonaffiliated Stock
under Delaware law. (See "DISSENTERS RIGHTS OF APPRAISAL.")
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. The
Buying Group obtained such a "highly confident" letter on May 13, 1998 from
The Bank of New York Company, Inc. and BNY Capital Markets, Inc. to the effect
that, subject to certain qualifications and conditions set forth in the
letter, they were highly confident that they, directly or through any of their
affiliates, could successfully arrange and fully syndicate a $600 million
senior secured credit 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.
See "SPECIAL FACTORS -- Financing of the Merger" for a summary of the terms
and conditions of the "highly confident" letter. The Special Independent
Committee reviewed the "highly confident" letter and based upon such review,
the Special Independent Committee requested the inclusion of a provision for a
financing commitment in the Merger Agreement.
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 certain issues
relating to the proposed merger agreement through the evening of March 15,
1998, including provisions providing for (i) the right of the Company to
terminate the merger agreement in the event that the Buying Group does not
deliver to the Company a firm commitment for the financing of the Merger by
May 15, 1998, (ii) the Board of Directors, acting on the recommendation of the
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Special Independent Committee, 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 the Class A
Stock, (iii) the holders of a majority of the Nonaffiliated Stock to approve
the Merger, (iv) the obligations of the parties to proceed with the Merger in
the event the holders of a significant amount of shares exercised their right
to dissent from the Merger and seek appraisal, (v) the rights of each party to
terminate the merger agreement, (vi) the obligation of the Company to pay
certain expenses of the Buying Group relating to the Merger in certain
circumstances, and (vii) certain representations to be made by Mr. Johnson in
such merger agreement.
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 the Company's 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 shareholder 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 the MOU which outlined an agreement-in-principle regarding the
terms of a settlement of the Consolidated Action. See "LITIGATION." At the
time the MOU was executed, the Baskerville Complaint was still pending in the
D.C.
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Court and the parties to the MOU understood that consummation of the Merger
was contingent on, among other things, there being no pending or threatened
litigation challenging the Merger. The parties to the MOU believed that the
Baskerville Complaint would be voluntarily or involuntarily dismissed. 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 "SPECIAL FACTORS--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, the last full trading day before 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
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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.") Goldman Sachs
reviewed with the Special Independent Committee the substance of its
discussions with Salomon. The Special Independent Committee did not rely
upon such discussions in formulating its views concerning the Company's
business and prospects, or concerning the fairness of either the $48 Offer
or the $63 offer price.
(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
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
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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 analyzed by
Goldman Sachs 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 38% of the outstanding shares of Class A Stock. The small
public float was believed by the Special Independent Committee to
negatively impact the liquidity of the market for the public's shares. The
public float is 6,240,322 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.")
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While the Special Independent Committee was aware of the pending litigation
that had been filed in Delaware and Washington, D.C. concerning the $48 Offer,
there was no specific discussion of such litigation during the consideration
of the $63 proposal.
The Special Independent Committee considered the fact that if the Merger is
approved, the holders of the Nonaffiliated Stock will not participate in the
future growth of the Company. Because of the risks and uncertainties
associated with the Company's future prospects, the Special Independent
Committee concluded that this detriment was not quantifiable. The Special
Independent Committee also concluded that obtaining a very significant cash
premium for the Nonaffiliated Stock now was preferable to enabling the holders
of such stock to have a speculative potential future return; the Special
Independent Committee also decided to insist upon provisions in the Merger
Agreement requiring approval of the Merger by the holders of a majority of the
Nonaffiliated Stock and protecting dissenters rights of appraisal, so that
such holders could decide for themselves.
The Special Independent Committee did not consider the net book value, going
concern value or liquidation value in light of the Special Independent
Committee's mandate to evaluate an offer from the Buying Group and the Buying
Group's determination that if the Special Independent Committee would not
recommend an offer of $63, the Company would remain a publicly held
corporation. The Special Independent Committee did not consider the $4.1
million in share repurchases in 1997, within a per share price range of
$24.375 to $30.00 because of the limited amount of stock repurchased and the
per share prices thereof. Certain of the factors considered by the Special
Independent Committee resulted in an implied per share value in excess of $63,
however such factors were in some manner related to the projections provided
by management. It was the Special Independent Committee's judgment that such
factors were mitigated because (i) the projections appeared aggressive in view
of the historical performance of the Company and there were certain
uncertainties associated with the projections and (ii) various factors were
considered by the Special Independent Committee, each of which, in the opinion
of the Special Independent Committee, supported its determination that the
Merger Agreement and Merger are fair to and in the best interests of the
Company and the holders of the Nonaffiliated Stock. See "SPECIAL FACTORS--
Recommendation of the Special Independent Committee and Board of Directors;
Fairness of the Merger--Special Independent Committee."
Board of Directors of the Company. In reaching its determinations referred
to above, the Board of Directors of the Company considered and relied upon the
conclusions and recommendations of the Special Independent Committee, the
unanimous approval of the Merger Agreement and the Merger by the three
directors of the Company (Messrs. Lewis, Washington and Wilkins) 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 shareholder of two TCI-affiliated
companies), and the following additional factors, each of which, in the view
of the Board of Directors, supported such determinations: (i) 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; (ii) the fact that the Buying Group had obtained a
"highly confident" letter on May 13, 1998 from The Bank of New York Company,
Inc. and BNY Capital Markets, Inc. to the effect that, subject to certain
qualifications and conditions set forth in the letter, they were highly
confident that they, directly or through any of their affiliates, could
successfully arrange and fully syndicate a $600 million senior secured credit
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. See "SPECIAL
FACTORS--Financing of the Merger" for a summary of the terms and conditions of
the "highly confident" letter; 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 light of their
knowledge of the business, financial condition and prospects
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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 by a majority of the
Board of Directors to represent solely the interests of the Company
stockholders other than the Buying Group; (ii) the Special Independent
Committee retained and was advised by independent legal counsel retained
solely to negotiate on behalf of the holders of the Nonaffiliated Stock; (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 voting power of the Nonaffiliated Stock. A
majority of the Board of Directors, who are not employees of the Company,
believe that sufficient procedural safeguards to ensure fairness of the
transaction and to permit the Special Independent Committee to effectively
represent the interests of the holders of the Nonaffiliated Stock were present
and therefore there was no need to retain any additional unaffiliated
representative to act on behalf of the holders of the Nonaffiliated Stock in
view of (i) the unaffiliated status of the Special Independent Committee, its
legal counsel, and financial advisors, whose sole purpose was to represent the
holders of Nonaffiliated Stock and (ii) the fact that the Special Independent
Committee, even though consisting of a director of the Company and therefore
not completely unaffiliated with the Company is a mechanism well recognized
under Delaware law to ensure fairness.
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, 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 member of the Buying Group 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 (for example, as a privately
held entity, the Company would no longer be required to file quarterly and
annual reports with the SEC or publish and distribute to its stockholders
annual reports and proxy statements), which the members of the Buying Group
anticipate could result in savings of approximately $400,000 per year. 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 on going basis and the Buying Group wanted
to acquire the entire equity interest in the Company and neither Mr. Johnson
nor Liberty desired to sell the shares that they owned to a third party.
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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 determined to undertake
the transaction at this time because they believed that a long term strategy
for increasing the value of the Company would be more readily achievable if
the Company were private. In addition, based upon discussions in the financial
community, they believe that financing for such a transaction would be
available to take the Company private.
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 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").
The Buying Group also considered the ability of the Buying Group to finance
the Merger at the $63 price. Although Salomon generally assisted the Buying
Group on this transaction and, in particular, advised the Buying Group on
bidding and negotiating strategies, participated in negotiations with Goldman
Sachs and analyzed the Company's projections and assumptions thereto, Salomon
did not deliver a fairness opinion as to the Merger and did not provide the
Buying Group with any reports, opinions or appraisals.
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
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(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; 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
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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
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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. Goldman
Sachs selected the Large Selected Companies and the Medium Selected Companies
for comparison purposes because such companies were publicly traded companies
in the entertainment industry. This review showed that shares of the Company's
Class A Stock were up approximately 51% for the three-year period ended March
6, 1998, as compared to 11% for the Large Selected Companies and 7% for Medium
Selected Companies. This review also showed that shares of the Company's Class
A Stock were up approximately 78% for the one-year ended March 13, 1998, as
compared to 26% for the Large Selected Companies and 25% for Medium Selected
Companies.
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 considered levered
consideration for the Company as a multiple of various financial performance
measurements to be relevant to its analyses because it is a standard valuation
measure for a public company. 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. Goldman Sachs considered implied discount
rates to be relevant because they are standard valuation measures for a public
company. 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 considered adjusted market
capitalization as a multiple of LTM sales and as a multiple of LTM EBITDA to
be relevant to its analysis because they are standard valuation measures for a
public company. 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
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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. Goldman Sachs considered P/E ratios to be relevant
to its analyses because the ratio is a standard valuation measure for a public
company. 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. The selected transactions
involving the Mature Networks include: Home Shopping Network/USA Network,
Seagram's Universal/USA Networks, Fox & Liberty/Rainbow Programming, Fox
Kids/Intl. Family Entertainment, Cablevision/MSG, Westinghouse CBS/TNN and
CMT, Comcast-Disney/E!, Time Warner/TBS, Cap Cities-Hearst/Lifetime,
Cablevision/American Movie Classics, Cap Cities-Hearst/H&E, CNBC/FNN,
Hearst/ESPN and Intl. Family Entertainment/Family Channel. The selected
transactions involving the Development Networks include: TCI Music/The Box
Worldwide, Disney/Classic Sports, Paxson Communications/Travel Channel, News
Corp/ The Golf Channel, TV Food Network, Flextech/The Family Channel (UK),
Liberty/fX, Liberty/Faith & Values, NBC/Court TV, Concept
Communications/Nostalgia Network, Liberty Sports/SportChannel Chicago,
Landmark/Travel Channel, Viacom/MTV Europe (Maxwell), Discovery Channel/The
Learning Channel, Flextech/Children's Channel, TCI/Video Juke Box,
Gaylord/Country Music TV and Nostalgia Television. The selected transactions
involving the Home Shopping Networks include: Silver King/Home Shopping
Network and Comcast-Liberty/QVC. 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).
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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"). The range of discount rates
referenced above were chosen by Goldman Sachs based upon the Company's average
cost of capital and the risks identified by the Special Independent
Committee's assessment of the Company's 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. The above analysis did not purport to be
indicative of actual results and did not purport to reflect the prices at
which shares of the Company's Class A Stock may trade. Discounted cash flow
analysis was included because it is a widely used valuation methodology, but
the results of such methodology are highly dependent upon the numerous
assumptions that must be made, including earnings growth rates, terminal
values and discounts rates.
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. Goldman Sachs
selected the above-referenced buyout transactions because such transactions
represented recent circumstances where the majority shareholders bought out
the minority shareholders.
While the summary set forth above contains the material analyses performed
by Goldman Sachs, it does not purport to be a complete description of such
analyses. 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
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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, Liberty or TCI, or
any of their respective subsidiaries, (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") and (iv) the Johnson Children's Insurance Trust). The benefit
to the holders of Nonaffiliated Stock of the transaction is the payment of a
significant premium, in cash, above the market value for such stock prior to
the announcement of the transaction. This cash payment assures that all
stockholders will receive the same amount for their shares, rather than taking
the risks associated with attempting to sell their shares in the market. The
detriment to such holders is their inability to participate as continuing
stockholders in the possible future growth of the Company. If the Merger is
consummated, the Buying Group will hold the entire equity interest in the
Company not already owned by the members of the Buying Group and the Buying
Group will benefit from any future earnings or growth of the Company and any
increases in value of the Company; however, the Buying Group will also bear
the risk of any decreases in value of the Company and will bear the risks
associated with debt to be incurred by the Company in connection with the
Merger. In addition, because the Company will be closely held and cease to be
publicly traded, the Buying Group believes that they may be able to increase
the value of the Company to a greater degree than if it were still public
because management will no longer be focused on meeting quarterly earnings and
other estimates but instead will be focused on the creation of long-term
stockholder value. Moreover, because the securities of the Company will cease
to be publicly traded, the Buying Group will bear the risks associated with
the lack of liquidity in their investment in the Company. In addition to the
lack of liquidity associated with the Company ceasing to be publicly traded,
the March Buying Group Letter (as hereinafter defined) provides for certain
rights of first offer upon a proposed sale by either Mr. Johnson or Liberty,
which procedure may limit the ability of Mr. Johnson and Liberty to sell their
shares of the Surviving Corporation and increase the amount of time necessary
to complete any such sale.
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. However, the Company and Mr. Gordon, Executive Vice President, Finance
and Chief Financial Officer of the Company, are currently in discussions
concerning the terms pursuant to which he may submit his resignation. The
Company and Mr. Gordon anticipate that an agreement will be reached pursuant
to which Mr. Gordon will depart after the consummation of 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.
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PLANS FOR THE COMPANY AFTER THE MERGER
The Buying Group expects that the business and operations of the Surviving
Corporation will be continued substantially as they are currently being
conducted by the Company and its subsidiaries. The Buying Group does 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 the
Buying Group 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, BTV
Acquisition, Liberty, TCI 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, BTV Acquisition, Liberty and TCI
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. Neither the
Company nor the Buying Group have formulated any specific plans regarding
repayment of the indebtedness incurred in connection with the Merger; however,
such persons anticipate that such indebtedness will be repaid primarily with
or by means of cash from the operation of the business of the Company, or such
other means as the Company and the Buying Group may determine in their sole
discretion.
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
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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 in the form of a letter of credit from The Bank
of New York to refinance certain indebtedness of Mr. Johnson and to pay
certain expenses (including certain tax liabilities which will accrue to him
by virtue of the cash out in the merger of 842,105 shares of the Company's
Class A Stock which was formerly owned by Mr. Johnson and contributed to FW
Strategic Partners, L.P., an investment partnership in which Mr. Johnson is a
limited partner, as Mr. Johnson's capital contribution) incurred or to be
incurred by Mr. Johnson in connection with the Merger including approximately
$9.2 million to be used to satisfy indebtedness of Mr. Johnson owed to
NationsBank and approximately $9 million to be used to satisfy indebtedness of
Mr. Johnson owed to The Bank of New York. The above amounts are included in
the approximately $42 million estimated to be required to pay all other
expenses and costs associated with the Merger. See "SPECIAL FACTORS--Financing
of the Merger." The remainder of the funds may be used to satisfy other
liquidity requirements of Mr. Johnson. 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. BTV Acquisition and the Company expect to obtain the funds
necessary to make such loans to Mr. Johnson from the borrowings under the
contemplated credit facilities to be entered into with The Bank of New York
and certain other financial institutions in connection with the Merger. See
"SPECIAL FACTORS--Financing of the Merger" for a description of those
contemplated credit facilities. 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. 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
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under "SPECIAL FACTORS--Recommendation of the Special Independent Committee
and 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
65.25% of the common stock of the Surviving Corporation, Liberty will own
34.09% of the common stock of the Surviving Corporation and the Johnson
Children's Insurance Trust will own .65% of the Surviving Corporation on a
fully diluted basis (assuming that no officers of the Company continue their
Options and become entitled to acquire equity interests in the Surviving
Corporation). Mrs. Sheila Crump Johnson, a director of the Company, is the
spouse of Mr. Johnson. Mr. 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, director of
Liberty and a director of The Bank of New York Company, Inc. 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 and 70,588 shares of the Company's Class A Stock are held by the Johnson
Children's Insurance Trust, an irrevocable trust established for the benefit
of the children of Mr. and Mrs. Johnson for which The Bank of New York serves
as trustee. The Bank of New York, as trustee of such trust, on June 15, 1998
requested the opportunity to continue to hold shares of the Surviving
Corporation after the Merger. The parties have agreed to execute an amendment
to the Merger Agreement providing that upon the consummation of the Merger no
payment shall be made with respect to the shares of the Class A Stock held by
such trust and such trust will own an interest in the Surviving Corporation.
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 "SPECIAL FACTORS--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 Acquisition. 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. However, the
Company and Mr. Gordon are currently in discussions concerning the terms
pursuant to which he may submit his resignation. The Company and Mr. Gordon
anticipate that an agreement will be reached pursuant to which Mr. Gordon will
depart after the consummation of the Merger.
The Company's executive officers and directors (other than Mr. Johnson)
currently own an aggregate of 7,235 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 one-half of his or her Options to be continued in
the Surviving Corporation. If all of the Company's executive officers and
directors elect to continue their Options in the Surviving Corporation, such
executive officers and directors would own shares in the Surviving Corporation
representing approximately 5.8% of the common stock of the Surviving
Corporation. Any such arrangement shall be pursuant to a separate agreement
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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, Publishing and Ad Sales, $9,184,300; William T. Gordon III,
Executive Vice President, Finance and Chief Financial Officer, $10,381,298;
Sheila Crump Johnson, a director and Executive Vice President, Corporate
Affairs, $6,778,687; Jefferi K. Lee, Executive Vice President, BET Operations,
$10,145,250; Curtis N. Symonds, Executive Vice President, Affiliate Sales and
Service, $8,682,242; Janis P. Thomas, Executive Vice President, Branding and
Marketing, $11,142,750; Louis Carr, Executive Vice President, Ad Sales,
$814,500; and Maurita Coley, Senior Vice President, BET Programming,
$1,357,500. See "SECURITIES OWNERSHIP--Beneficial Ownership of Class A Stock
by Certain Parties Related to the Company or the Buying Group." Under the
terms of the Merger Agreement, the current officers of the Company will be the
officers of the Surviving Corporation following consummation of the Merger,
whether or not each such person cashes out his or her Options.
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 Stock 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 $467.2 million. In addition, BTV
Acquisition will require approximately $14.3 million to pay other expenses and
costs relating to the transactions and $27.7 million to refinance or finance
indebtedness of the Company, BET, and Mr. Johnson, and for other general
corporate purposes for a total cost of $42 million. BET's outstanding
indebtedness expected to be refinanced includes its unsecured revolving senior
credit facility, of which $32 million was outstanding at April 30, 1998, and
its 10.55% senior secured notes, of which $7.5 million was outstanding at
April 30, 1998.
BTV Acquisition delivered to the Company a letter dated March 13, 1998 from
The Bank of New York Company, Inc. ("BNYCO") and BNY Capital Markets, Inc.
("BNY Capital Markets") to the effect that they were highly confident that
they, directly or through any of their affiliates, could successfully arrange
and fully
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syndicate a $600 million senior secured credit 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 expression of confidence by BNYCO and BNY
Capital Markets is subject to certain customary qualifications and conditions
set forth in the letter, including, among others, that (i) the credit 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 credit
facility, BTV Acquisition, the Company and BET and with the documentation for
the credit facility and the Merger. The highly confident letter did not
constitute a commitment to make available the credit facility and, under the
terms of the Merger Agreement, the Company would have had the option of
terminating the Merger Agreement at any time prior to the Effective Time if
BTV Acquisition did not obtain by May 15, 1998 a commitment for the financing
of the transactions contemplated by the Merger Agreement.
On May 15, 1998, BTV Acquisition delivered to the Company a commitment
letter dated May 15, 1998, as amended as of May 20, 1998 (the "Commitment
Letter"). Pursuant to the Commitment Letter, but subject to the conditions set
forth therein, (i) The Bank of New York (the "Bank" and together with BNYCO
and BNY Capital Markets, the "BNY Group") has agreed to act as administrative
agent (in such capacity, the "Agent") for proposed senior secured revolving
credit and term loan facilities aggregating up to $625,000,000 (collectively,
the "Acquisition Facilities") for the purpose of providing the financing for
the Merger, (ii) BNYCO has agreed to participate up to the full amount in the
Acquisition Facilities and (iii) BNY Capital Markets has agreed to act as the
sole arranger of the Acquisition Facilities and to syndicate the Acquisition
Facilities. The BNY Group and the Buying Group currently expect that the BNY
Group will syndicate a portion of the Acquisition Facilities to other banks or
financial institutions (the "Lenders"). The proceeds of the Acquisition
Facilities will be used (i) to pay the Merger Consideration, (ii) to pay
expenses of the Merger, (iii) for general corporate purposes, including the
repurchase of employee-owned stock options, and (iv) to refinance certain
existing indebtedness of the Company, BET, and Mr. Johnson. The BNY Group's
obligations under the Commitment Letter are subject to (i) the negotiation and
execution of a definitive credit agreement in respect of the Acquisition
Facilities (the "Credit Agreement") and related documents that are
satisfactory in form and substance to the BNY Group and BTV Acquisition, (ii)
the absence of any material adverse change in the condition (financial or
otherwise), business, assets, properties, prospects, operations, performance
or current capital structure of BTV Acquisition, the Company, BET, BET
Satellite Services, Inc. or any of the direct or indirect subsidiaries of the
Company from that described to the BNY Group in the information previously
delivered to the BNY Group, (iii) verification by the BNY Group of the
information previously provided to the BNY Group, (iv) the satisfaction of the
BNY Group with certain due diligence matters concerning the Merger and BTV
Acquisition, the Company, BET, BET Satellite Services, Inc. and the direct and
indirect subsidiaries of the Company and such aspects of their business that
the BNY Group chooses to investigate, (v) the absence of any change or
proposed change in law that could materially and adversely affect the
Acquisition Facilities, the Merger or the economic consequences thereof, and
(vi) the absence of any material adverse change in the financial markets and
in the market for senior debt financing.
The Commitment Letter contemplates that the definitive Credit Agreement will
contain terms and conditions which are customary in transactions of this type,
including, without limitation, the following:
Borrower. The initial borrower under the Acquisition Facilities will be BTV
Acquisition. Upon the consummation of the Merger, the Surviving Corporation
will become the obligor under the Credit Agreement. Immediately following the
Merger, BET will replace and assume all of the obligations and liabilities of
the Surviving Corporation under the Credit Agreement. The obligor under the
Credit Agreement at any particular time is referred to as the "Borrower."
Interest Rate. Amounts outstanding under the Acquisition Facilities will
bear interest, at the option of the Borrower, at a rate per annum equal to
either: (i) the London interbank offered rate (adjusted for actual reserves)
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("LIBOR") or (ii) the Alternate Base Rate, in each case, plus the Applicable
Margin. The "Alternate Base Rate" or "ABR" is defined as the greater of (x)
the Bank's prime commercial lending rate as publicly announced from time to
time, and (y) 0.50% plus the federal funds rate (as published by the Federal
Reserve Bank of New York). The Applicable Margin with respect to ABR loans and
LIBOR loans will be based upon the Total Leverage Ratio, which is defined as
the ratio of (i) total debt of the Company and its subsidiaries on a
consolidated basis (including capitalized leases) to (ii) EBITDA (as defined
in the Credit Agreement).
Term. Borrowings under the Acquisition Facilities will be amortized, and
commitments with respect to drawings under the Acquisition Facilities will be
correspondingly reduced, over the eight year term of the Acquisition
Facilities in accordance with an agreed schedule.
Guarantors. All of the Borrower's obligations under the Facilities will be
fully and unconditionally guaranteed by the Company, BET Satellite Services,
Inc. and all of the direct and indirect wholly owned subsidiaries of the
Borrower at closing and in the future (collectively, the "Guarantors").
Security. The Acquisition Facilities will be secured by a first priority
security interest in (i) all of the stock of the Borrower and its subsidiaries
and (ii) all intercompany notes owed to the Borrower and the Guarantors.
Conditions. The obligations of the Lenders under the Credit Agreement to
provide the initial advances pursuant to the Acquisition Facilities will be
subject to usual and customary conditions for credit facilities of that size,
type and purpose, including, without limitation, the following: (i) no
material adverse change in the financial condition, operations, business or
prospects of the Borrower or the Guarantors, individually or taken as a whole,
since January 31, 1998; (ii) delivery by the Borrower and the Guarantors of
such financial statements and other information as the Agent shall require,
all of which shall be in all respects reasonably satisfactory to the Agent;
(iii) no material undisclosed liabilities (contingent or otherwise) including,
without limitation, pension liabilities, post- retirement healthcare benefits
and litigation; (iv) absence of material litigation; (v) receipt of financial
projections reasonably satisfactory to the Agent in all respects; (vi)
consummation of the Merger in a manner satisfactory to the Agent and its
counsel; and (vii) cancellation of, and repayment of all obligations under,
the Company's existing credit facility with the Bank.
Covenants and Events of Default. The Credit Agreement will contain
affirmative and negative covenants and events of default, in each case which
are customary for credit facilities of that size, type and purpose. Such
affirmative and negative covenants will, among other matters, limit the
Borrower's ability to dispose of assets, or incur additional indebtedness and
require it to satisfy certain ongoing financial requirements. Such events of
default will include, among other matters, an event of default upon a change
in control (as defined in the Credit Agreement) of the Company following the
Merger.
Expiration. The obligations of the BNY Group under the Commitment Letter
will expire and terminate automatically if loan documentation satisfactory in
form and substance to the BNY Group, the Company and their respective counsel
is not executed on or before September 30, 1998.
REGULATORY REQUIREMENTS; THIRD PARTY CONSENTS
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 Act waiting periods.
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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 (unless terminated earlier or a request for additional
information is received). Early termination of the required waiting period was
granted at 5:14 p.m. New York City time on May 6, 1998.
The Company does not believe any third party consents will be required by
the Company in connection with the Merger other than the possible consent of
(i) Aetna Life Insurance Company as holder of the Senior Secured Notes issued
by BET in 1990 and guaranteed by the Company and (ii) The Bank of New York and
the other lenders under BET's existing revolving credit facility, which is
also guaranteed by the Company. The consent of such lenders will not be
necessary if, as currently contemplated, the debt owed to those lenders is
refinanced in connection with the Merger. The Company is currently in
discussions with those lenders as to the outstanding indebtedness and the
potential need for consents.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of 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
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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:
<TABLE>
<S> <C>
Financing Fees(1)............................................... $ 4,600,000
Financial Advisors Fees......................................... 6,000,000
SEC Filing Fees................................................. 94,328
Legal Fees and Expenses......................................... 5,000,000
Accounting Fees................................................. 50,000
Printing and Mailing Expenses................................... 208,000
Exchange Agent Fees............................................. 7,500
Special Independent Committee Fee............................... 30,000
Solicitation Fees............................................... 12,500
-----------
Total......................................................... $16,002,328
===========
</TABLE>
- --------
(1) See "SPECIAL FACTORS--Financing of the Merger."
Financial advisors fees include estimated fees and expenses payable to both
Salomon and Goldman Sachs. Estimated financial advisors fees exclude $271,534
paid to Salomon in connection with its retention by the Company to render
certain financial advisory and investment banking services to the Company
during the period July 1997 to September 10, 1997. Such $271,534 fees paid to
Salomon related to the work done by Salomon until September 10, 1997,
including the preparation of the materials presented to the Company's Board of
Directors on September 10, 1997.
For services rendered in connection with its engagement, the Buying Group
has agreed to pay Salomon (i) a fee of $100,000 and (ii) an additional fee of
$1,775,000 contingent upon the acquisition by Mr. Johnson and/or Liberty of
all or substantially all of the Company's equity securities not held by them.
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
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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. The contingent portion of Goldman Sachs' fee
will be approximately $2.9 million assuming approximately 7.7 million shares
of applicable Common Stock. 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.
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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 Stock for use at the Special Meeting to be held at 10:00
a.m., local time, on Thursday, July 30, 1998, at the Capital Hilton, 16th and
K Street, N.W., Washington, D.C. 20036, or at any adjournment(s) or
postponement(s) thereof, 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. 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, Liberty or TCI, or
any of their respective subsidiaries, or (iii) held by Dissenting
Stockholders) will be converted into the right to receive $63 per share in
cash, without interest.
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, 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 "SPECIAL FACTORS--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 June 29, 1998 as the
record date for the Special Meeting (the "Record Date"). Only stockholders of
record as of the close of business on June 29, 1998 will be entitled to notice
of and to vote at the Special Meeting.
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As of the close of business on June 29, 1998, the Company had outstanding
10,071,713 shares of Class A Stock, held of record by approximately 607
registered holders, 1,831,600 shares of Class B Stock, and 4,820,000 shares of
Class C Stock. Mr. Johnson beneficially owns 2,237,503 shares of the Company's
Class A Stock (including shares under Options exercisable within the next 60
days) representing approximately 21.6% 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 June 29, 1998, Mr. Johnson and Liberty collectively held 39.2% 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 62.9% 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 voting power of the
outstanding shares of Common Stock of the Company. Because Mr. Johnson and
Liberty together own a majority of the voting power 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 3,120,162 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. Because the Company's officers
(other than Mr. Johnson) are not affiliates of Mr. Johnson or Liberty, they
have the discretion to vote the shares of Class A Stock they own in favor of
the Merger Agreement, and, with the exception of Mr. Johnson's spouse, Mrs.
Sheila Crump Johnson, their affirmative votes will count in determining
whether the Independent Vote Requirement has been satisfied. Mrs. Johnson's
shares of Class A Stock will not count toward satisfaction of the Independent
Vote Requirement, but her outstanding Options will be treated in the same
manner as the Options held by other officers of the Company (other than Mr.
Johnson). In addition, the shares of Class A Stock held by the Johnson
Children's Insurance Trust will not count toward satisfaction of the
Independent Vote Requirment. The Company's officers (other than Mr. Johnson)
currently own an aggregate of 2,122 shares of Class A Stock, representing less
than 1% of the outstanding shares of Class A Stock. The Company believes it is
the present intention of all such officers owning Class A Stock to vote all
their shares in favor of the Merger Agreement. The officers also own Options
to purchase an aggregate of 1,457,995 shares of Class A Stock, which options
will be cashed out at the Effective Time (unless an alternative arrangement is
negotiated between the Buying Group and any such officers to continue those
options as equity interests in the Surviving Corporation). See "SPECIAL
FACTORS--Interests of Certain Persons in the Merger; Certain Relationships."
The Merger is also subject to other conditions. See "THE MERGER AGREEMENT--
Conditions."
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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, Senior Vice President and Chief
Administrative Officer.
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. If any other matters are
properly presented at the Special Meeting for action, including, among other
things, consideration of a motion to adjourn such meeting to another time
and/or place (including, without limitation, for the purpose of soliciting
additional proxies or allowing additional time for the satisfaction of
conditions to the Merger), the persons named in the enclosed form of proxy and
acting thereunder generally will have discretion to vote on such matters in
accordance with their best judgment. Notwithstanding the foregoing, the
persons named in the proxies will not use their discretionary authority to use
proxies voting against the Merger to vote in favor of adjournment or
postponement of the Special Meeting. The Merger is also subject to a number of
conditions. See "THE MERGER AGREEMENT -- Conditions." At the present time the
Company does not anticipate waiving any of the material conditions of the
Merger. However, if it becomes necessary to waive such conditions, the Company
will deliver revised material and additional proxy cards to stockholders and
will give stockholders an opportunity to change their vote. While no such
waiver is contemplated at this time, if such a waiver of any material
conditions of the Merger were presented to the Board of Directors, the Board
would consider whether a majority of the holders of the Nonaffiliated Stock
would still vote in favor of the Merger as well as the impact on the market
price for the Class A Stock if the Merger were terminated, before waiving any
such conditions.
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.
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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, 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 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 April 30, 1998, BET Cable
Network reached over 50.2 million households, as reported by affiliated cable
system operators, providing a broad mix of music videos, off-network situation
comedies and original programming.
On May 20, 1998, the Company signed a letter of intent with Bell Atlantic
pursuant to which the Company and Bell Atlantic will try to reach an agreement
to market Bell Atlantic products under the BET brand name.
On June 16, 1998 the Company purchased Arabesque, a division of Kensington
Publishing Corporation, a New York corporation ("Kensington"). Arabesque
publishes Kensington's line of African American romance novels. The Company
has also secured the dramatic rights to Arabesque's books for possible
television film development.
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.
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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 Media Corporation is a Delaware corporation and a wholly owned
subsidiary of TCI. Liberty through its subsidiaries and affiliates, produces,
acquires and distributes entertainment and informational programming services,
as well as electronic retailing services. Such programming is delivered via
cable television and other distribution technologies to viewers in the United
States and overseas. The principal office and business address of Liberty is
8101 East Prentice Avenue, Suite 500, 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. On June 23, 1998, TCI and AT&T Corp. ("AT&T")
entered into a merger agreement pursuant to which TCI would be merged into a
subsidiary of AT&T and become a wholly owned subsidiary of AT&T. Consummation
of this merger is subject to various conditions, including receipt of all
required regulatory approvals, the expiration of the waiting period under the
HSR Act, and approval of the stockholders of both TCI and AT&T. The Company
and the Buying Group do not anticipate that the proposed TCI/AT&T merger will
affect the Merger. The principal office and business address of TCI is 5619
DTC Parkway, Englewood, CO 80111. The telephone number of TCI is (303) 267-
5500.
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THE MERGER AGREEMENT
The following is a summary of the material 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 into the right to
receive 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, (ii) owned by BTV Acquisition, Mr.
Johnson, Liberty or any of their respective subsidiaries or (iii) (upon
approval and execution of the amendment to the Merger Agreement) held by the
Johnson Children's Insurance Trust 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) an amount in cash equal to the
aggregate Merger Consideration (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
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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 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.
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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. See "SPECIAL FACTORS--Interests of
Certain Persons in the Merger; Certain Relationships" for a discussion of such
an alternative arrangement being contemplated by the Buying Group.
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 or
termination 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.
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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 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.
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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 March Buying Group Letter provides, however, that Liberty
will be entitled to two designees on the Board. See "SPECIAL FACTORS--Buying
Group Letter Agreements." The Merger Agreement also provides that the current
officers of the Company will be the officers of the Surviving Corporation.
However, the Company and Mr. Gordon are currently in discussions concerning
the terms pursuant to which he may submit his resignation. The Company and Mr.
Gordon anticipate that an agreement will be reached pursuant to which Mr.
Gordon will depart after the consummation of the Merger.
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.
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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 which, like the Behrens Complaint, alleged, among other things, that the
$48 Offer was unfair and inadequate. 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). On June 25, 1998, counsel
to the parties to the Consolidated Action and the plaintiff in the D.C. Action
executed a Stipulation of Settlement that provided, among other things subject
to court approval, for the settlement, release and discharge of all claims
arising out of the Merger and for the dismissal of both the Consolidated
Action and the D. C. Action.
The obligation of BTV Acquisition to consummate the Merger is conditioned
upon there being no pending or threatened litigation. See "THE MERGER
AGREEMENT--Conditions."
50
<PAGE>
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
51
<PAGE>
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, Senior Vice President and Chief Administrative Officer.
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
52
<PAGE>
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.
53
<PAGE>
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 nine months ended April 30,
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 Merger Agreement since (i) the proposed Merger
Consideration is all cash and (ii) if the Merger is completed, the Company's
Class A Stock would cease to be publicly traded.
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 nine months ended April 30, 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 Reports on Form 10-Q for the fiscal quarters ended October
31, 1997, January 31, 1998 and April 30, 1998, and incorporated herein by
reference.
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS ENDED
APRIL 30, FISCAL YEAR ENDED JULY 31,
----------------- ----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT SHARE DATA AND RATIO)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating revenues...... $129,459 $113,287 $154,227 $132,275 $115,222 $ 97,510 $ 74,218
Income from operations.. 46,351 39,531 53,775 42,837 37,517 26,410 23,609
Income from continuing
operations............. 26,060 20,947 28,022 22,678 19,912 14,776 12,640
Discontinued opera-
tions.................. -- (1,959) (4,235) (615) -- -- --
Net income.............. 26,060 18,988 23,787 22,063 19,912 14,776 12,640
Ratio of earnings to
fixed charges(1)....... 12.3:1 9.4:1 9.8:1 8.5:1 N/A N/A N/A
PER COMMON SHARE DATA(2)
Net income per common
share:
Basic:
Income from continuing
operations............ $ 1.56 $ 1.25 $ 1.68 $ 1.27 $ 1.00 $ 0.72 $ 0.61
Net income............. 1.56 1.13 1.42 1.24 1.00 0.72 0.61
Diluted:
Income from continuing
operations............ 1.49 1.22 1.63 1.23 1.00 0.72 0.61
Net income............. 1.49 1.11 1.38 1.21 1.00 0.72 0.61
Shares used in computing
earnings per share:
Basic.................. 16,912 16,713 16,703 17,834 19,867 20,490 20,844
Diluted................ 17,468 17,181 17,213 18,221 19,961 20,590 20,887
Cash dividends de-
clared................. -- -- -- -- -- -- --
<CAPTION>
(UNAUDITED)
APRIL 30, JULY 31,
----------------- ----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets............ $191,093 $167,328 $173,511 $150,731 $157,810 $113,868 $104,842
Long term debt.......... 47,987 63,121 62,993 60,560 35,875 12,392 13,207
Shareholders' equity.... 113,230 82,607 88,418 66,749 96,684 81,378 77,791
Book value per
share(3)............... 6.77 4.96 5.29 3.98 4.90 4.07 3.75
</TABLE>
54
<PAGE>
- --------
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 nine months ended April
30, 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 period end.
55
<PAGE>
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 April 30,
1998, advances aggregating $8,933,000 were outstanding. As of April 30, 1998,
$10,679,000 (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. R&S has elected to return all of its licenses to the
FCC in return for the agency forgiving the debt associated with the purchase
price of the licenses. In addition, pursuant to the election with the FCC, R&S
will obtain a refund of a portion of its purchase price. The March Buying
Group Letter had contemplated 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.
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.
56
<PAGE>
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 distribution to an amount not
to exceed 70% of net cash flow after debt service as defined, accumulated
after September 30, 1989. At July 31, 1997, $126 million was available for
dividend distribution pursuant to such covenant.
MARKET PRICE OF CLASS A STOCK
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
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.......................................... 63 60 3/4
</TABLE>
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 July 1, 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 $63 1/16.
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.
COMMON 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 Common
Stock.
Since August 1, 1995, none of Mr. Johnson or BTV Acquisition, Liberty, TCI
and their respective subsidiaries has purchased any Common Stock. During that
same time period, the Company has not made any purchases of Common Stock
except that:
57
<PAGE>
(A) During the second quarter of fiscal year 1996, the Company purchased
in a single transaction 1,518,300 shares of Class A Stock and 1,518,300
shares of Class B Stock beneficially owned by Time Warner Inc. at a price
of $19.39 per share. 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 African-American audiences.
(B) During the fourth quarter of fiscal year 1996, the Company purchased
in a single transaction 200 shares of Class A Stock at a price of $25.50
per share;
(C) During the first quarter of fiscal year 1997, the Company purchased
33,400 shares of Class A Stock at a range of prices paid per share of
$24.375 to $30.00 and an average purchase price of $28.316;
(D) During the second quarter of fiscal year 1997, the Company purchased
98,400 shares of Class A Stock at a range of prices paid per share of
$24.875 to $27.875 and an average purchase price of $26.939; and
(E) During the third quarter of fiscal year 1997, the Company purchased
18,000 shares of Class A Stock at a range of prices paid per share of
$26.25 to $26.75 and an average purchase price of $27.172.
58
<PAGE>
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.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF CLASS PERCENTAGE OF CLASS A
NAME OF BENEFICIAL OWNER A STOCK BENEFICIALLY OWNED STOCK BENEFICIALLY OWNED
- ------------------------ -------------------------- ------------------------
<S> <C> <C>
Mr. Johnson and TCI....... 10,720,703(a) 62.9%(b)
GAMCO Investors, Inc. and
certain related enti-
ties..................... 2,443,850(c) 24.3%
Capital Group Cos., Inc.
and certain related enti-
ties..................... 662,100(d) 6.6%
</TABLE>
- --------
(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 2,056,703 shares of Class A Stock, holds Options
(currently exercisable or exercisable within the next 60 days) to acquire
180,800 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 21.6% 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
127,600 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 81,200 shares of Class A
Stock that are not exercisable currently or within the next 60 days and
70,588 shares of Class A Stock owned by the Johnson Children's Insurance
Trust, an irrevocable trust established for the benefit of the children of
Mr. and Mrs. Johnson, as to which Mr. and Mrs. Johnson disclaim beneficial
ownership. 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. 15 dated May 21,
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. (635,800), GAMCO Investors,
Inc. (1,611,250), Gabelli Foundation, Inc. (8,000), MJG Associates, Inc.
(3,000), Gabelli Associates Limited (24,000), Gabelli Associates Fund
(125,000), 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
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<PAGE>
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 2,443,850
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 635,800 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 and BTV Acquisition 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. To the best knowledge of Liberty and TCI,
none of their respective directors or executive officers own any Class A
Stock.
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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:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF OUTSTANDING
NAME OF BENEFICIAL OWNER SHARES OWNED CLASS A STOCK OWNED
- ------------------------ ------------ -------------------------
<S> <C> <C>
Robert L. Johnson (1).................. 2,237,503 21.6
Sheila Crump Johnson (2)............... 127,600 1.3
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)....................... 215,550 2.1
James A. Ebron (7)..................... 174,800 1.7
William T. Gordon(8)................... 201,102 2.0
Janis P. Thomas (9).................... 215,100 2.1
Jefferi K. Lee(10)..................... 195,100 1.9
Curtis N. Symonds(11).................. 163,695 1.6
Louis Carr(12)......................... 12,000 *
Maurita Coley(13)...................... 24,170 *
Byron Marchant......................... 0 *
Scott Mills............................ 0 *
All directors and executive officers of
the Company as a group(14)............ 3,444,133 29.7
</TABLE>
- --------
* Less than one percent.
(1) Includes (i) 180,800 shares of Class A Stock which are subject to
purchase upon exercise of Options exercisable currently or within the
next 60 days and (ii) 127,600 shares of Class A Stock owned by Sheila
Crump Johnson, Mr. Johnson's wife, of which 127,500 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, (ii) an additional 81,200
Options owned by Mr. Johnson that are not exercisable currently or within
the next 60 days and (iii) 70,588 shares of Class A Stock owned by the
Johnson Children's Insurance Trust, an irrevocable trust established for
the benefit of the children of Mr. and Mrs. Johnson, as to which Mr. and
Mrs. Johnson disclaim beneficial ownership. 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 (i) shares of Common Stock owned by Robert L. Johnson, Mrs.
Johnson's husband, as to which Mrs. Johnson disclaims beneficial
ownership and (ii) 70,588 shares of Class A Stock owned by the Johnson
Children's Insurance Trust, an irrevocable trust established for the
benefit of the children of Mr. and Mrs. Johnson, as to which Mr. and Mrs.
Johnson disclaim beneficial ownership. Includes 127,500 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 17,000 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.
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<PAGE>
(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) 215,000 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 17,000 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 174,800 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 17,000 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 200,000 shares of Class A Stock subject to purchase upon
exercise of Options owned by Mr. Gordon that are exercisable currently or
within the next 60 days. The remaining 1,102 shares are directly owned by
Mr. Gordon. Mr. Gordon owns an additional 17,000 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 215,000 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
17,000 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 195,000 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. The remaining 100 shares are owned directly by
Mr. Lee. Mr. Lee owns an additional 17,000 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 163,695 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 17,000 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 12,000 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 6,000 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 (i) 24,000 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 and (ii) 170 shares of Class A Stock held by an
investment club in which Ms. Coley is a member, with respect to which Ms.
Coley disclaims beneficial ownership. Ms. Coley owns an additional 6,000
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
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<PAGE>
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. The Johnson Children's
Insurance Trust, an irrevocable trust established for the benefit of Mr.
Johnson's children and for which The Bank of New York serves as trustee,
beneficially owns 70,588 shares of the 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 currently owned approximately 65% by Mr. Johnson and 35%
by Liberty. Following the effectiveness of the Merger, on a fully diluted
basis, Mr. Johnson will own 65.25% of the common stock of the Company (as the
surviving corporation in the Merger), Liberty will own 34.09% and the Johnson
Children's Insurance Trust will own .65% (assuming that no officers of the
Company continue their Options and become entitled to acquire equity interests
in the Surviving Corporation). 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. None of the officers and directors of the
Company (other than Mr. Johnson and, with respect to the shares of BTV
Acquisition 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. See "SPECIAL FACTORS--Interests of Certain Persons
in the Merger; Certain Relationships."
63
<PAGE>
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
64
<PAGE>
1997 and as a director of United Video Satellite
Group, Inc. since February, 1998. The business
address of Mr. Bennett and the address for Liberty
is 8101 E. Prentice Avenue, Suite 500, Englewood,
CO 80111.
Herbert P. Wilkins, Mr. Wilkins has served as a director of the Company
Sr....................... 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 also served as Executive Vice
President, Corporate Affairs of the Company from
September 1992 through May 1998 and has served 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,
Finance, and Chief Financial Officer since August
1993. From 1987 to 1993, Mr. Gordon was a partner
with the accounting firm of Price Waterhouse LLP.
Mr.
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<PAGE>
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,
Publishing and Ad Sales since May 1998. Previously,
Mr. Ebron served as Executive Vice President,
Corporate Media Sales from September 1995 through
May 1998. 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, BET
Operations and Technology since May 1998.
Previously, Mr. Lee served as Executive Vice
President, Network Operations and Programming from
September 1992 through May 1998. 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 Service since May 1998.
Previously, Mr. Symonds served as Executive Vice
President, Affiliate Sales and Marketing from
September 1992 through May 1998. 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,
Branding and Marketing since May 1998. Previously,
Ms. Thomas served as Executive Vice President,
Brand Marketing and Licensing from August 1997
through May 1998. 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 Executive Vice President, Ad
Sales since May, 1998. Previously, Mr. Carr served
as Senior Vice President, National Media Sales from
January 1995 through May 1998. 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, BET
Programing since May 1998. Previously, Ms. Coley
served as Senior Vice President, Network Operations
and Programming, from August 1995 through May 1998.
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.
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Byron F. Marchant........ Mr. Marchant has served as Senior Vice President
and Chief Administrative Officer since May 1998.
Previously, Mr. Marchant served as Senior Vice
President and General Counsel from May 1997 through
May 1998. 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. The March Buying Group Letter
provides, however, that Liberty will be entitled to two designees on the
Board. See "SPECIAL FACTORS--Buying Group Letter Agreements."
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
67
<PAGE>
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 and as Vice Chairman of TCI since June 1998.
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. 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.
68
<PAGE>
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, Mr. Schotters has served as Senior Vice President
II....................... 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.
69
<PAGE>
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.
70
<PAGE>
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 Reports on Form 10-Q for the fiscal quarters
ended October 31, 1997, January 31, 1998 and April 30, 1998;
(3) The Company's Current Reports on Form 8-K filed on March 20, 1998 and
June 23, 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.
71
<PAGE>
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
Corporate 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.
72
<PAGE>
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 Corporate 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
/s/ Byron F. Marchant
Byron F. Marchant
Secretary
Washington, D.C.
July 2, 1998
73
<PAGE>
EXHIBITS TO THE PROXY STATEMENT
<TABLE>
<C> <S> <C>
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
</TABLE>
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AMONG
ROBERT L. JOHNSON,
LIBERTY MEDIA CORPORATION,
BTV ACQUISITION CORPORATION
AND
BET HOLDINGS, INC.
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
The Merger
<C> <S> <C>
Section 1.01. The Merger................................................. A-7
Section 1.02. Effective Time............................................. A-7
Section 1.03. Closing.................................................... A-7
Section 1.04. Effects of the Merger...................................... A-7
Section 1.05. Certificate of Incorporation............................... A-7
Section 1.06. Bylaws..................................................... A-8
Section 1.07. Directors and Officers..................................... A-8
ARTICLE II
Conversion of Securities; Exchange of Certificates
Section 2.01. Conversion of Securities................................... A-8
Section 2.02. Exchange of Certificates and Cash.......................... A-8
Section 2.03. Stock Transfer Books....................................... A-10
Section 2.04. Stock Options; Payment Rights.............................. A-10
Section 2.05. Dissenting Shares.......................................... A-10
ARTICLE III
Representations and Warranties of the Company
Section 3.01. Organization and Qualifications; Subsidiaries.............. A-11
Section 3.02. Certificate of Incorporation and Bylaws.................... A-11
Section 3.03. Capitalization............................................. A-11
Section 3.04. Authority Relative to This Agreement....................... A-12
Section 3.05. No Conflict; Required Filings and Consents................. A-12
Section 3.06. Compliance; Permits........................................ A-13
Section 3.07. SEC Filings; Financial Statements.......................... A-13
Section 3.08. Absence of Certain Changes and Events...................... A-14
Section 3.09. Employee Benefit Plans..................................... A-14
Section 3.10. Taxes...................................................... A-15
Section 3.11. Absence of Litigation...................................... A-15
Section 3.12. Franchises, Intellectual Property, Etc..................... A-15
Section 3.13. FCC and Copyright Matters.................................. A-15
Section 3.14. Opinion of Financial Advisor............................... A-15
Section 3.15. Board Approval............................................. A-16
Section 3.16. Brokers.................................................... A-16
Section 3.17. No Actual Knowledge........................................ A-16
ARTICLE IV
Representations and Warranties of Johnson, Liberty and Buyer
Section 4.01. Authority Relative to This Agreement....................... A-16
Section 4.02. No Conflict; Required Filings and Consents................. A-16
Section 4.03. Organization and Qualification............................. A-17
Section 4.04. Certificate of Incorporation and Bylaws.................... A-17
Section 4.05. Authority Relative to This Agreement....................... A-17
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Section 4.06. No Conflict; Required Filings and Consents............... A-17
Section 4.07. Organization and Qualification........................... A-18
Section 4.08. Certificate of Incorporation and Bylaws.................. A-18
Section 4.09. Authority Relative to This Agreement..................... A-18
Section 4.10. No Conflict; Required Filings and Consents............... A-18
Section 4.11. Brokers.................................................. A-19
Section 4.12. Financing................................................ A-19
ARTICLE V
Conduct of Business Pending the Merger
Section 5.01. Conduct of Business by the Company Pending the Merger.... A-19
ARTICLE VI
Additional Covenants
Section 6.01. Access to Information; Confidentiality................... A-21
Section 6.02. Proxy Statement; Schedule 13E-3.......................... A-21
Section 6.03. Action by Stockholders................................... A-21
Section 6.04. No Solicitation.......................................... A-22
Section 6.05. Directors' and Officers' Indemnification................. A-23
Section 6.06. Notification of Certain Matters.......................... A-23
Section 6.07. Further Action; Best Efforts............................. A-23
Section 6.08. Public Announcements..................................... A-24
Section 6.09. Conveyance Taxes......................................... A-24
ARTICLE VII
Closing Conditions
Conditions to Obligations of Each Party to Effect the
Section 7.01. Merger................................................... A-24
Section 7.02. Additional Conditions to Obligations of Buyer............ A-25
Section 7.03. Additional Conditions to Obligations of the Company...... A-26
ARTICLE VIII
Termination, Amendment and Waiver
Section 8.01. Termination.............................................. A-26
Section 8.02. Effect of Termination.................................... A-27
Section 8.03. Amendment................................................ A-27
Section 8.04. Waiver................................................... A-27
Section 8.05. Fees, Expenses and Other Payments........................ A-27
ARTICLE IX
General Provisions
Effectiveness of Representations, Warranties and
Section 9.01. Agreements............................................... A-27
Section 9.02. Notices.................................................. A-28
Section 9.03. Certain Definitions...................................... A-29
Section 9.04. Headings................................................. A-29
Section 9.05. Severability............................................. A-29
Section 9.06. Entire Agreement......................................... A-29
Section 9.07. Assignment............................................... A-29
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Section 9.08. Parties in Interest...................................... A-29
Section 9.09. Governing Law............................................ A-30
Section 9.10. Submission to Jurisdiction; Waivers...................... A-30
Section 9.11. Enforcement of this Agreement............................ A-30
Section 9.12. Counterparts............................................. A-30
EXHIBIT A Certificate of Incorporation of BTV Acquisition
Corporation..............................................
EXHIBIT B Bylaws of BTV Acquisition Corporation....................
</TABLE>
A-4
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ----
<S> <C>
Agreement................................................................. A-7
Alternative Transaction................................................... A-22
Benefit Plans............................................................. A-14
Buyer..................................................................... A-7
Buyer Material Adverse Effect............................................. A-18
Buyer Representatives..................................................... A-21
Certificates.............................................................. A-9
Class A Stock............................................................. A-8
Class B Stock............................................................. A-8
Class C Stock............................................................. A-8
Closing................................................................... A-7
Closing Date.............................................................. A-7
Code...................................................................... A-9
Common Stock.............................................................. A-10
Communications Act........................................................ A-15
Company................................................................... A-7
Company Charter........................................................... A-12
Company Disclosure Schedule............................................... A-11
Company Material Adverse Effect........................................... A-11
Company Option Plan....................................................... A-11
Company Permits........................................................... A-13
Company SEC Reports....................................................... A-13
Company Stockholder Approval.............................................. A-12
Company Stockholders' Meeting............................................. A-22
Company Subsidiary........................................................ A-11
Confidentiality Agreement................................................. A-21
Copyright Act............................................................. A-15
DGCL...................................................................... A-7
Dissenting Shares......................................................... A-10
Effective Time............................................................ A-7
ERISA..................................................................... A-14
ESPP...................................................................... A-11
Exchange Act.............................................................. A-13
Exchange Agent............................................................ A-8
Exchange Agent Agreement.................................................. A-8
Exchange Fund............................................................. A-8
Expenses.................................................................. A-27
Fair Market Value......................................................... A-22
FCC....................................................................... A-13
Financing................................................................. A-25
Governmental Entity....................................................... A-12
HSR Act................................................................... A-13
Indemnified Parties....................................................... A-23
IRS....................................................................... A-14
Johnson................................................................... A-7
Liberty................................................................... A-7
Liberty Group............................................................. A-24
Liberty Material Adverse Effect........................................... A-17
Merger.................................................................... A-7
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ----
<S> <C>
Merger Consideration...................................................... A-8
Options................................................................... A-11
Preferred Stock........................................................... A-11
Premium Amount............................................................ A-23
Proxy Statement........................................................... A-21
Rights.................................................................... A-11
Schedule 13E-3............................................................ A-21
Section 203............................................................... A-12
Securities Act............................................................ A-13
Special Committee......................................................... A-16
Surviving Certificate..................................................... A-8
Surviving Corporation..................................................... A-7
taxes..................................................................... A-15
TCI....................................................................... A-24
Transmittal Documents..................................................... A-9
</TABLE>
A-6
<PAGE>
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
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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
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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
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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.
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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
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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)
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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
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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.
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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.
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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
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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
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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
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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;
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(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;
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(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
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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.
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(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.
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(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
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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.
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(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.
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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.
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(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
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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.
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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.
A-30
<PAGE>
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.
/s/ Debra Lee
By: _________________________________
Name: Debra Lee
Title: President and Chief
Operating Officer
/s/ Robert L. Johnson
_____________________________________
Robert L. Johnson
LIBERTY MEDIA CORPORATION
/s/ Robert R. Bennett
By: _________________________________
Name: Robert R. Bennett
Title: President
BTV ACQUISITION CORPORATION
/s/ Robert L. Johnson
By: _________________________________
Name: Robert L. Johnson
Title: President
A-31
<PAGE>
EXHIBIT B
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
PERSONAL AND CONFIDENTIAL
March 15, 1998
Special Independent Committee of the Board of Directors
BET Holdings, Inc.
One BET Plaza
1900 W Place, N.E.
Washington, D.C. 20018-1211
Dear Sir:
You have requested our opinion as to the fairness from a financial point of
view to the holders (excluding Robert L. Johnson, Liberty Media Corporation
and its affiliates) of the outstanding shares of Common Stock, par value $0.02
per share (the "Shares"), of BET Holdings, Inc. (the "Company") of the $63.00
per Share in cash to be received by such holders pursuant to the Agreement and
Plan of Merger, dated as of March 15, 1998, among Robert L. Johnson and
Liberty Media Corporation (together, "Buyer"), BTV Acquisition Corporation, a
wholly-owned subsidiary of Buyer, and the Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually 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. We are familiar with the Company having acted as the financial
advisor to the Special Independent Committee of the Company's Board of
Directors in connection with, and having participated in certain of the
negotiations leading to, the Agreement. We are also familiar with Liberty
Media Corporation having acted as co-managing underwriter on a public offering
of 7-1/8% Notes due 2028 of its affiliate, TCI Communications, Inc. on
February 19, 1998, for which we received customary fees.
In connection with this opinion, we have reviewed, among other things, the
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. We also have 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, we have reviewed the
reported price and trading activity for the Shares, 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 in other industries generally and
performed such other studies and analyses as we considered appropriate.
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<PAGE>
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. We have also, with your
approval, considered the Special Independent Committee's assessment of the
risks and uncertainties in achieving the Company forecasts prepared by its
management. In addition, we have not made an independent evaluation or
appraisal of the assets and liabilities of the Company or any of its
subsidiaries and we have not been furnished with any such evaluation or
appraisal. We were 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. Our advisory services and the opinion expressed
herein are provided for the information and assistance of the Special
Independent Committee of the Board of Directors of the Company in connection
with its consideration of the transaction contemplated by the Agreement and
such opinion does not constitute a recommendation as to how any holder of
Shares should vote in connection with such transaction.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the $63.00
per Share in cash to be received by the holders (excluding Robert L. Johnson,
Liberty Media Corporation and its affiliates) of Shares pursuant to the
Agreement is fair from a financial point of view to such holders.
Very truly yours,
/s/ Golman, Sachs & Co.
- ------------------------
GOLMAN, SACHS & CO.
B-2
<PAGE>
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 (S)228 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 (S)251 (other than a merger effected pursuant to
(S)251(g) of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)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 (S)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
(S)(S)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 (S)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.
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<PAGE>
(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 (S)228 or
(S)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
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
PROPOSAL OF THE BOARD OF DIRECTORS: The Directors recommend a vote "FOR" Item
1 set forth below:
. Approval and adoption 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 Change of Address
are authorized to vote upon such and or Comments
other business as may properly Mark Here [_]
come before the meeting.
(Please sign exactly as name
appears on the left.)
Sign, Date and Return this Proxy
Card Promptly Using the Enclosed Dated: , 1998
Envelope.
___________________________________
Signature
___________________________________
Signature if held jointly
Check here if you plan to attend
the Special Meeting of
Stockholders [_]
- ----------------------------------- --------------------------------------
----------------
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 the Capital Hilton, 16th and K
Street, N.W., Washington, D.C. 20036 on Thursday, July 30, 1998, at 10:00 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
